This report analyzes the effects of domestic petroleum regulations on refined product prices in the United States and on the trade-off between the levels of domestic refinery production and refined product imports. The major conclusions are that: (1) The crude oil cost advantage which domestic refiners enjoy because of crude oil price controls has decreased by 50% since March 1976. (2) At least some of the resulting increase in crude oil acquisition cost has been passed through into gasoline and distillate prices. (3) In the East Coast residual fuel oil market, imports have increased substantially since 1976, and the increase may have prevented the passthrough of crude oil cost increases. (4) The crude oil cost advantage and the small refiner bias in the entitlements program have caused greater domestic refinery production and lower utilization of foreign refining capacity than would have occurred without the regulations. (5) Deregulation of crude oil prices is likely to result in some increase in refined product prices, but full passthrough will not occur if average noncrude oil costs are lower for foreign refiners than for domestic refiners. (ERA citation 04:042303)
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