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Regional Impacts of Petroleum Price Regulation: The Case of Texas, 1973-1983

A dynamic engineering-based econometric model of the Terns petroleum industry is used to jointly assess the impacts of federal price controls and the windfall profit tax, on both oil and gas supply, over the period 1973-1983. Comparing simulation results obtained using actual prices, and then counterfactual, uncontrolled prices, show small but persistent losses in above-ground production but considerably larger percentage impacts in drilling activity and new reserve additions. Thus, the long-run opportunity costs of post-embargo energy policy may not be fully reflected in traditional calculations that use constant supply elasticities to calculate annual supply impacts without regard to previous years' prices or production levels.

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Energy Specializations: Petroleum – Markets and Prices for Crude Oil and Products; Petroleum – Policy and Regulation

JEL Codes:
L13 - Oligopoly and Other Imperfect Markets
E60 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General

Keywords: Oil prices Regulation, Texas, Dynamic engineering-based econometric model, Oil industry

DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No2-8

Published in Volume 11, Number 2 of The Quarterly Journal of the IAEE's Energy Economics Education Foundation.