Regional Energy Programme for Poverty Reduction

Oil Price Study

Will soaring oil prices dash the poor’s hopes of escape from poverty? This is a distinct possibility if alternatives are not found quickly. In a number of countries, rising costs of domestic fuels and public transport have severely affected poor households. In some cases, the ensuing discontent has spilled out onto the streets. Now at record levels, oil prices pose an unforeseen challenge to the Millennium Development Goals – crucially, the overarching goal to eradicate extreme poverty and hunger.

Oil Price Vulnerability Index

The UNDP Regional Energy Programme for Poverty Reduction (REP-PoR)commissioned an Asia-Pacific policy study on the Impact of Rising Oil Prices on the Poor and Implications for the MDGs. As part of this study an Oil Price Vulnerability Index (OPVI) was constructed, to measure a country’s level of exposure to international oil prices. The OPVI is constructed so as to capture the three commonly accepted aspects of vulnerability: hazards, resistance and damage. Hazards are international events not under the country’s control, resistance represents the resilience and the fundamental strength of the economy and damage is measured through social vulnerability and is tracked by indicators of human development.

Categorization of countries based on OPVI
Low OPVI	Iran, China, Malaysia
Medium OPVI	Bhutan, India, Papua New Guinea, Indonesia, Thailand, Mongolia, Viet Nam, Myanmar
High OPVI	Philippines, Afghanistan, Nepal, Bangladesh, Pakistan, Lao PDR, Fiji, Samoa, Sri Lanka, Solomon Islands, Cambodia, Vanuatu, Maldives

OPVI ranking of countries with and without the influence of HDI
Countries	OPVI rank without HDI	OPVI rank with HDI
Afghanistan	13	23
Bangladesh	15	21
Bhutan	4	11
Cambodia	22	24
China	2	3
Fiji	18	10
India	5	9
Indonesia	7	6
Iran	1	1
Lao PDR	17	22
Malaysia	3	2
Maldives	24	13
Mongolia	9	12
Myanmar	11	15
Nepal	14	18
Pakistan	16	17
Papua New Guinea	6	8
Philippines	12	7
Samoa	19	16
Solomon Islands	21	19
Sri Lanka	20	14
Thailand	8	4
Vanuatu	23	20
Viet Nam	10	5
Blue = Least vulnerable, Orange = Medium, Red = Most vulnerable Based on data avaliable in 2006

Structure of the proposed Asia-Pacific Compensatory Oil Finance (AP-COIL) Facility

A key finding of this report is that high oil prices will affect the least developed countries and low income countries (LDCs and LICs) of the region the most.These countries have modest economic growth, high indebtedness, low foreign reserves and balance of payments at the margin. If oil prices remain high or rise further, these countries will struggle to finance their growing oil import bills. Prolonged liquidity problems will force many countries to resort to external borrowings, the rise in debt and debt service costs squeezing their capacity to invest in critical economic, social and infrastructural development. All this, in turn, can only worsen the plight of their poor and critically undermine their prospects for achieving the MDGs.

Nandita Interview with Tom Mintier

Nandita Mongia from UNDP Regional Center Bangkok is interviewed by Tom Mintier regarding the publication "Overcoming Vulnerability to Rising Oil Prices: Options for Asia and the Pacific" The video has been split into three parts and clicking on the image below will lead you to Part 1 of three, the remaining parts can be reached following the tumbnails below the video.