Paul L. Caron

Friday, February 1, 2019

Taxes And U.S. Oil Production

Nirupama L. Rao (Michigan), Taxes and U.S. Oil Production: Evidence from California and the Windfall Profit Tax, 10 Am. Econ. J.: Econ. Pol'y 268 (2018):

The recent boom in U.S. oil production has prompted debates on levying new taxes on oil. This paper uses new well-level production data and price variation from federal oil taxes and price controls to assess how taxes affected production. After-tax price elasticity estimates range between 0.295 (0.038) and 0.371 (0.025). Response along the shut-in margin is minimal. There is no evidence of spatial shifting of production to minimize tax liabilities. Taken together the results suggest that taxes reduced domestic production in the 1980s, and the response largely came from wells that continued to pump oil, but at a reduced rate.

(Hat Tip: Ted Seto)

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