PETROLEUM POLICY ISSUES IN DEVELOPING-COUNTRIES

Petroleum is of vital importance to most developing countries either in their capacity as producers or consumers. On both counts they are heavily exposed to the impact of the large oil price fluctuations which have characterized the last 20 years and are likely to be prevalent in the foreseeable future. To optimize their benefits in government take and investment producing countries should place emphasis on profit-related fiscal instruments. Consuming countries should ensure that oil prices reflect their opportunity costs. The design of consumption taxes on petroleum products should take into account: a) their revenue-raising potential; b) their distributional effects; c) the need to correct for externalities in the use of petroleum; and, d) the energy security/price vulnerability aspects.