The Impact Of Oil Price Fluctuations

Abstract

The study aims to determine the reality and prospects of oil in Algeria. Considering that the Algerian economy is largely dependent on oil, Algerian fiscal policy also depends heavily on oil revenues, which constantly change with the change in oil prices in global markets. The oil price variable was chosen due to its importance in oil taxation. The unconstrained VAR model was used to examine how changes in oil price PPT affect oil tax IMP_PPT, and to analyse the response functions and variance components. Through this standard relationship, we can obtain a specific and clear interpretation of the impact of oil price fluctuations on oil taxation. The study concluded that a positive structural shock in the oil price, estimated at one standard deviation or one dollar, will have a positive moral impact on oil taxation in the short term. The study also recommends the necessity of adopting a strategy to rationalise oil supplies in line with demand in Algeria, as the balance between these variables is considered the most important source of revenue generation.