Reducing US oil-import dependence: A tariff, subsidy, or gasoline tax

Journal Article · Tue May 01 00:00:00 EDT 1990 · Economic Review (Federal Reserve Bank of Dallas); (United States)

OSTI ID:5495404

Yuecel, M K ^[1]; Dahl, C ^[2]

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1. Federal Reserve Bank of Dallas, TX (USA)
2. Louisiana State Univ. (USA)

Low oil prices and rising oil imports have caused growing concern about U.S. vulnerability to oil-supply shocks. The authors devise a measure of vulnerability and use it to compare three policies that have been proposed to reduce U.S. vulnerability to oil-supply disruptions: a 25% oil-import tariff, a $5-per-barrel subsidy to domestic oil producers, and an increase in the gasoline tax from 9 cents to 25 cents per gallon. They find that the tariff would make the United States less vulnerable to disruptions. By increasing both consumer and producer prices, the tariff lowers consumption while encouraging domestic production. The increased gasoline tax could either lower or raise vulnerability. If domestic supply is not very responsive to price changes, the gasoline tax increases vulnerability. If domestic supply is responsive to price changes, the gasoline tax reduces vulnerability. The subsidy encourages increased consumption and production, leading to a faster depletion of the resource base. Hence, the subsidy would make the United States more vulnerable to oil-supply shocks. 10 refs., 8 figs., 1 tab.

• OSTI ID: 5495404
• Journal Information: Economic Review (Federal Reserve Bank of Dallas); (United States), Journal Name: Economic Review (Federal Reserve Bank of Dallas); (United States); ISSN 0732-1414
• Country of Publication: United States
• Language: English

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