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The Economics of International Oil Sharing

Abstract:
Fifteen years after the 1973-74 oil embargo, two of the programs designed by consuming countries to cope with oil disruptions are still in place. One is the strategic stockpiles of oil owned or controlled by the governments of the industrial nations. The other is the oil-sharing plan of the International Energy Agency. In fact, both programs received their impetus from the IEA, which was formed in 1974 by the United States, Canada, most Western European countries (except France), Japan, Australia, and New Zealand. The TEA requires signatory countries to hold oil stocks equal to ninety days' imports of oil (interpreted generally as an amount over and above normal working stocks). This has largely been accomplished. Oil sharing, however, is to be imposed only in the event of oil-supply cutoffs of 7 percent or more to any individual member or the group as a whole. Although petitioned several times by individual countries, sharing has never been implemented. Neither has the program been systematically evaluated by a task force outside the IEA. This is the purpose of the study which this paper draws upon (Horwich and Weimer, eds., 1988).

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Energy Specializations: Petroleum – Policy and Regulation; Energy Access – Energy Poverty and Equity

JEL Codes:
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General
Q56 - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

Keywords: Oil sharing, Oil Embargo, IEA, Oil trade model (OTM), OECD

DOI: 10.5547/ISSN0195-6574-EJ-Vol9-No4-2


Published in Volume 9, Number 4 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.