The Economic and Energy Effects of Alternative Oil Import Policies

The U.S. has become increasingly dependent on oil imports, especially from the Organization of Petroleum Exporting Countries (OPEC). Our high dependency level makes us economically vulnerable to abrupt price increases imposed by OPEC. The worst affects of price increases are on inflation and unemployment, but there are also significant negative effects on economic growth and the balance of trade. Oil imports also limit U.S. freedom of action in world affairs. GAO examined alternatives to this problem of excessive reliance on imported oil. The three pricing policy alternatives are price deregulation, import fees, and domestic crude oil taxes. The fourth alternative, import quotas, is a quantitative limit on imports and so does not work directly through the price mechanism. GAO also examined the effects of the present administration's decontrol plan and its two-part windfall profits tax.