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Effects of Transport Regulation on the Oil Market: Does Market Power Matter?
Author(s) -
Kverndokk Snorre,
Rosendahl Knut Einar
Publication year - 2013
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12013
Subject(s) - economics , market power , monopoly , consumption (sociology) , oil consumption , carbon leakage , microeconomics , industrial organization , emissions trading , greenhouse gas , social science , ecology , sociology , automotive engineering , engineering , biology
Instruments used to regulate the consumption of oil in the transport sector include fuel taxes, biofuel requirements, and fuel‐efficiency standards. However, the effects that these have on oil consumption and price vary. If market power is present in the oil market, the directions of change in consumption and price might contrast with those in a competitive market. As a result, the market structure affects not only the effectiveness of the policy instruments used to reduce oil consumption, but also the terms of trade and carbon leakage. In particular, reduced oil consumption, as a result of increased fuel‐efficiency standards, will unambiguously increase the price of oil under a monopoly.