Domestic Oil Policy

Domestic oil policy slides [link]

Key Points

• Fracking
  • Overview
  • Social Costs
  • Pass-through
  • Who really benefits from an increase in domestic oil production?
• Hydrocarbon transportation
  • Overview of oil supply chain
  • Keystone pipeline overview and controversy
  • Jones Act

Required reading and response questions

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Lecture 1

• Watch this video from CNBC on “How Fracking Changed America Forever” (you don’t need to read the article)
• Then read this paper by Muehlenbachs, Spiller, and Timmins on estimating the social costs of fracking.
  • You don’t need to read the appendix of the paper, but, if you’re interested, it has a nice succinct summary of the “hedonic” property valuation model, which maps home prices to peoples’ preferences for amenities.

Response questions

1. What data do the authors use in their analysis? What is a unit of observation in this data set?
2. The authors use difference in differences. What are the two groups being differenced?
3. What are the main empirical results? Do you believe these over or under-estimate the social costs of fracking?

Optional Readings

• This New York Times article has additional context and is indicative of the news coverage of this issue.

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Lecture 2

• Read Muehlegger & Sweeney 2021. (You can skip section 2, and you don’t need to read the appendix)

Response questions

1. What is “pass-through”?
2. Based on the analysis in this paper, who do you think benefited more from the fracking boom – producers or drivers (consumers)?

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Lecture 3

• Read the following CRS Report on oil sands and the Keystone XL pipeline. Note: you can read the intro, and skim the other sections, focussing on the tables and figures.
• Listen to this Planet Money podcast
• And then read this short policy piece
• Optional: Borenstein and Kellogg (2014) “The Incidence of an Oil Glut”

Response questions

1. What are the main costs and benefits (to the US) of the Keystone Pipeline?
2. Do you think the US was right to reject the proposal?
3. Do you think the Jones Act should be repealed? If yes, why do you think it hasn’t been? If no, why not?