Preliminary analysis of economic impacts of petroleum shortages with tax rebates: Task 4

Technical Report · Wed Apr 01 04:00:00 EST 1981

OSTI ID:6758659

This study investigates the potential economic impact of a shortfall in crude oil imports on US industrial output and employment, and on state and local government budgets. The assumption is that there is a 10 million barrel per day reduction in supplies from the Middle East, to be shared by agreement among the free-world importing countries, amounting to approximately a 20% reduction in consumption by each country. At current levels of US consumption this would amount to a reduction approximately 3.4 million barrels per day. It is further assumed that the free market would allocate supplies of petroleum products, causing a large increase in the price of petroleum products in the short-term. For the purposes of this analysis the price increase on petroleum products is assumed to be 100%, implying a short-term petroleum demand/price elasticity of -.2 (No attempt has been made in this analysis to determine the exact effect on market-clearing prices; a different assumption on the extent of the price increase can readily be handled within the analytical framework employed in this study). It is further assumed that the windfall profits accruing to oil companies due to the sudden price increase will be taxed to the extent that 50% of these added revenues will be made available for rebates targeted to segments of the economy. The purpose of the proposed rebates is to restore lost purchasing power to the economy, to avoid undue disruption to economic production, and to mitigate budget hardships on individuals, businesses and governmental organizations resulting from the sudden rise in prices of petroleum products. These rebates should be made in a fashion that will preserve the incentives to conserve energy that are inherent in market prices that reflect the true costs of resources consumed.

• Research Organization: Faucett (Jack) Associates, Inc., Chevy Chase, MD (USA)
• DOE Contract Number: AC01-79PE70050
• OSTI ID: 6758659
• Report Number(s): JACKFAU-81-253/4; ON: DE87006651
• Country of Publication: United States
• Language: English

Related Subjects

02 PETROLEUM
020700* -- Petroleum-- Economics
Industrial
& Business Aspects
29 ENERGY PLANNING, POLICY, AND ECONOMY
294002 -- Energy Planning & Policy-- Petroleum
ECONOMIC IMPACT
ECONOMY
ENERGY SOURCES
FOSSIL FUELS
FUELS
IMPORTS
LOCAL GOVERNMENT
NORTH AMERICA
PETROLEUM
STATE GOVERNMENT
SUPPLY DISRUPTION
USA