Search Results

You are looking at 1 - 3 of 3 items for :

  • "max-min price stabilization law" x
Clear All
Mr. Sanjeev Gupta, Mr. Benedict J. Clements, Mr. Kevin Fletcher, and Ms. Gabriela Inchauste
This paper discusses issues relating to the domestic pricing of petroleum in oil-producing countries. It finds that in most major oil-exporting countries, government policies keep domestic prices below free-market levels, resulting in implicit subsidies that equaled 3.0 percent of GDP, on average, in 1999. Moreover, the paper argues, these petroleum subsidies are inefficient and inequitable-entailing substantial opportunity costs in terms of forgone revenue or productive spending-and also procyclical, complicating macroeconomic management. Nonetheless, the elimination of petroleum subsidies is often politically difficult, although countervailing measures and publicity campaigns can help engender support for reform.
Mr. Sanjeev Gupta

help smooth out the path of domestic petroleum prices. These include moving-average rules (which base retail prices on a moving average of past spot prices), trigger rules (which update only if spot prices change by a predetermined trigger amount), or max-min rules (which place a ceiling and a floor on the level of retail petroleum prices). For example, Chile has a max-min price stabilization law under which reference prices are updated weekly. Hedging instruments can also mitigate oil price fluctuations. For example, the state of Texas hedges its heavy reliance on

Mr. Sanjeev Gupta, Mr. Benedict J. Clements, Mr. Kevin Fletcher, and Ms. Gabriela Inchauste

trigger amount), or max-min rules (which place a ceiling and a floor on the level of retail petroleum prices). For example, Chile has a max-min price stabilization law under which reference prices are updated weekly. Hedging instruments can also mitigate oil price fluctuations. For example, the state of Texas hedges its heavy reliance on oil revenue by buying and selling options in order to narrow the range within which its revenue stream fluctuates. Oil-producing countries do not disclose whether they use hedging instruments because this is market