How Stress Influences Commodity Trading Flows, Storage and Transportation

Abstract

This paper examines how different types of stress impacts commodity trading flows as a function of energy infrastructure having varying degrees of rigidity and resiliency related to modes of transport and ability to store. A simple model illustrating the effect of stress on cellular transport and accumulation of certain nuclear proteins is referenced as an analogue, demonstrating similar mechanisms and correspondingly, the benefits of diversification in managing risk for commodity traders and investors. In times of great stress these benefits are augmented with the ability to transport and store due to the fact that without these tools, outcomes are more volatile. The organic cellular model is an example of evolutionary flexibility in order to survive, with similar potential implications for the future success or failure of U.S. energy infrastructure as the consequences of both anticipated and unexpected system stress continues to proliferate.

Keywords: commodities, commodity trading, crude oil, organic response; energy infrastructure; transportation and logistics; storage; flexibility; resilience; stress

JEL Classification: G00