Drawing a Roadmap for Oil Pricing Reform
In 2011, the median oil imports rose to 5 percent of gross domestic product for net importers. In the past several years, many governments have not passed through the world oil price increases to consumers fully. As a sign of divergent pricing poli...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/05/17733366/drawing-roadmap-oil-pricing-reform http://hdl.handle.net/10986/15590 |
| Summary: | In 2011, the median oil imports rose to
5 percent of gross domestic product for net importers. In
the past several years, many governments have not passed
through the world oil price increases to consumers fully. As
a sign of divergent pricing policies, the retail prices of
gasoline, diesel, and cooking gas in January 2013 varied by
a factor of 190, 250, and 70, respectively, across
developing countries. Policies to keep oil product prices
low to benefit the economy and protect the poor have had a
number of unintended negative consequences, including
flourishing corruption in the oil sector and entrenchment of
monopoly operators or inefficient firms through which
subsidies are channeled, stifling competition and raising
costs. The path to market-based pricing depends on the
starting conditions: the gap between current and
market-based price levels, the level of public awareness
about the extent of departure from market prices, the degree
of market concentration and competition in downstream oil,
the subsidy delivery mechanism where subsidies are provided,
the robustness of social service delivery, and the perceived
credibility of the government. The evidence presented in
this paper suggests that pricing reform often does not have
a clear end and should instead be viewed as a continuous
process of adjustment and search for mechanisms that take
into account the country's institutions and political
system, and the oil sector's market structure,
infrastructure, and history. |
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