Abstract
A theoretical model explaining the determination of prices in the markets for North Sea crude oil is set up. Three markets are analysed in a three-stage game in which market concentration increases by each stage: In the first stage, the International Petroleum Exchange is modeled as a thick futures market. This market is also used to hedge against the uncertain outcome of the 15-Day forward market, modeled in the second stage. There, a small club of traders enter futures contracts knowing that this will affect the storage decision and thereby the spot price profile. The third stage models the spot market as a two-period duopoly with inventories. The strategic effect of, and interaction between, inventories and futures positions is investigated.
Many thanks to Robert Waldmann for lucid comments. The usual disclaimer applies.
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© 1992 Kluwer Academic Publishers
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Møllgaard, P., Phlips, L. (1992). Oil Futures and Strategic Stocks at Sea. In: Phlips, L., Taylor, L.D. (eds) Aggregation, Consumption and Trade. Advanced Studies in Theoretical and Applied Econometrics, vol 27. Springer, Dordrecht. https://doi.org/10.1007/978-94-011-1795-1_10
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DOI: https://doi.org/10.1007/978-94-011-1795-1_10
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