LDC Cooperation in World Oil Conservation

Environmental concerns are leading many industrialized countries to consider measures which would reduce their consumption of oil, as well as other energy sources. The reluctance of the developing countries to join in these conservation efforts will reduce the policy's effectiveness. This paper explores the conditions under which the exclusion of important oil consumers (like developing countries) would weaken unilateral OECD actions to conserve oil. Oil conservation undertaken unilaterally by the OECD can lead to lower world oil prices, and offsetting increases in oil consumption elsewhere. We provide estimates of these offsetting effects and how they influence the costs of participating in the policy. We also examine the effect of adding and excluding countries to a coordinated policy of oil conservation.