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

33 Pages Posted: 20 Jun 2013  

Snorre Kverndokk

Ragnar Frisch Centre for Economic Research

Knut Einar Rosendahl

Norwegian University of Life Sciences; Statistics Norway - Research Department

Date Written: July 2013

Abstract

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

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

Snorre Kverndokk (Contact Author)

Ragnar Frisch Centre for Economic Research ( email )

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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)

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