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Hedging Government Oil Price Risk

  • James Daniel
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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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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/185.

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    Length: 21
    Date of creation: 01 Nov 2001
    Date of revision:
    Handle: RePEc:imf:imfwpa:01/185
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    1. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank.
    2. Ricardo Hausmann, 1995. "Dealing with Negative Oil Shocks: The Venezuelan Experience in the Eighties," Research Department Publications 4010, Inter-American Development Bank, Research Department.
    3. repec:imf:imfwpa:00/118 is not listed on IDEAS
    4. Cashin, Paul & McDermott, C. John & Scott, Alasdair, 2002. "Booms and slumps in world commodity prices," Journal of Development Economics, Elsevier, vol. 69(1), pages 277-296, October.
    5. Arrau, Patricio & Claessens, Stijn, 1992. "Commodity stabilization funds," Policy Research Working Paper Series 835, The World Bank.
    6. Eduardo M.R.A. Engel & Rodrigo Valdés, 2000. "Optimal Fiscal Strategy for Oil Exporting Countries," Documentos de Trabajo 78, Centro de Economía Aplicada, Universidad de Chile.
    7. repec:imf:imfwpa:99/80 is not listed on IDEAS
    8. Claessens, Stijn & Varangis, Panos & DEC, 1994. "Oil price instability, hedging, and an oil stabilization fund : the case of Venezuela," Policy Research Working Paper Series 1290, The World Bank.
    9. Manmohan S. Kumar, 1992. "The Forecasting Accuracy of Crude Oil Futures Prices," IMF Staff Papers, Palgrave Macmillan, vol. 39(2), pages 432-461, June.
    10. C. John McDermott & Paul Cashin & Alasdair Scott, 1999. "Booms and Slumps in World Commodity Prices," IMF Working Papers 99/155, International Monetary Fund.
    11. repec:imf:imfwpa:96/82 is not listed on IDEAS
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