33 Pages Posted: 20 Jun 2013
Date Written: July 2013
Instruments used to regulate the consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel‐efficiency standards. However, the effects that these have on oil consumption and price vary. If market power is present in the oil market, the directions of change in consumption and price might contrast with those in a competitive market. As a result, the market structure affects not only the effectiveness of the policy instruments used to reduce oil consumption, but also the terms of trade and carbon leakage. In particular, reduced oil consumption, as a result of increased fuel‐efficiency standards, will unambiguously increase the price of oil under a monopoly.
Keywords: Carbon leakage, monopoly, oil consumption, transport policy instruments, terms of trade
JEL Classification: D42, Q54, R48
Suggested Citation: Suggested Citation
Kverndokk, Snorre and Rosendahl, Knut Einar, Effects of Transport Regulation on the Oil Market: Does Market Power Matter? (July 2013). The Scandinavian Journal of Economics, Vol. 115, Issue 3, pp. 662-694, 2013. Available at SSRN: https://ssrn.com/abstract=2282335 or http://dx.doi.org/10.1111/sjoe.12013
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