The Structure of the Oil Market and Causes of High Prices
September 21, 2005

Public Information Notice: IMF Executive Board Holds Seminar on Oil Market Developments and Issues
April 7, 2005

What Hinders Investment in the Oil Sector?
February 22, 2005




Oil Market Developments and Issues

Prepared by the Policy Development and Review Department

March 1, 2005

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Contents


Executive Summary
   

I.

Introduction

 

II.

Recent Oil Price Increases in Perspective and
Prospects for the Future

  A.
Significance of Recent Price Movements
  B.
Factors Behind Price Increases and Prospects for the Future
 
   The role of commodity trading
  C.
What Hinders Investment in the Oil Sector?
 
   Background
 
   Obstacles to investment
 
   Prospects for future investment
 
   Conclusions
 

III.

The Impact of Oil Market Developments
on the Global Economy

  A.
Impact of Recent Price Movements
 
   Global effects
 
   The likely impact of the higher prices so far
 
   Recycling and possible impact on financial markets
  B.
What if—the Likely Impact of Much Higher Oil Prices
 
   Introduction
 
   Impact of much higher oil prices on advanced economies
 
   Impact on emerging market and developing countries
 

IV.

Impact of Higher Prices on Exporters

 

V.

Financing Needs for Developing Countries
from Higher Oil Prices
  A.
Estimates of the Incremental Potential Financing Gap
  B.
The Mix between Adjustment and Financing
  C.
Projected Need for Additional Use of Fund Resources
 

VI.

Policy Response to Higher Oil Prices
  A.
Background
  B.
Near-Term Policy Responses
 
   Net petroleum exporters
 
   Net petroleum importers
 
   Short-run domestic petroleum pricing
  C.
External Financing and Use of Fund Resources
  D.
Selected Structural Issues
 
   Domestic petroleum price and taxation regimes
 
   Oil revenue issues and investments in the oil sector
 
   Oil funds
  E.
Transparency
 

VII.

The Scope for Producer and Consumer Action and Cooperation

 

VIII.

Progress on Data Transparency Issues in Oil Markets

 
   Data production
 
   Main weaknesses in the data
 
   Progress so far
 
   Looking ahead
 

IX.

Issues for Discussion

 

Tables

1. Global Oil Market: Demand, Capacity, and Prices
2. Impact of Nominal Oil Price Hikes
3. Impact of an $80 Price of Oil in 2005
4. Impact on GDP Growth in Developing and Emerging Market Net Oil Importing Countries
5. Hydrocarbon Net Exporting Countries’ Oil and Natural Gas Export and Fiscal Revenue in 2003
6. Oil and Gas Export and Revenue Windfalls
7. Impact of the Change in Hydrocarbon Revenue on Key Indicators
8. Impact of the Change in Hydrocarbon Revenue on Key Fiscal Indicators, by Income Group
9. Share of the Windfall Saved in Special Funds
10. Impact of Higher Oil Prices
11. Adjustment/Financing Mix in 2005
 

Figures

1. Selected Prices of Crude Oil
2. Oil Intensity
3. OPEC Crude Oil Production with Total and Spare Production Capacity
4. Total Global Drilling Rigs and Real Petroleum Spot Price
5. Spread Between the West Texas Intermediate and Dubai Fateh Crude Oil Spot Price, and the Average Petroleum Spot Price
6. Proven World Oil Reserves Excluding Canadian Oil Sands; and OPEC and Non-OPEC Crude Oil Reserves
7. Average Petroleum Spot Price and Excess Capacity
8. Transparency in Uses of the Hydrocarbon Windfall
 

Boxes

1. Recent Changes in Composition and Activities of Energy Traders and Investors
2. Hotelling’s Rule for Optimal Resource Management
3. Managing Natural Resource Windfalls—Country Experience
4. Domestic Petroleum Price Reform
5. Oil Funds—Selected Examples
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