EMF OP 35: Limiting Oil Imports: Cost Estimates From a Range of U.S. Model Projections

Abstract: 

The costs of curtailing growth in U.S. oil imports are estimated based upon the supply and energy demand responses to price from six world oil models that were compared recently by the Energy Modeling Forum. Direct resource costs over the 1989-2010 period are estimated from U.S. results for a flat and a rising price case that span an $18 per barrel difference by the year 2000 and beyond. To provide a more balanced perspective, the paper also includes estimates of some potential benefits from import-reduction policies — smaller wealth transfers during a disruption and lower oil prices without disruptions as a result of the policy. While keeping future oil imports at today’s level appears to be quite costly, our results indicate some opportunity for economic gain with less aggressive import-reduction programs.