The Mirage of Oil Protection

The debate over oil tariffs revolves around the question, should consumers pay higher prices now and in the future to prevent an oil supply calamity? A number of economists and industry experts, in addition to many individuals within the industry, have answered the question affirmatively. They have called for a tariff on crude oil and oil products to protect the domestic industry, and, in turn, consumers and the economic and military interests of the nation as a whole, from low-cost and reserve-rich foreign suppliers who do not have our best interests in mind. This book attempts to show that even the most sophisticated arguments for oil protectionism are not convincing. It surveys previous U.S. episodes of energy protectionism to demonstrate the perils of political solutions to competitive problems. The book concludes that oil protectionism will lead not to sustained industry relief but to political and economic struggles within an overbuilt domestic industry. Sustainable industry relief requires market-oriented reforms in the areas of taxation, regulation, and privatization. In an era of lower, volatile prices, only this free-market approach can enhance the health of the domestic industry while respecting the rights of consumers. Co-published with the Cato Institute.