Increases in world oil prices since 2004have challenged consumers and oil-importing countries acrossthe world. Oil prices temporarily fell sharply in 2009, onlyto triple three years later. The oil import share of grossdomestic product rose by nearly half among net oil importersin just two years between 2009 and 2011. Governments thatcontrol oil product prices have come under pressure tointervene by keeping domestic prices low and effectivelysubsidizing consumers. This study focuses on the evolvingrole of oil in national economies, particularly those ofdeveloping countries, and proposes a menu of options fordrawing a roadmap for pricing policy reform for oilproducts. In light of events since 2009, it examines howrecent price movements have affected countries'vulnerability to world oil price increases, how governmentshave adjusted domestic fuel prices in response, theconsequences of the policy responses, other copingmechanisms to deal with high oil prices and pricevolatility, the roadblocks to reforming pricing policy, andhow to deal with them. This report suggests a menu ofoptions for moving away from sectoral subsidies tomarket-based pricing, accompanied by an integrated socialprotection program and complementary policies to reduceconsumption through efficiency improvement and fueldiversification. Sending the right price signals andreducing consumption can bring many benefits, ranging fromgreater supply security to less congestion and pollutionfrom road transport. This report can help policy makersconduct more informed national dialogues on managing fuelpricing and the political economy around it.
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