Do Crises Tear the Fabric of Oil Trade?

Robert Weiner ()
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Robert Weiner: Resources for the Future

RFF Working Paper Series from 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.

Keywords: oil; trading companies; crisis; Brent; North Sea (search for similar items in EconPapers)
JEL-codes: D74 F23 L14 L71 Q34 Q41 (search for similar items in EconPapers)
Date: 2006-03-08
New Economics Papers: this item is included in nep-ene and nep-int
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Citations: View citations in EconPapers (2)

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