The social costs to the US of monopolization of the world oil market, 1972--1991
The partial monopolization of the world oil market by the OPEC cartel has produced significant economic costs to the economies of the world. This paper reports estimates of the costs of monopolization of oil to the US over the period 1972--1991. Two fundamental assumptions of the analysis are, (1) that OPEC has acted as a monopoly, albeit with limited control, knowledge, and ability to act and, (2) that the US and other consuming nations could, through collective (social) action affect the cartel's ability to act as a monopoly. We measure total costs by comparing actual costs for the 1972--1991 period to a hypothetical more competitive'' world oil market scenario. By measuring past costs we avoid the enormous uncertainties about the future course of the world oil market and leave to the reader's judgment the issue of how much the future will be like the past. We note that total cost numbers cannot be used to determine the value of reducing US oil use by one barrel. They are useful for describing the overall size of the petroleum problem and are one important factor in deciding how much effort should be devoted to solving it. Monopoly pricing of oil transfers wealth from US oil consumers to foreign oil producers and, by increasing theeconomic scarcity of oil, reduces the economy's potential to produce. The actions of the OPEC cartel have also produced oil price shocks, both upward and downward, that generate additional costs because of the economy's inherent inability to adjust quickly to a large change in energy prices. Estimated total costs to the United States from these three sources for the 1972--1991 period are put at $4.1 trillion in 1990$$($$1.2 T wealth transfer, $0.8 T macroeconomic adjustment costs, $2.1 T potential GNP losses). The cost of the US's primary oil supply contingency program is small ($10 B) by comparison.
- Research Organization:
- Oak Ridge National Lab. (ORNL), Oak Ridge, TN (United States)
- Sponsoring Organization:
- USDOE; USDOE, Washington, DC (United States)
- DOE Contract Number:
- AC05-84OR21400
- OSTI ID:
- 6594868
- Report Number(s):
- ORNL-6744; ON: DE93011829
- Country of Publication:
- United States
- Language:
- English
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Related Subjects
MONOPOLIES
ECONOMIC IMPACT
PETROLEUM
MARKET
COST
FINANCIAL DATA
GLOBAL ASPECTS
OPEC
PRICES
SUPPLY DISRUPTION
USA
DATA
DEVELOPED COUNTRIES
ENERGY SOURCES
FOSSIL FUELS
FUELS
INFORMATION
INTERNATIONAL ORGANIZATIONS
NORTH AMERICA
OIL-EXPORTING COUNTRIES
020700* - Petroleum- Economics
Industrial
& Business Aspects