Yépez-Garcia, Rigoberto ArielDana, Julie2012-06-292012-06-292012978-0-8213-9577-6https://hdl.handle.net/10986/9341Countries heavily dependent on imported oil to power a significant portion of their electricity generation are especially vulnerable to high and volatile oil prices. In net oil-importing countries worldwide, high and volatile oil prices ripple through the power sector to numerous segments of the economy. As prices move up and down, so does the cost of electricity production, which has far-reaching effects on the economy, fiscal and trade balances, businesses, and household living standards. High and volatile oil prices affect economies at both a macro and micro level. The major direct effects at the macro level are a deteriorating trade balance, through a higher import bill, reflecting a worsening in terms of trade; and a weakening fiscal balance due to greater government transfers and subsidies to insulate movements in international energy markets. At the micro level, investment uncertainty results from the higher risk of engaging in new projects and associated development and sunk costs, which, in turn, affects policy decisions and economic growth. This study responds to the needs of policy makers and energy planners in oil-importing countries to better manage exposure to oil price risk. The study's objective is threefold. First, it analyzes the economic effects of higher and volatile prices on oil-importing countries, with emphasis on the power sector, using examples from Latin America and the Caribbean (LAC). Second, it proposes a menu of complementary options that can be applied over multiple time frames. Several structural measures are designed to reduce oil generation and consumption, while a range of financial instruments are suggested for managing price risk in the short term. Finally, it attempts to quantify some of the macroeconomic and microeconomic benefits that could accrue from implementing such options.CC BY 3.0 IGOAGGREGATE DEMANDAPPROACHAVAILABILITYAVERAGE PRICEBALANCEBALANCE OF PAYMENTSBARRELS OF OILBARRIERS TO ENERGY EFFICIENCYBIOMASSCAPITAL FORMATIONCAPITAL GOODSCAPITAL MARKETSCLEANER ENERGYCLIMATECLIMATE CHANGECOALCOAL GENERATIONCOMBUSTIONCOMPARATIVE ADVANTAGECOMPETITIVENESSCOMPLEX TASKCONSUMER PRICECONSUMER PRICE INDEXCONSUMER PRICESCONVENTIONAL ENERGYCONVENTIONAL FUELSCOST INCREASESCOST OF ELECTRICITYCOST OF ELECTRICITY PRODUCTIONCPICRUDE OILDEBTDELIVERY MECHANISMDEMAND ELASTICITYDEMAND MANAGEMENTDIESELDIESEL FUELDISPOSABLE INCOMEDISTRIBUTION OF COSTSDOMESTIC OILECONOMIC ACTIVITYECONOMIC BENEFITSECONOMIC DEVELOPMENTECONOMIC DIVERSIFICATIONECONOMIC EFFECTSECONOMIC GROWTHECONOMIC IMPACTSECONOMIC INDICATORSECONOMIC UNCERTAINTYECONOMICSECONOMIES OF SCALEEFFICIENCY GAINSEFFICIENCY IMPROVEMENTSELECTRIC POWERELECTRIC UTILITIESELECTRIC UTILITYELECTRICITYELECTRICITY CONSUMPTIONELECTRICITY GENERATIONELECTRICITY GENERATION MIXELECTRICITY PRICESELECTRICITY PRICINGELECTRICITY PRODUCTIONELECTRICITY RATESELECTRIFICATIONEMISSIONSENERGY COSTSENERGY DEMANDENERGY ECONOMICSENERGY EFFICIENCYENERGY EXPENDITURESENERGY GENERATIONENERGY INFORMATION ADMINISTRATIONENERGY INTENSITYENERGY MANAGEMENTENERGY MARKETSENERGY MIXENERGY NEEDSENERGY PLANNERSENERGY PLANNINGENERGY PORTFOLIOENERGY PRICEENERGY PRICINGENERGY RESOURCESENERGY SAVINGSENERGY SECURITYENERGY SOURCESENERGY SUBSIDIESENERGY SYSTEMENERGY USEENVIRONMENTALEXCHANGE RATEEXPENDITUREEXPENDITURESEXPLOITATIONEXTREME SCENARIOSFEASIBILITYFINANCIAL INSTRUMENTSFINANCIAL RISKFINANCIAL RISKSFOREIGN EXCHANGEFOSSILFOSSIL FUELSFUELFUEL COSTFUEL COSTSFUEL OILFUEL PRICESFUEL REQUIREMENTSFUELSGAS TURBINEGASIFICATIONGENERATING CAPACITYGREENHOUSE GASGROSS DOMESTIC PRODUCTHEAVY FUEL OILHIGHER ENERGY PRICESHYDROCARBONSHYDROELECTRIC POWERHYDROPOWERIMPROVING ENERGY EFFICIENCYINCOME HOUSEHOLDSINFLATIONINTERNATIONAL COMPETITIVENESSINVESTMENT DECISIONSISLAND ECONOMIESKILOWATT HOURLNGMARKET INTEGRATIONMARKET PRICEMARKET PRICESMARKET STRUCTUREMINESMONETARY FUNDMONETARY POLICYMONOPOLIESMONOPOLYNATURAL GASNATURAL GAS PRICESNATURAL-GASNET OILOILOIL CONSUMPTIONOIL EQUIVALENTOIL EXPORTEROIL EXPORTERSOIL EXPORTSOIL IMPORTSOIL PRICEOIL PRICESOIL PRODUCTIONOIL PRODUCTSPETROLEUMPETROLEUM GASPETROLEUM PRODUCTSPOLICY DECISIONSPOLICY INSTRUMENTSPOLICY MAKERSPORTFOLIOPOWERPOWER COMPANYPOWER GENERATIONPOWER GENERATION CAPACITYPOWER MIXPOWER SECTORPOWER SECTORSPOWER SYSTEMPOWER SYSTEM PLANNINGPOWER SYSTEMSPRICE CHANGESPRICE CONTROLSPRICE FLUCTUATIONSPRICE INCREASEPRICE INCREASESPRICE LEVELPRICE OF ELECTRICITYPRICE OF OILPRICE RISKPRICE SPIKESPRICE STABILIZATIONPRICE STRUCTUREPRICE TRENDPRICE UNCERTAINTYPRICE VOLATILITYPRICING MECHANISMPRICING MECHANISMSPRICING POLICIESPRICING POLICYPRICING REFORMSPRIMARY ENERGYPRIMARY ENERGY SUPPLYPRODUCERSPRODUCTION COSTSPRODUCTIVE RESOURCESPUBLIC UTILITIESPURCHASINGPURCHASING POWERREAL WAGESREGULATORY FRAMEWORKREGULATORY POLICIESRENEWABLE ENERGYRENEWABLE RESOURCESRESERVE REQUIREMENTSRISK MANAGEMENTSALESSCENARIOSSOLAR ENERGYSPOT PRICESUBSTITUTESUGARCANESUPPLY CHAINSUPPLY SIDESURPLUSSUSTAINABLE DEVELOPMENTSUSTAINABLE ENERGYTARIFF STRUCTURETERMS OF TRADETHERMAL POWERTHERMAL UNITTOTAL CONSUMPTIONTRADITIONAL FUELTRANSMISSION LINETRANSMISSION SYSTEMUNCERTAINTIESUTILITIESUTILITY COMPANYVOLATILE PRICESVULNERABILITY INDICATORSWHOLESALE PRICEWINDWIND ENERGYWorld Bank10.1596/978-0-8213-9577-6