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EMF OP 31: Economic Impacts of U.S. Oil Replacement Policies: Methodology and Results for the OTA Analysis

This paper discusses the likely economic impacts of two different OTA scenarios: (1) a major oil disruption lasting five years; and (2) a major disruption with an accelerated U.S. oil replacement policy. Each case is compared with a baseline scenario depicting stable oil market conditions without an accelerated oil substitution policy. The analysis addresses three central issues: (1) the effect of a major disruption on oil prices; (2) the effect of an aggressive U.S. oil replacement policy on mitigating the oil price shock during a major disruption; and (3) the effects of these oil price changes on the U.S. economy. Our analysis is based upon a number of studies of these issues, including several EMF studies. Impacts on the oil price and the economy are derived for two time periods — two years and five years after the disruptions.