IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2204.03318.html
   My bibliography  Save this paper

What is the effect of EU's fuel-tax cuts on Russia's oil income?

Author

Listed:
  • Johan Gars
  • Daniel Spiro
  • Henrik Wachtmeister

Abstract

Following the oil-price surge in the wake of Russia's invasion of Ukraine, many countries in the EU are cutting taxes on petrol and diesel. Using standard theory and empirical estimates, we assess how such tax cuts influence the oil income in Russia. We find that a tax cut of 20 euro cents per liter increase Russia's oil profits by around 11 million Euros per day in the short run and long run. This is equivalent to 4100 million Euros in a year, 0.3% of Russia's GDP or 7% of its military spending. We show that a cash transfer to EU citizens, with an equivalent fiscal burden as the tax cut, reduces these side effects to a fraction.

Suggested Citation

  • Johan Gars & Daniel Spiro & Henrik Wachtmeister, 2022. "What is the effect of EU's fuel-tax cuts on Russia's oil income?," Papers 2204.03318, arXiv.org, revised May 2022.
    • Handle: RePEc:arx:papers:2204.03318
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2204.03318
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dahl, Carol A., 2012. "Measuring global gasoline and diesel price and income elasticities," Energy Policy, Elsevier, vol. 41(C), pages 2-13.
    2. Peter Erickson & Michael Lazarus, 2014. "Impact of the Keystone XL pipeline on global oil markets and greenhouse gas emissions," Nature Climate Change, Nature, vol. 4(9), pages 778-781, September.
    3. Christopher Severen & Arthur A. van Benthem, 2022. "Formative Experiences and the Price of Gasoline," American Economic Journal: Applied Economics, American Economic Association, vol. 14(2), pages 256-284, April.
    4. Caldara, Dario & Cavallo, Michele & Iacoviello, Matteo, 2019. "Oil price elasticities and oil price fluctuations," Journal of Monetary Economics, Elsevier, vol. 103(C), pages 1-20.
    5. Aklilu, Abenezer Zeleke, 2020. "Gasoline and diesel demand in the EU: Implications for the 2030 emission goal," Renewable and Sustainable Energy Reviews, Elsevier, vol. 118(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Johan Gars & Daniel Spiro & Henrik Wachtmeister, 2022. "The effect of European fuel-tax cuts on the oil income of Russia," Nature Energy, Nature, vol. 7(10), pages 989-997, October.
    2. Taran Fæhn, Cathrine Hagem, Lars Lindholt, Ståle Mæland, and Knut Einar Rosendahl, 2017. "Climate policies in a fossil fuel producing country demand versus supply side policies," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Gren, Ing-Marie & Tirkaso, Wondmagegn, 2021. "Costs and equity of uncertain greenhouse gas reductions – fuel, food and negative emissions in Sweden," Energy Economics, Elsevier, vol. 104(C).
    4. James Ming Chen & Mobeen Ur Rehman, 2021. "A Pattern New in Every Moment: The Temporal Clustering of Markets for Crude Oil, Refined Fuels, and Other Commodities," Energies, MDPI, vol. 14(19), pages 1-58, September.
    5. Zhang, Zhikai & Wang, Yudong & Xiao, Jihong & Zhang, Yaojie, 2023. "Not all geopolitical shocks are alike: Identifying price dynamics in the crude oil market under tensions," Resources Policy, Elsevier, vol. 80(C).
    6. Alberto Gago & Xavier Labandeira & Xiral López Otero, 2014. "A Panorama on Energy Taxes and Green Tax Reforms," Hacienda Pública Española / Review of Public Economics, IEF, vol. 208(1), pages 145-190, March.
    7. Berger, Eva M. & Bialek, Sylwia & Garnadt, Niklas & Grimm, Veronika & Other, Lars & Salzmann, Leonard & Schnitzer, Monika & Truger, Achim & Wieland, Volker, 2022. "A potential sudden stop of energy imports from Russia: Effects on energy security and economic output in Germany and the EU," Working Papers 01/2022, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    8. Romain Houssa & Jolan Mohimont & Chris Otrok, 2019. "A model for international spillovers to emerging markets," Working Paper Research 370, National Bank of Belgium.
    9. Ferrari, Davide & Ravazzolo, Francesco & Vespignani, Joaquin, 2021. "Forecasting energy commodity prices: A large global dataset sparse approach," Energy Economics, Elsevier, vol. 98(C).
    10. Fédéric Holm-Hadulla & Kirstin Hubrich, 2017. "Macroeconomic Implications of Oil Price Fluctuations : A Regime-Switching Framework for the Euro Area," Finance and Economics Discussion Series 2017-063, Board of Governors of the Federal Reserve System (U.S.).
    11. Labandeira, Xavier & Labeaga, José M. & López-Otero, Xiral, 2017. "A meta-analysis on the price elasticity of energy demand," Energy Policy, Elsevier, vol. 102(C), pages 549-568.
    12. Gulan, Adam & Haavio, Markus & Kilponen, Juha, 2021. "Can large trade shocks cause crises? The case of the Finnish–Soviet trade collapse," Journal of International Economics, Elsevier, vol. 131(C).
    13. Petrella, Ivan & Di Pace, Federico & Juvenal, Luciana, 2020. "Terms-of-Trade Shocks are Not all Alike," CEPR Discussion Papers 14594, C.E.P.R. Discussion Papers.
    14. Liddle, Brantley & Parker, Steven, 2022. "One more for the road: Reconsidering whether OECD gasoline income and price elasticities have changed over time," Energy Economics, Elsevier, vol. 114(C).
    15. Scheitrum, Daniel, 2017. "Renewable Natural Gas as a Solution to Climate Goals: Response to California's Low Carbon Fuel Standard," MPRA Paper 77193, University Library of Munich, Germany.
    16. Gupta, Monika & Bandyopadhyay, Kaushik Ranjan & Singh, Sanjay K., 2019. "Measuring effectiveness of carbon tax on Indian road passenger transport: A system dynamics approach," Energy Economics, Elsevier, vol. 81(C), pages 341-354.
    17. Lucas W. Davis, 2017. "The Environmental Cost of Global Fuel Subsidies," The Energy Journal, International Association for Energy Economics, vol. 0(KAPSARC S).
    18. Yang, Tianle & Zhou, Fangxing & Du, Min & Du, Qunyang & Zhou, Shirong, 2023. "Fluctuation in the global oil market, stock market volatility, and economic policy uncertainty: A study of the US and China," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 377-387.
    19. Broberg, Thomas, 2014. "Relative income and the WTP for public goods - A case study of forest conservation in Sweden," CERE Working Papers 2014:6, CERE - the Center for Environmental and Resource Economics.
    20. Zhu, Qi & Jin, Sisi & Huang, Yuxuan & Yan, Cheng, 2022. "Oil price uncertainty and stock price informativeness: Evidence from listed U.S. companies," Energy Economics, Elsevier, vol. 113(C).

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2204.03318. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.