IDEAS home Printed from https://ideas.repec.org/p/rff/dpaper/dp-06-16.html
   My bibliography  Save this paper

Do Crises Tear the Fabric of Oil Trade?

Author

Listed:
  • Weiner, Robert

    (Resources for the Future)

Abstract

In 1990, Iraq invaded Kuwait, touching off an economic, financial, diplomatic, and military crisis associated with a tremendous spike in oil prices and recession in OECD and oil-importing developing countries. But was the Gulf Crisis a disruption? Did it affect the fabric of oil trade? To examine this question, this paper examines the changing role of international trade intermediaries (ITIs, often referred to as “trading companies”) in the oil market. ITIs connect buyers and sellers, serving as the glue that holds many commodity markets together. Oil trading companies have attracted harsh scrutiny form policymakers as a result of allegations regarding their role in the United Nations’ Iraqi Oil-for-Food Program, but minimal scholarly attention. The paper takes advantage of a unique microdatabase on the Brent market. Produced in the U.K. North Sea, Brent Blend is by far the most widely traded crude oil in the international market. Participants in the Brent market are diverse, with the largest traders falling into two categories. The first comprises “industrial MNEs”—companies active in the business of producing or refining crude oil. The second category comprises financial houses and trading companies. This diversity provides an opportunity to test hypotheses regarding behavioral differences across types of companies and geographic origin, before, during, and after the crisis.

Suggested Citation

  • Weiner, Robert, 2006. "Do Crises Tear the Fabric of Oil Trade?," RFF Working Paper Series dp-06-16, Resources for the Future.
    • Handle: RePEc:rff:dpaper:dp-06-16
    as

