Autori
Mollgaard, H. Peter
Phlips, Louis

Titolo
Oil stocks as a squeeze preventing mechanism : is self-regulation possible?
Periodico
European University Institute of Badia Fiesolana (Fi). Department of Economics - Working papers
Anno: 1993 - Fascicolo: 12 - Pagina iniziale: 1 - Pagina finale: 46

Squeezes are registered occasionally in the forward market for Brent crude oil. The squeezer accumulates forward contracts and creates artificial demand by refusing to close out, exploiting imperfections in the decentralized market clearing. The artificial demand in turn creates a price surge and the possibility of a squeeze thus introduces uncertainty about the market outcome. Squeezes therefore render the market institution less pa.atable to other market participants (traders and refineries) who may find other ways of accomplishing the economic functions of the forward market, so the producers have a long term interest in keeping market clearing smooth by supplying stocks to squeezed short. The extent to which such self-regulatory stocks should be held is analysed in the context of a repeated game. Unless the probability of a squeeze is very small, self-regulation should be possible.



Testo completo: http://hdl.handle.net/1814/453

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