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Pre-Financing Oil Imports with Gold

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  • Liliya Zhekova

Abstract

Given that US dollar purchasing power has been diminishing against both Oil and Gold in the past hundred years, we examine the extent to which Germany could decrease its import costs by pre-financing oil with gold for the period 2005-2023. To account for this the study develops five models (M1, M2, M3, M4, M5) of pre-financing strategies. The research proposes the most effective model that decreases oil import both in terms of costs and volatility. The findings suggest that both costs and volatility in monthly import values decrease across all models. Results show that the most capital-efficient is the model, which has an initial lump sum pre-financing of three times the yearly oil demand prior to the start date. M3 achieves to reduce costs by 25% and volatility by 35%. This paper reiterates gold nature – acting as a safe haven and hedge against inflation.

Suggested Citation

  • Liliya Zhekova, 2024. "Pre-Financing Oil Imports with Gold," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 8, pages 149-166.
    • Handle: RePEc:bas:econst:y:2024:i:8:p:149-166
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    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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