WASHINGTON - The price of oil is currently hovering near $80 per barrel, but that doesn’t include the potential economic costs to the United States that would be caused by disruptions in oil supply, according to a discussion paper by Resources for the Future (RFF), an independent research group.

The report estimates the oil security premium for domestically produced oil at about $2.28 per barrel in 2008, rising to $4.45 by 2030, in constant 2007 dollars. In contrast, the oil security premium for imported oil starts at about $4.45 per barrel in 2008 and rises to $6.82 by 2030. While that analysis suggests that emphasizing domestic oil production over foreign imports has some advantages, the authors note that the security premium is minor compared to the current and future direct costs of oil, which the authors project to increase to more than $130 per barrel by 2030. Given that high price, the report concludes that the best policy would be to emphasize reductions in U.S. petroleum consumption, regardless of the source of oil.

For a copy of the complete discussion paper, go to www.rff.org/RFF/Documents/RFF-DP-10-05.pdf.

Publication date: 03/22/2010