nep-ene New Economics Papers
on Energy Economics
Issue of 2007‒08‒18
five papers chosen by
Roger Fouquet
Imperial College, UK

  2. Cost-Benefit Analysis Case Study on Regulations to Lower the Level of Sulphur in Gasoline By Glenn Jenkins; Chun-Yan Kuo; Aygul Ozbafli
  3. Industry restructuring, OPEC response – and oil price formation By Finn Roar Aune, Klaus Mohn, Petter Osmundsen and Knut Einar Rosendahl
  4. The Comovements between Futures Markets for Crude Oil: Evidence from a Structural GARCH Model By Spargoli, Fabrizio; Zagaglia, Paolo
  5. Diesel price convergence and mineral oil taxation in Europe By Axel Dreher; Tim Krieger

  1. By: Richard S.J. Tol (Economic and Social Research Institute, Dublin, Ireland)
    Abstract: 211 estimates of the social cost of carbon are included in a meta-analysis. The results confirm that a lower discount rate implies a higher estimate; and that higher estimates are found in the gray literature. It is also found that there is a downward trend in the economic impact estimates of the climate; that the Stern Review’s estimates of the social cost of carbon is an outlier; and that the right tail of the distribution is fat. There is a fair chance that the annual climate liability exceeds the annual income of many people.
    Keywords: climate change, social cost of carbon
    JEL: Q54
    Date: 2007–08
  2. By: Glenn Jenkins (Queen's University, Canada); Chun-Yan Kuo (Queen's University, Canada); Aygul Ozbafli (Queen's University, Canada)
    Abstract: The Canadian Cost-Benefit Analysis Guide: Regulatory Proposals, sets out the general methodology and analytical steps to perform a cost-benefit analysis of proposed regulatory changes. To make the Guide operational, this case study has been prepared following the analytical approach recommended by the Guide. In 1994 the sulphur content of Canadian gasoline was found to be high and varied widely across the country. Scientists and health experts have found evidence that emissions of pollutants from vehicles cause considerable harm to the health of Canadians and to the environment. In order to derive the net economic benefits, we integrate the economic benefits with the economic costs for each of the alternative scenarios. In the cost-benefit analysis, all private costs must be measured in terms of their economic opportunity costs. The results indicate that reducing the sulphur in gasoline for any scenario under consideration would generate substantial net health benefits or well-being for Canadians as a whole. Estimates of the net present value (at an eight percent discount rate) range from $1,809 million to $2,663 million.
    Keywords: Gasoline, Sulphur, Cost-Benefit, Environment
    JEL: D61 Q52 Q53
    Date: 2007–03
  3. By: Finn Roar Aune, Klaus Mohn, Petter Osmundsen and Knut Einar Rosendahl (Statistics Norway)
    Abstract: Increased focus on shareholder returns, capital discipline and return on capital employed (RoACE) caused a slowdown in investment rates and production growth among international oil companies around the turn of the century. Focusing on supply side dynamics of the oil market, we explore a hypothesis that the restructuring in the international oil industry towards the end of the 1990s had long-lived effects on OPEC strategies – and on oil price formation. Based on a partial equilibrium model for the global oil market, we examine the effects of the industry restructuring on oil supply and oil prices, compared with a counterfactual reference scenario characterised by industrial stability and unchanged price ambitions within OPEC. A key result is that important factors behind the currently high oil price can be traced back to the industrial restructuring and to the Asian economic crisis. This suggests that temporary economic and financial shocks may have a long-term impact on oil price formation.
    Keywords: Oil market; investment behaviour; market power; equilibrium model
    JEL: G31 L13 Q41
    Date: 2007–07
  4. By: Spargoli, Fabrizio (Università Politecnica delle Marche); Zagaglia, Paolo (Dept. of Economics, Stockholm University)
    Abstract: This paper studies the linkages between the prices of oil futures traded on the New York Mercantile Exchange and the Intercontinental Exchange of London. We estimate a structural BEKK-GARCH model that allows for non-zero correlation between the structural innovations. We identify the structural parameters through restrictions on the reduced-form GARCH model. We find that the oil futures traded on the NYMEX and ICE can be used for mutual hedging purposes only when the structural conditional variances of both innovations are modest and, as such, no turbulent events have taken place. Periods with positive structural correlations are instead associated with peaks in the structural conditional variance of both innovations. During times of market turmoil, the structural variance of the returns on NYMEX futures becomes larger than that of ICE futures. This means that, when there are common shocks to both markets, the NYMEX reacts more strongly than the ICE. Our empirical evidence explains the negative reduced-form correlation between the two returns which is observed in turbulent periods.
    Keywords: oil prices; futures markets; GARCH; structural VAR
    JEL: C22 G19
    Date: 2007–08–14
  5. By: Axel Dreher (ETH Zurich, KOF Swiss Economic Institute); Tim Krieger (University of Paderborn)
    Abstract: We empirically analyze convergence of European producer and consumer prices for diesel fuel and investigate the role of excise taxation. By comparing the speed of convergence of prices and taxes we find a surprisingly fast speed of convergence for consumer prices. While this can in part be explained by fuel tourism, the main driving force is producer price dynamics. Tax convergence contributes weakly to price convergence, but the overall effect is to slow down consumer relative to producer price convergence.
    Keywords: price convergence, diesel, international taxation, European integration, panel unit roots
    JEL: F15 H7 Q48 C2
    Date: 2007–08

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