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Destabilization of the Crude Oil Market and Efforts Toward Price Stabilization

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  • Yoshikazu Kobayashi

    (The Institute of Energy Economics, Japan)

Abstract

With crude oil price largely fluctuating, both oil producing and consuming countries have come to identify the challenges brought by the destabilization of crude oil price. Among those, there have been discussions on fair price, that is, the price level which both consuming and oil producing countries can accept. It is, however, difficult to specify a particular price level as a fair price. It is reasonable to understand that a fair price is determined by the price level obtained as a result of the pursuit of stabilization of the crude oil market by both oil producing and consuming countries. As measures for stabilization of the crude oil market, it is important to form a mechanism that provides the market with balanced information that will avoid unnecessary price fluctuation, taking into account the recently increasing importance of market sentiments and information in price formation. It is furthermore meaningful that both oil producing and consuming countries ensure enough flexibility to absorb the occurrence of unexpected phenomena in terms of supply and demand. It is also important to ensure a diversity of market players and design a system where the market mechanism is exerted to the utmost extent.

Suggested Citation

  • Yoshikazu Kobayashi, 2010. "Destabilization of the Crude Oil Market and Efforts Toward Price Stabilization," Energy Working Papers 22794, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:energy:22794
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    File URL: http://www.eaber.org/node/22794
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    Keywords

    crude oil; price level; price stabilisation; oil consumption;

    JEL classification:

    • Q30 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - General
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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