Policy makers in countries that derive substantial export and fiscal revenue from exhaustible resources, such as oil, gas, and copper, are confronted with two major issues. The first-related to the finite nature of these resources-is how much oil income to spend on the present generation and how much to save for future generations. The second is how to adjust government spending and cushion the domestic economy from the sharp and unpredictable variations in oil prices and revenue. A number of oil producing countries have attempted to address these issues either through savings schemes or oil stabilization funds, or both.3 These funds have been established despite the difficulty of determining a long-run equilibrium oil price and predicting whether price swings are temporary or permanent.4.