An Oil Import Tax?

Consumers, producers, and the economy usually flourish under free trade. Import quotas or tariffs usually reduce the efficiency of the economy and lower living standards. Nevertheless, tariffs can make sense.

Thus, the recent rise in prices can be attributed almost exclusively to the sharp reduction in exports by Iran and to the ensuing panic as oil companies and importers bid frantically for the remaining supplies. Saudi Arabia has, until recently, increased its production to take up part of the slack caused by the initial reduction in oil from Iran and then the further reduction following the outbreak of war between Iraq and Iran. During 1979, when there was the greatest run-up in prices, Middle East production and world production actually increased, even though Iranian output fell.

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Thomas Gale Moore

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Consumers, producers, and the economy usually flourish under free trade. Import quotas or tariffs usually reduce the efficiency of the economy and lower living standards. Nevertheless, tariffs can make sense.

Thus, the recent rise in prices can be attributed almost exclusively to the sharp reduction in exports by Iran and to the ensuing panic as oil companies and importers bid frantically for the remaining supplies. Saudi Arabia has, until recently, increased its production to take up part of the slack caused by the initial reduction in oil from Iran and then the further reduction following the outbreak of war between Iraq and Iran. During 1979, when there was the greatest run-up in prices, Middle East production and world production actually increased, even though Iranian output fell.