Domestic Petroleum Price Smoothing in Developing and Transition Countries

Author/Editor:

Benedict F. W. Bingham ; James Daniel ; Giulio Federico

Publication Date:

May 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper examines the case for government-led smoothing of domestic petroleum prices in the face of volatile international prices. Governments in most developing and transition countries engage in petroleum price smoothing, as the survey of country practice carried out for this paper shows. This paper reviews the potential welfare implications of petroleum price volatility, and assesses different price smoothing rules on the basis of historical oil prices. These simulations reveal the presence of a sharp trade-off between price smoothing and fiscal stability, suggesting that developing and transition country governments should engage in limited price smoothing and, if possible, rely on hedging instruments to do so.

Series:

Working Paper No. 01/75

Subject:

English

Publication Date:

May 1, 2001

ISBN/ISSN:

9781451849738/1018-5941

Stock No:

WPIEA0752001

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

28

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