Oil price volatility has been highly criticized on many fronts, from the
top-level official to the average consumer. Authorities for both
producing and consuming nations have called for mechanisms to restore
order to a chaotic market.The author traces the development of petroleum
commodity markets, then examines the quest by producers and consumers
for stability in world oil markets. He finds that modest producer and
consumer gains can be realized through negotiations that achieve removal
of barriers to trade, elimination of hurdles to foreign investment, and
strengthening of financial institutions.Verleger reviews previous
attempts to stabilize price fluctuations of other commodities and finds
that these efforts have invariably failed. He argues that the very size
of the oil market makes it unlikely that an effort to stabilize oil
prices would succeed. Moreover, he shows that an oil price stabilization
agreement would impose large costs on consumers.