    Download full text from publisher

    File URL: http://www.rff.org/RFF/documents/RFF-DP-06-16.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mike W Peng & Anne Y Ilinitch, 1998. "Export Intermediary Firms: A Note on Export Development Research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 29(3), pages 609-620, September.
    2. Levy, Brian, 1982. "World oil marketing in transition," International Organization, Cambridge University Press, vol. 36(1), pages 113-133, January.
    3. Carlos, Ann M, 1992. "Principal-Agent Problems in Early Trading Companies: A Tale of Two Firms," American Economic Review, American Economic Association, vol. 82(2), pages 140-145, May.
    4. Kristin J Forbes, 2002. "How Do Large Depreciations Affect Firm Performance?," IMF Staff Papers, Palgrave Macmillan, vol. 49(Special i), pages 214-238.
    5. Forbes, Kristin J., 2002. "Cheap labor meets costly capital: the impact of devaluations on commodity firms," Journal of Development Economics, Elsevier, vol. 69(2), pages 335-365, December.
    6. Kenneth A. Froot & Jeremy C. Stein, 1991. "Exchange Rates and Foreign Direct Investment: An Imperfect Capital Markets Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(4), pages 1191-1217.
    7. Harald Trabold, 2002. "Export Intermediation: An Empirical Test of Peng and Ilinitch," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(2), pages 327-344, June.
    8. Melick, William R. & Thomas, Charles P., 1997. "Recovering an Asset's Implied PDF from Option Prices: An Application to Crude Oil during the Gulf Crisis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 32(1), pages 91-115, March.
    9. Weiner, Robert J., 2002. "Sheep in wolves' clothing? Speculators and price volatility in petroleum futures," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(2), pages 391-400.
    10. Carlos, Ann M. & Nicholas, Stephen, 1988. "“Giants of an Earlier Capitalism†: The Chartered Trading Companies as Modern Multinationals," Business History Review, Cambridge University Press, vol. 62(3), pages 398-419, October.
    11. Mike W Peng & Anne S York, 2001. "Behind Intermediary Performance in Export Trade: Transactions, Agents, and Resources," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(2), pages 327-346, June.
    12. Philip K. Verleger, Jr., 1993. "Adjusting to Volatile Energy Prices," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 41, October.
    13. Robert J Weiner, 2005. "Speculation in international crises: report from the Gulf," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 36(5), pages 576-587, September.
    14. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
    15. Hubbard, R. Glenn & Weiner, Robert, 1983. "The sub-trigger crisis : An economic analysis of flexible stock policies," Energy Economics, Elsevier, vol. 5(3), pages 178-189, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. James L. Smith, 2009. "World Oil: Market or Mayhem?," Journal of Economic Perspectives, American Economic Association, vol. 23(3), pages 145-164, Summer.
    2. Hache, Emmanuel & Lantz, Frédéric, 2013. "Speculative trading and oil price dynamic: A study of the WTI market," Energy Economics, Elsevier, vol. 36(C), pages 334-340.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Daunfeldt, Sven-Olov & Engberg, Erik & Halvarsson, Daniel & Kokko, Ari & Tingvall, Patrik, 2019. "Wholesale firms: A catalyst for Swedish exports?," Ratio Working Papers 328, The Ratio Institute.
    2. Virginie Baritaux & Magali Aubert & Etienne Montaigne & Hervé Remaud, 2006. "Matchmakers in wine marketing channels: The case of French wine brokers," Agribusiness, John Wiley & Sons, Ltd., vol. 22(3), pages 375-390.
    3. Mihir A. Desai & C. Fritz Foley & Kristin J. Forbes, 2004. "Financial Constraints and Growth: Multinational and Local Firm Responses to Currency Crises," NBER Working Papers 10545, National Bureau of Economic Research, Inc.
    4. Theingi, & Purchase, Sharon, 2011. "How exporters’ and intermediaries’ resources influence export performance," Australasian marketing journal, Elsevier, vol. 19(2), pages 100-107.
    5. Krüger, Jens, 2009. "How do firms organize trade?: Evidence from Ghana," Kiel Advanced Studies Working Papers 449, Kiel Institute for the World Economy (IfW Kiel).
    6. Marion Jansen & Roberta Piermartini, 2009. "Temporary Migration and Bilateral Trade Flows," The World Economy, Wiley Blackwell, vol. 32(5), pages 735-753, May.
    7. Ho-Fuk Lau, 2008. "Export channel structure in a newly industrialized economy," Asia Pacific Journal of Management, Springer, vol. 25(2), pages 317-333, June.
    8. Peng, Mike W. & Zhou, Yuanyuan & York, Anne S., 2006. "Behind make or buy decisions in export strategy: A replication and extension of Trabold," Journal of World Business, Elsevier, vol. 41(3), pages 289-300, September.
    9. Peng, Mike W. & Lee, Seung-Hyun & Hong, Sungjin J., 2014. "Entrepreneurs as intermediaries," Journal of World Business, Elsevier, vol. 49(1), pages 21-31.
    10. Jolanda Hessels & Siri Terjesen, 2010. "Resource dependency and institutional theory perspectives on direct and indirect export choices," Small Business Economics, Springer, vol. 34(2), pages 203-220, February.
    11. Kristin J. Forbes, 2007. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 171-202, National Bureau of Economic Research, Inc.
    12. Robert Weiner, 2006. "Do Birds of a Feather Flock Together? Speculator Herding in the World Oil Market," RFF Working Paper Series dp-06-31, Resources for the Future.
    13. Innan Sasaki & Niina Nummela & Davide Ravasi, 2021. "Managing cultural specificity and cultural embeddedness when internationalizing: Cultural strategies of Japanese craft firms," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(2), pages 245-281, March.
    14. Dionisius Narjoko & Hal Hill, 2007. "Winners and Losers during a Deep Economic Crisis: Firm‐level Evidence from Indonesian Manufacturing," Asian Economic Journal, East Asian Economic Association, vol. 21(4), pages 343-368, December.
    15. Zoltán J. Ács & Siri Terjesen, 2015. "Born local: toward a theory of new venture’s choice of internationalization," Chapters, in: Global Entrepreneurship, Institutions and Incentives, chapter 13, pages 242-256, Edward Elgar Publishing.
    16. Ben Tomlin & Loretta Fung, 2015. "Exchange Rate Movements and the Distribution of Productivity," Review of International Economics, Wiley Blackwell, vol. 23(4), pages 782-809, September.
    17. Trabold, Harald & Parvati Trubswetter & Philipp J H Schroder, 2003. "Intermediation in Foreign Trade: When do Exporters Rely on Intermediaries?," Royal Economic Society Annual Conference 2003 206, Royal Economic Society.
    18. Siri Terjesen & Amanda Elam, 2009. "Transnational Entrepreneurs‘ Venture Internationalization Strategies: A Practice Theory Approach," Entrepreneurship Theory and Practice, , vol. 33(5), pages 1093-1120, September.
    19. Forbes, Kristin J., 2002. "Cheap labor meets costly capital: the impact of devaluations on commodity firms," Journal of Development Economics, Elsevier, vol. 69(2), pages 335-365, December.
    20. Guillaume Daudin, 2005. "Les transactions de la mondialisation," Revue de l'OFCE, Presses de Sciences-Po, vol. 92(1), pages 221-262.

    More about this item

    Keywords

    oil; trading companies; crisis; Brent; North Sea;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L71 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - Mining, Extraction, and Refining: Hydrocarbon Fuels
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rff:dpaper:dp-06-16. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Resources for the Future (email available below). General contact details of provider: https://edirc.repec.org/data/rffffus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.