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Assessing the U.S. oil security premium

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  • Brown, Stephen P.A.
  • Huntington, Hillard G.

Abstract

World oil supply disruptions lead to U.S. economic losses. Increased oil consumption increases the vulnerability of the economy to oil supply disruptions, but it matters where the additional oil is produced. Increased production from stable producers can dampen future oil price shocks, whereas increased production from unstable producers can exacerbate future oil price shocks. Because oil is fungible, U.S. pricing and import policies can differentiate only between domestic and imported oil rather than between stable and unstable sources. The economic losses associated with oil supply disruptions—GDP losses and some transfers abroad—are externalities that can be quantified as oil security premiums. We estimate these premiums by taking into account projected world oil market conditions, probable oil supply disruptions, the market response to oil supply disruptions, and the resulting U.S. economic losses.

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  • Brown, Stephen P.A. & Huntington, Hillard G., 2013. "Assessing the U.S. oil security premium," Energy Economics, Elsevier, vol. 38(C), pages 118-127.
    • Handle: RePEc:eee:eneeco:v:38:y:2013:i:c:p:118-127
    DOI: 10.1016/j.eneco.2013.03.010
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    Cited by:

    1. Charles F. Mason & Lucija A. Muehlenbachs & Sheila M. Olmstead, 2015. "The Economics of Shale Gas Development," Annual Review of Resource Economics, Annual Reviews, vol. 7(1), pages 269-289, October.
    2. Huntington, Hillard G., 2018. "Measuring oil supply disruptions: A historical perspective," Energy Policy, Elsevier, vol. 115(C), pages 426-433.
    3. Molyneaux, Lynette & Brown, Colin & Wagner, Liam & Foster, John, 2016. "Measuring resilience in energy systems: Insights from a range of disciplines," Renewable and Sustainable Energy Reviews, Elsevier, vol. 59(C), pages 1068-1079.
    4. Beccue, Phillip C. & Huntington, Hillard G. & Leiby, Paul N. & Vincent, Kenneth R., 2018. "An updated assessment of oil market disruption risks," Energy Policy, Elsevier, vol. 115(C), pages 456-469.
    5. Bai, Yang & Dahl, Carol, 2018. "Evaluating the management of U.S. Strategic Petroleum Reserve during oil disruptions," Energy Policy, Elsevier, vol. 117(C), pages 25-38.
    6. Brown, Stephen P.A. & Huntington, Hillard G., 2017. "OPEC and world oil security," Energy Policy, Elsevier, vol. 108(C), pages 512-523.
    7. Wei, Na & Xie, Wen-Jie & Zhou, Wei-Xing, 2022. "Robustness of the international oil trade network under targeted attacks to economies," Energy, Elsevier, vol. 251(C).
    8. Emery, Isaac & Mbonimpa, Eric & Thal, Alfred E., 2017. "Climate-based policies may increase life-cycle social costs of vehicle fleet operation," Energy Policy, Elsevier, vol. 101(C), pages 1-9.
    9. Balke, Nathan S. & Brown, Stephen P.A., 2018. "Oil supply shocks and the U.S. economy: An estimated DSGE model," Energy Policy, Elsevier, vol. 116(C), pages 357-372.
    10. Newell, Richard G. & Pizer, William A. & Raimi, Daniel, 2019. "U.S. federal government subsidies for clean energy: Design choices and implications," Energy Economics, Elsevier, vol. 80(C), pages 831-841.
    11. Brown, Stephen P.A., 2018. "New estimates of the security costs of U.S. oil consumption," Energy Policy, Elsevier, vol. 113(C), pages 171-192.
    12. Greene, David L. & Liu, Changzheng, 2015. "U.S. oil dependence 2014: Is energy independence in sight?," Energy Policy, Elsevier, vol. 85(C), pages 126-137.
    13. Rose, Adam & Wei, Dan & Paul, Donald, 2018. "Economic consequences of and resilience to a disruption of petroleum trade: The role of seaports in U.S. energy security," Energy Policy, Elsevier, vol. 115(C), pages 584-615.
    14. Liu, Litao & Cao, Zhi & Liu, Xiaojie & Shi, Lei & Cheng, Shengkui & Liu, Gang, 2020. "Oil security revisited: An assessment based on complex network analysis," Energy, Elsevier, vol. 194(C).
    15. N. Wei & W. -J. Xie & W. -X. Zhou, 2021. "Robustness of the international oil trade network under targeted attacks to economies," Papers 2101.10679, arXiv.org, revised Jan 2021.
    16. Brown, Stephen P.A. & Huntington, Hillard G., 2015. "Evaluating U.S. oil security and import reliance," Energy Policy, Elsevier, vol. 79(C), pages 9-22.

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    More about this item

    Keywords

    Oil markets; Energy security; Oil prices and economic activity;
    All these keywords.

    JEL classification:

    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy
    • Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy

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