World trade organization oil
In theory, the WTO Member could thus apply as high a custom duty as it pleases on the imported good. But de facto, energy trade has been treated as mostly outside of the GATT for several decades.
This is now no longer possible. Fitting energy goods and services into the WTO system is anything but a simple task. The problem is that although the WTO Agreements evidently cover trade in energy, they were simply not drafted with the realities of energy in mind. This leaves us with the question whether the WTO legal framework as it is now is capable of adequately regulating the complexities of trade in energy. Several unresolved issues can be identified. To add to this, energy is clearly not an isolated matter in international trade.
The larger debate on climate change thus unveils how energy and the environment are intertwined and in addition raises important questions regarding the legality of so-called green and renewable energy subsidies. Could such subsidies be justified under the WTO legal framework as an incentive to promote green energy or do they risk being abused by WTO Members as a form of disguised protectionism?
Concerning subsidies on traditional energy products, i. Mainly major fossil fuel-importing countries like the EU and the US continue to oppose to this practice. They argue that dual pricing, because of the allegedly export-restrictive effect, is trade distortive and inconsistent with the obligations set out in Article XI GATT on Quantitative Restrictions. There is a market access bias in the WTO, i. While in global energy trade, the problem is rather linked to export taxes and export restrictions.
The matter of energy dual pricing and export taxes remains undecided in the WTO until this day. Albeit in a different way, disputes over export taxes on raw materials continue to pose new, and perhaps unintended, challenges to both the WTO and public international law. As a rule, Members tend to use the Article XX g exception to justify otherwise GATT-inconsistent measures for the conservation of their exhaustible natural resources such as oil and gas.
These unresolved issues have practical consequences. Russia, the major Eurasian energy producing and exporting country, acceded to the Organization in August , after protracted negotiations of almost two decades. From key definitions of energy good and services, to transit, to renewable energy subsidies, to dual pricing, to sovereignty over natural resources — it is clear that the list of energy issues in need of further elaboration in WTO law is extensive.
A more specialized international law instrument, tailored to regulate trade and investment in the energy sector, does exist: The Russian Federation, the major Eurasian energy producing and exporting country, has not ratified the Treaty. Moreover, it has also stepped back from provisional application of the Treaty in , allegedly in connection with the controversial pending Yukos arbitration case. In recent years, our understanding of the nature of energy price shocks and their effects on the economy has evolved dramatically.
Only a few years ago, the prevailing view in the literature was that at least the major crude oil prices increases were exogenous with respect to the OECD economies and that these increases were caused by oil supply disruptions triggered by political disturbances in the Middle East.
This view has little empirical support. Likewise, the popular notion that OPEC constitutes a cartel that controls the price of oil has not held up to scrutiny. At the same time, there has been increasing recognition of the importance of shifts in the demand for oil. There is no consensus in the literature on how to model the global market for crude oil. One strand of the literature views oil as an asset, the price of which is determined by desired stocks. In this interpretation, shifts in the expectations of forward-looking traders are reflected in changes in the real price of oil and changes in oil inventories.
The other strand of the literature views the price of oil as being determined by shocks to the flow supply of oil and flow demand for oil with little attention to the role of inventories in smoothing oil consumption. Recent research shows that shocks to the flow supply of crude oil overall have had little impact on the real price of oil since Unlike shocks to the flow demand or flow supply, speculative demand shocks can cause large immediate effects on the real price of oil, for example in response to geopolitical events.
Although speculative trading appears to have played an important role in some historical episodes, there is no evidence that it caused the surge in the real price of oil during and only very limited evidence that it helps explain the oil price surge. Instead, the bulk of the increase in the real price of oil was caused by fluctuations in the global business cycle, driven in large part by unexpected growth in emerging Asia superimposed on strong growth in the OECD.
As the world economy collapsed in late , so did the real price of oil. More than half of the observed decline in the real price of oil, however, was driven by expectations about a prolonged global recession. The gradual recovery of the real price of oil in can be attributed equally to a partial reversal of these expectations and to a recovery of the demand for industrial commodities, reflecting the improved state of the global economy.
The distinction between different oil demand and oil supply shocks has far-reaching implications because each shock has different effects on the U. In addition, not all such shocks are unambiguously harmful to oil importing economies.