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Title: The social costs to the US of monopolization of the world oil market, 1972--1991

Abstract

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 wealthmore » 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.« less

Authors:
;
Publication Date:
Research Org.:
Oak Ridge National Lab., TN (United States)
Sponsoring Org.:
DOE; USDOE, Washington, DC (United States)
OSTI Identifier:
6594868
Alternate Identifier(s):
OSTI ID: 6594868; Legacy ID: DE93011829
Report Number(s):
ORNL-6744
ON: DE93011829
DOE Contract Number:
AC05-84OR21400
Resource Type:
Technical Report
Country of Publication:
United States
Language:
English
Subject:
02 PETROLEUM; 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

Citation Formats

Greene, D.L., and Leiby, P.N. The social costs to the US of monopolization of the world oil market, 1972--1991. United States: N. p., 1993. Web. doi:10.2172/6594868.
Greene, D.L., & Leiby, P.N. The social costs to the US of monopolization of the world oil market, 1972--1991. United States. doi:10.2172/6594868.
Greene, D.L., and Leiby, P.N. Mon . "The social costs to the US of monopolization of the world oil market, 1972--1991". United States. doi:10.2172/6594868. https://www.osti.gov/servlets/purl/6594868.
@article{osti_6594868,
title = {The social costs to the US of monopolization of the world oil market, 1972--1991},
author = {Greene, D.L. and Leiby, P.N.},
abstractNote = {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.},
doi = {10.2172/6594868},
journal = {},
number = ,
volume = ,
place = {United States},
year = {Mon Mar 01 00:00:00 EST 1993},
month = {Mon Mar 01 00:00:00 EST 1993}
}

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