Nepal vulnerable to ‘oil shocks’: UN study

Kathmandu, November 1:

A report published by the United Nations Development Programme (UNDP) last week said Nepal is extremely vulnerable to oil price rises.

The report has placed Nepal at 14th position among 24 nations surveyed on the Oil

Price Vulnerability Index . The report cited Nepal’s weak economy, which makes it less resistant to ‘oil shocks’, for this vulnerability.

The report has outlined five strategies on how governments can reduce vulnerability. The first strategy talks about managing the economic costs of oil price volatility and how this can be handled in the short-run through a basket of fiscal and financial instruments like targeted subsidies, tax adjustment, price restraints and providing compensation schemes to the poor.

The second strategy looks at the supply side. The report says because oil prices have gone up, nations are investing more in exploration and few like Vietnam have discovered oilfields in their territories. The report also says that countries should diversify sources of import and boost refining capacities.

The third and fourth strategies focus on reducing demand for oil.