Coping with Oil Price Volatility

Oil is important in every economy; when its prices are high and volatile, governments feel compelled to intervene. Because there can be large costs associated with such interventions, reserve banks, central planning institutions, and think tanks in industrial countries have been carrying out quantitative analyses of oil price volatility for a number of years. This report focuses on fluctuations around trends in oil prices. It examines measurements of oil price volatility and evaluates several different approaches to coping with oil price volatility: hedging, security stocks, price-smoothing schemes, and reducing dependence on oil including diversification. It does not deal with the impact of oil price volatility on countries' macroeconomic performance or with macroeconomic policy responses; these generally have more to do with coping with higher price levels than with higher volatility per se. The study examines oil price volatility largely from the point of view of consumers and does not cover the management of revenue volatility by large oil exporters.

Bibliographic Details

Main Authors:	Bacon, Robert, Kojima, Masami
Language:	English en_US
Published:	World Bank, Washington, DC 2008-08
Subjects:	ADVERSE EFFECTS, APPROACH, AVAILABILITY, AVERAGE PRICES, BALANCE, BALANCE OF PAYMENTS, BARRELS OF OIL, BEHAVIOR OF PRICES, BUDGET SURPLUS, BUYER, CASH FLOW, COAL, COMMODITIES, COMMODITY, COMMODITY PRICES, CONSUMER GOODS, CONSUMER PRICE, CONSUMER PRICE INDEX, COPYRIGHT, COST INCREASES, CRUDE OIL, CRUDE OIL PRICE, DATA AVAILABILITY, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DIESEL, DISTRIBUTION OF OIL, DOMESTIC OIL, DOMESTIC PRICE, DOMESTIC PRICES, ECONOMIC EFFECTS, EFFICIENCY IMPROVEMENT, END USERS, ENERGY CONSERVATION, ENERGY DEMAND, ENERGY EFFICIENCY, ENERGY POLICIES, ENERGY PRICE, ENERGY SOURCES, EQUAL SHARES, EXCHANGE RATE, EXPENDITURE, EXPENDITURES, FINANCIAL ASSETS, FISCAL POLICY, FOOD PRICES, FOREIGN EXCHANGE, FUEL, FUEL PRICES, FUEL TYPE, FUELS, FUTURE PRICE, FUTURE PRICES, FUTURES, GAS, GASOLINE, GASOLINE PRICES, GOVERNMENT BUDGET, GOVERNMENT REVENUE, GRAPHICS, GROSS DOMESTIC PRODUCT, HYDROCARBONS, HYDROPOWER, INCOME, INCOME GROUPS, INDIVIDUAL FIRMS, INDUSTRIAL COUNTRIES, INSTITUTION, INTERNATIONAL MARKET, INVESTMENT DECISION, KEROSENE, LOCAL CURRENCIES, LOCAL CURRENCY, MACROECONOMIC POLICY, MARGIN ACCOUNT, MARKET PRICE, MATERIAL, NATURAL GAS, NATURAL GAS PRICES, NUCLEAR POWER, OIL, OIL CONSUMPTION, OIL EXPORTER, OIL EXPORTERS, OIL MARKETS, OIL PRICE, OIL PRICES, OIL PRODUCERS, OIL PRODUCTS, OIL SUPPLY, OIL USE, OUTPUT, OUTPUTS, PETROLEUM, PETROLEUM EXPORTING COUNTRIES, PETROLEUM GAS, PORTFOLIO, PRICE BANDS, PRICE BEHAVIOR, PRICE CHANGES, PRICE CONTROLS, PRICE FLUCTUATIONS, PRICE FORECAST, PRICE INCREASE, PRICE INCREASES, PRICE INFORMATION, PRICE LEVEL, PRICE LEVELS, PRICE MOVEMENTS, PRICE OF OIL, PRICE SERIES, PRICE SPIKES, PRICE TREND, PRICE TRENDS, PRICE UNCERTAINTY, PRICE VARIATION, PRICE VARIATIONS, PRICE VOLATILITY, PRICING POLICY, PRICING STRATEGY, PRIMARY ENERGY, RATE OF RETURN, REGULAR GASOLINE, RENEWABLE ENERGY, RESERVE BANKS, RESIDUAL FUEL, RESIDUAL FUEL OIL, RESULT, RESULTS, SALE, SALES, SAVINGS, SELLING PRICE, SELLING PRICES, SMALL COUNTRIES, SPOT PRICE, SPOT PRICES, STOCKS, SUBSTITUTES, SURPLUS, TAX, TIME PERIOD, TIME PERIODS, VOLATILE PRICES,
Online Access:	http://documents.worldbank.org/curated/en/2008/08/9780518/coping-oil-price-volatility https://hdl.handle.net/10986/17539
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