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Domestic Petroleum Price Smoothing in Developing and Transition Countries
Author:
Mr. Benedict F. W. Bingham
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Mr. James Daniel null

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Mr. Giulio Federico null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 075
Language:
English
Publication Date:
01 May 2001
DOI:
https://doi.org/10.5089/9781451849738.001
ISBN:
9781451849738
ISSN:
1018-5941
Pages:
28
Keywords:
WP; price; retail price; spot price; pass-through; consumer; Oil prices; petroleum prices; price stabilization; hedging; pass-through rule; price change; adjustment cost; price shock; oil price risk; risk trade-off; price volatility; Price adjustments; Consumption; Oil; Middle East; Western Hemisphere; Europe; Africa
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund