1887

Oil Dependence

Is Transport Running Out of Affordable Fuel?

image of Oil Dependence

Oil consumption is increasingly concentrated in transport and relatively limited fluctuations in transport demand can have increasingly significant effects on oil prices. This Round Table assesses the policy instruments available to address oil security and climate change and examines their interaction with measures to manage congestion and mitigate local air pollution. A number of incompatibilities and trade-offs are identified underlining the importance of integrated policy making. The report includes an examination of the factors that drive oil prices in the short and long term and a discussion of the outlook for oil supply.

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Summary of Discussions

International Transport Forum

The transport sector’s demand for oil is less price sensitive than any other part of the economy. This is partly because demand for transport services is relatively insensitive to price and partly because substitutes for oil in road transport are currently far from cost-effective. Evidence from the USA suggests that as incomes rise, transport sector oil demand becomes even less price sensitive. This implies that oil consumption is set to become increasingly concentrated in the transport sector. It also implies that relatively limited fluctuations in demand can have increasingly significant effects on oil prices.

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