his volume brings together and expands on research on the subject of energy T security externalities that we have conducted over a twenty-year period. We were motivated to bring this work together by the lack of a comprehensive analysis of the issues involved that was conveniently located in a single document, by the desire to focus that disparate body of research on the assessment of energy security externalities for policy purposes, and by the continuing concern of researchers and policymakers regarding the issues involved. Many misconceptions about energy security continue to persist in spite of a large body of research to the contrary, and we hope that this volume will help to dispel them. Most of our original research was funded by either the U.S. Department of Energy or Resources for the Future (RFF), and all of it was conducted while we served as staff members of RFF. To these institutions, and to the many individuals who commented on our original work, we wish to express our sincere gratitude. We also wish to express our appreciation to our colleague Margaret Walls for her sub­ stantial contribution to Chapter 7 on transportation policy.

1 Introduction.- Changing Perspectives about Energy Security.- Taxonomy of Potential Externalities.- From Externalities to Premiums.- Plan of the Book.- Endnotes.- 2 Basic Economic Concepts.- What is an Externality?.- Potential Externalities Related to Energy Imports.- Potential Externalities Related to Energy Price Variability.- Problems of International Policy Coordination.- Military Expenditures and Oil Import Costs.- Concluding Remarks: Defining Energy Security Premiums.- Endnotes.- 3 Empirical Evidence on Energy Security Externalities.- Experience with Oil Shocks.- Oil Market Behavior.- Indirect Effects of Oil Imports.- Macroeconomic Effects of Energy Price Disturbances.- Military Expenditures for Energy Security.- A Contrary View: The Greene and Leiby Study.- Concluding Remarks.- Endnotes.- 4 Empirical Measures of Oil Security Premiums.- Measurement of Oil Premiums.- Economic Premium Estimates.- Strategic Stockpile Premiums.- Concluding Remarks.- Endnotes.- 5 Changes in the Efficiency and Stability of the World Oil Market.- Price Responsiveness of Oil Supply and Demand.- Changes in Supply and Demand.- Changes in Market Organization and Institutions.- Concluding Remarks.- Endnotes.- 6 Applications of Energy Security Externalities to Electricity Policy.- National versus Local Energy Security Issues.- Externalities That Arise at the Local Level.- Concluding Remarks.- Endnote.- 7 Applications of Energy Security Externalities to Transportation Policy.- Externalities in the Transportation Sector.- Potential Contributions of Alternative-Fuel Technologies.- CNG as a Replacement for Gasoline.- Concluding Remarks: A Comparison of Alternative-Fuel Vehicles.- Appendix A: Derivation of the Social Welfare Impacts of CNG.- Appendix B: Further Analysis of Alternative Fuels and Energy Price Stabilization.- Endnotes.- 8 Implications for Energy Policy.- Summary and Policy Implications.- Have the Externalities Been Internalized Already?.- Concluding Remarks.- Endnotes.- References.- Name Index.