Hedging Government Oil Price Risk

November 1, 2001

Preview Citation

Format: Chicago

James Daniel. Hedging Government Oil Price Risk, (USA: International Monetary Fund, 2001) accessed September 20, 2024

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

Many governments are heavily exposed to oil price risk, especially those dependent on revenue derived from oil production. For these governments, dealing with large price movements is difficult and costly. Traditional approaches, such as stabilization funds, are inherently flawed. Oil risk markets could be a solution. These markets have matured greatly in the last decade, and their range and depth could allow even substantial producers, and consumers, to hedge their oil price risk. Yet governments have held back from using these markets, mainly for fear of the political cost and lack of know how. This suggests that the IMF, together with other development agencies, should consider encouraging governments to explore the scope for hedging their oil price risk.

Subject: Commodities, Financial institutions, Financial regulation and supervision, Futures, Hedging, Oil, Oil prices, Oil, gas and mining taxes, Prices, Taxes

Keywords: Derivative markets, Fiscal policy, Futures, Gas and mining taxes, Global, Hedging, Hedging strategy, Oil, Oil price risk, Oil price shock, Oil price volatility, Oil prices, Output price, Price assumption, Risk exposure, Risk hedging, Risk market, WP

Publication Details

Pages:

21
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2001/185
Stock No:

WPIEA1852001
ISBN:

9781451859416
ISSN:

1018-5941

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