THE EFFECTS OF GOVERNMENT POLICY AND EXTERNAL SHOCKS ON U.S. REGIONAL PRODUCTION AND TRADING PATTERNS OF PETROLEUM AND PETROLEUM PRODUCTS, 1974-1982 (MODELS, ENERGY, PADD; UNITED STATES)

The purpose of this study is to determine how the various government energy programs, the OAPEC oil embargo and the Iranian Crisis have affected the production and trade among PADDs. Moreover, this study reveals the degree of regional integration and competition among PADDs. This investigation models international and interregional trade of crude oil and refined petroleum products among Petroleum Administration for Defense Districts (PADDs). The study examines the period January 1974 to December 1982.;The study takes these politically defined data regions (PADDs) and transforms them into nodally defined economic regions. The various domestic nodes are: New York, Chicago, New Orleans, Denver and Los Angeles. For world trade in petroleum products, the relevant node is Rotterdam. For crude oil, the nodes are Saudi Arabia, Nigeria, Canada and Indonesia. The model is spatial in that it incorporates distance as a variable, through the use of transportation costs. Transportation costs are based on a transportation network that was created to link the various nodes.;From this a separate regional production function is modeled for crude oil, motor gasoline, jet fuel, distillate fuel oil and residual fuel oil. Regional trade is explained by an excess supply function. Since it is assumed that these relationships are jointly determined, the estimates were generated through the use three stage least squares regression.;The results indicate that monthly changes in traditional economic variables such as, price, income and transportation costs, etc., are not major determinants of changes in production and trade of crude oil and petroleum products, but government policy variables did influence regional production and trade. The results indicate that there are significant regional variations in the production and trade of crude oil and petroleum products. And there are regional differences in the response to exogenous shocks. Finally, this study concludes that about half of all regional and world trade is jointly determined; however, most of this trade is complementary.;The study gives a background on all the relevant energy programs that have applied to crude oil and petroleum products during this period. Some of the programs studied are: crude oil and petroleum products price controls, the entitlements program and the windfall profit tax. Where necessary, the mechanics of these energy programs are explained. Following this, the theoretical effects of these programs on production and trade are detailed.