The trade consequences of pricey oil

David von Below and Pierre-Louis Vézina

No 115, OxCarre Working Papers from Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford

Abstract: This paper examines the trade and trade-induced welfare effects of high oil prices. Using a gravity model of trade we find that the distance elasticity of trade significantly increases with the oil price. This suggests that high oil prices make trade less global. We estimate that an increase in the oil price from 100$ to 200$ would have the similar effect as imposing a world-wide import tariff between 4% and 9%, depending on the distance between countries. In turn, such higher trade costs would lower welfare by 1.8% in the average non-oil-exporting country.

Keywords: oil prices; gravity; trade costs (search for similar items in EconPapers)
JEL-codes: F14 Q43 (search for similar items in EconPapers)
Date: 2013-06-03
New Economics Papers: this item is included in nep-cwa, nep-ene and nep-int
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The Trade Consequences of Pricey Oil (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:oxf:oxcrwp:115

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