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

Abstract:

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.