Daniel Mirza & Habib Zitouna , 2009.
"Oil Prices, Geography and Endogenous Regionalism: Too Much Ado About (Almost) Nothing,"
CEPII Working Paper 2009- 26 , October 2009 , CEPII.
This paper studies the effect of oil prices on the geography of international trade. We model transport costs as a function of variable and fixed costs. By affecting the first cost component, oil prices can then modify the structure of transportation costs across partners. This, we argue, acts as a factor of distortion in relative prices, thereby creating a reallocation of trade at the expense of remote countries. In that respect, an increase in oil prices should favor regionalism.