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Hedging Government Oil Price Risk
Author:
Mr. James Danielnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2001: Issue 185
Language:
English
Publication Date:
01 Nov 2001
DOI:
https://doi.org/10.5089/9781451859416.001
ISBN:
9781451859416
ISSN:
1018-5941
Pages:
21
Keywords:
WP; oil price risk; risk market; risk hedging; hedging strategy; price assumption; risk exposure; Oil; hedging; fiscal policy; derivative markets; output price; oil price volatility; oil price shock; Oil prices; Futures; gas and mining taxes; Global
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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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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2001: Issue 185