- Author : Clément Nouail
- Publisher :
- Release : 2021
- ISBN :
- Pages : 0 pages
Transaction Costs Economics and the Role of the Commodity Trader in the Organization of the Industry
Download or read book Transaction Costs Economics and the Role of the Commodity Trader in the Organization of the Industry written by Clément Nouail and published by . This book was released on 2021 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Large variations in commodity prices and the price drop observed in 2014 for many of them have, more than ever, highlighted the contribution of physical traders in the sectors. By focusing on the oil sector, this thesis aims to account for the role played by traders in the organization of international trade flows. First of all, we state that vertical disintegration strategies and the market openness have allowed independent traders to emerge. They have a key role in providing time and spatial transformation of the commodity, but also in managing the risks inherent in international trade. To this end, we show that the volatility of crude oil prices is increasingly sensitive to stock market returns and that oil supply and demand factors directly influence the long-term component of price volatility. Subsequently, using a simple cobweb model, we analyze the ability of physical traders to enable the oil market integration. We show that price increases, both in level and volatility, encourage producers to use traders in order to connect them to the international market. Using the graph theory, we also highlight the usefulness of traders in maintaining the oil market integrated in the event of decreasing prices and high volatility. Furthermore, it appears that countries hosting international traders demonstrate a gravity effect by importing large volumes from producing countries to redirect these flows to consuming markets. Finally, we argue that the theory of incomplete contracts needs to integrate price variability in order to deal with opportunistic behaviors in the commodity supply chains. This postulate and the inclusion of traders in the commodity industry lead us to consider short-term contracts and fixed price contracts as two organizations that fit into producers' vertical disintegration strategies. Using a partial equilibrium model with strategic storage behavior, we conclude that the dynamics of vertical integration in the oil industry is influenced by crude oil prices. Our work therefore defends the idea that there would be no market without the contribution of physical traders.