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
Bibliography
Includes bibliographical references (pages 25-27)
Notes
Master and use copy. Digital master created according to Benchmark for Faithful Digital Reproductions of Monographs and Serials, Version 1. Digital Library Federation, December 2002. http://purl.oclc.org/DLF/benchrepro0212 MiAaHDL
digitized 2010 HathiTrust Digital Library committed to preserve pda MiAaHDL