Oil vulnerability index of oil-importing countries

This paper assesses the relative oil vulnerability of 26 net oil-importing countries for the year 2004 on the basis of various indicators—the ratio of value of oil imports to gross domestic product (GDP), oil consumption per unit of GDP, GDP per capita and oil share in total energy supply, ratio of domestic reserves to oil consumption, exposure to geopolitical oil market concentration risks as measured by net oil import dependence, diversification of supply sources, political risk in oil-supplying countries, and market liquidity.The approach using the principal component technique has been adopted to combine these individual indicators into a composite index of oil vulnerability. Such an index captures the relative sensitivity of various economies towards developments of the international oil market, with a higher index indicating higher vulnerability. The results show that there are considerable differences in the values of individual indicators of oil vulnerability and overall oil vulnerability index among the countries (both inter and intraregional).