The Effects of Transport Regulation on the Oil Market: Does Market Power Matter?

Resources for the Future Discussion Paper No. 10-40

40 Pages Posted: 8 Sep 2010

See all articles by Snorre Kverndokk

Snorre Kverndokk

Ragnar Frisch Centre for Economic Research

Knut Einar Rosendahl

Norwegian University of Life Sciences; Statistics Norway - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: September 3, 2010

Abstract

Popular instruments to regulate consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel efficiency. Their impacts on oil consumption and price vary. One important factor is the market setting. We show that if market power is present in the oil market, the directions of change in consumption and price may contrast those in a competitive market. As a result, the market setting impacts not only the effectiveness of the policy instruments to reduce oil consumption, but also terms of trade and carbon leakage. In particular, we show that under monopoly, reduced oil consumption due to increased fuel efficiency will unambiguously increase the price of oil.

Keywords: Transport Regulations, Oil Market, Monopoly, Terms-of-Trade Effects, Carbon Leakage

JEL Classification: D42, Q54, R48

Suggested Citation

Kverndokk, Snorre and Rosendahl, Knut Einar, The Effects of Transport Regulation on the Oil Market: Does Market Power Matter? (September 3, 2010). Resources for the Future Discussion Paper No. 10-40. Available at SSRN: https://ssrn.com/abstract=1673329 or http://dx.doi.org/10.2139/ssrn.1673329

Snorre Kverndokk (Contact Author)

Ragnar Frisch Centre for Economic Research ( email )

Gaustadalleen 21
N-0349 Oslo
Norway
+47 22958811 (Phone)
+47 22958825 (Fax)

HOME PAGE: http://www.frisch.uio.no/cv/snorrek_eng.html

Knut Einar Rosendahl

Norwegian University of Life Sciences ( email )

PO Box 5033
NO-1432 Aas
Norway
+47 64966117 (Phone)

Statistics Norway - Research Department ( email )

Kongens Gt. 6
PO Box 8131 Dep
N-0033 Oslo
Norway
+47 21094954 (Phone)
+47 21094963 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
28
Abstract Views
440
PlumX Metrics