Oil Prices and Urban Housing Demand

Abstract

We develop a model of a monocentric, oil-exporting city. The model predicts producer price and transportation cost effects of oil price changes on the house price gradient. Empirical findings support the predictions, with house price changes positively linked to the price of oil in cities specialized in oil and gas-related industries, and negatively linked in suburban areas of all cities. These results quantify the large and differential risks to house prices associated with oil price changes both within and across cities.

Keywords: Transportation Cost, Gasoline Price, Industrial Specialization, Input-Output Model, Economic Base Model

JEL Classification: R30, Q4