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Do Foreign Gifts Buy Corporate Political Action? Evidence from the Saudi Crude Discount Program

Abstract:
Between 1991 and 2003, Saudi Aramco sold crude to U.S. refineries at a substantial discount, with a total cost of approximately 8.5 billion dollars. This paper assesses the incidence of these discount rents in the U.S. market and yields the first empirical evidence for the use of oil as a tool of political leverage through transfers to American firms. Using panel variation in discount receipts, I find that rents were captured by refiners as profits. Discounts were also associated with increases in refiners� political donations and strategic reallocations of these contributions.

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Keywords: Political economy, Oil, Refining, Saudi Arabia, Political contributions

DOI: 10.5547/01956574.42.3.jpec

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Published in Volume 42, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.