Oil prices and regional trade in the United States

Szewerniak, Wojciech W

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Description

Title

Oil prices and regional trade in the United States

Author(s)

Szewerniak, Wojciech W

Issue Date

2016-07-19

Director of Research (if dissertation) or Advisor (if thesis)

Xu, Yilan

Department of Study

Agr & Consumer Economics

Discipline

Agricultural & Applied Econ

Degree Granting Institution

University of Illinois at Urbana-Champaign

Degree Name

M.S.

Degree Level

Thesis

Keyword(s)

• oil prices
• trade
• gravity

Abstract

This paper explores the effect of a diesel price on trade flows across space within the U.S. Using a structural gravity model applied to the U.S. inter-state trade, we find diesel price has a significant negative effect on interstate trade, and that trade between any pair of states is more sensitive to an oil price shock the farther away the states are from one another. Exemplifying this in a general equilibrium, a 10% increase in diesel price decreases trade from Massachusetts to California by 2.9%, but only by 0.47% to New York, accounting for a 2.43 percentage point difference. At the same time Massachusetts increases trade within its own borders by 0.53%. In general, we can see that trade becomes more local (or regional) when fuel costs rise. Finally, such a modest increase of diesel price leads to non-uniform state welfare effects, with a median 0.69% real GDP loss, amounting to a total income loss of $82 billion nationwide.

Graduation Semester

2016-08

Type of Resource

text

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http://hdl.handle.net/2142/92852

Copyright and License Information

Copyright 2016 Wojciech Szewerniak

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