Oil import quotas in the context of the International Energy Agency sharing agreement: (Final report)
A requirement of the IEA oil sharing agreement is that, during disruptions, countries whose actual oil supplies exceed their supply rights eliminate the gap by reducing consumption. If, as described in chapter 2 and alluded to in chapter 3, the reduction is implemented by an import quota, the resulting ''kink'' in the world demand for imports could, under noncompetitive market conditions, cause the world price of oil to rise. No serious assessment of the emergency programs of the IEA can ignore this possible perverse outcome of oil sharing. The Emergency Sharing System does not require countries to impose quotas but in fulfilling a supply limitation prescribed by the ESS, countries will almost inevitably be forced to employ quotas rather than tariffs. The reason for this is the fact that the supply right is expressed as a quantitative consumption limit. The natural policy response is thus to specify the quantitative import ceiling that exactly meets the limit. A tariff is, of course, an addition to price that may or may not reduce imports exactly to the desired level. Altering the tariff in a trial and error attempt to bring imports precisely to the ceiling is almost certainly not a feasible course of action. Governments will have a second reason for preferring quotas to tariffs as a means of meeting their ESS obligation. In the first instance, both instruments will raise the effective domestic price of oil - tariffs, by simply being added to the prevailing price; quotas, by creating a value in the right or license to import oil. A rise in the effective price of oil will always be unpopular, but particularly so in the context of a disruption and the price rise already associated with it. An effective further price rise reflecting the right to import oil under a quota, however, is less likely to be associated by the public with past or present governmental policies than is a direct further rise due to a tariff.
- Research Organization:
- American Enterprise Inst. for Public Policy Research, Washington, DC; California Univ., Berkeley (USA)
- DOE Contract Number:
- FG01-85PE77035
- OSTI ID:
- 6667032
- Report Number(s):
- DOE/PE/77035-T3; ON: DE87006123
- Country of Publication:
- United States
- Language:
- English
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