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Federal Reserve Bank of Dallas
Working Papers
The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis
Nida Cakir Melek
Michael D. Plante
Mine K. Yucel
Abstract

This paper examines the effects of the U.S. shale oil boom in a two-country DSGE model where countries produce crude oil, refined oil products, and a non-oil good. The model incorporates different types of crude oil that are imperfect substitutes for each other as inputs into the refining sector. The model is calibrated to match oil market and macroeconomic data for the U.S. and the rest of the world (ROW). We investigate the implications of a significant increase in U.S. light crude oil production similar to the shale oil boom. Consistent with the data, our model predicts that light oil prices decline, U.S. imports of light oil fall dramatically, and light oil crowds out the use of medium crude by U.S. refiners. In addition, fuel prices fall and U.S. GDP rises. We then use our model to examine the potential implications of the former U.S. crude oil export ban. The model predicts that the ban was a binding constraint in 2013 through 2015. We find that the distortions introduced by the policy are greatest in the refining sector. Light oil prices become artificially low in the U.S., and U.S. refineries produce inefficiently high amount of refined products, but the impact on refined product prices and GDP are negligible.


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Nida Cakir Melek & Michael D. Plante & Mine K. Yucel, The U.S. Shale Oil Boom, the Oil Export Ban, and the Economy: A General Equilibrium Analysis, Federal Reserve Bank of Dallas, Working Papers 1708, 04 Sep 2017, revised 04 Sep 2017.
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Note: This paper was previously circulated under the title "A macroeconomic analysis of lifting the U.S. crude oil export ban."
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Subject headings:
Keywords: DSGE; oil; trade; fuel prices; export ban
DOI: 10.24149/wp1708
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