Inventory optimization in the U.S. petroleum industry: empirical analysis and implications for energy emergency policy

Article Abstract:

The sharp increases in crude oil prices during two of the last three supply shocks can be attributed to increased private inventory demand, stimulated by the expectation of speculative profits. The U.S. government is likely to respond to any such disruption by releasing oil from its Strategic Petroleum Reserve (SPR). The SPR represents only a small part of U.S. oil inventories, which makes the reaction of the private sector crucial in evaluating its effect. Inventory behavior is incorporated into a model of the world oil market that is linked to a short-run macroeconometric model of the U.S. economy. The model simulations support the opinion that a supply disruption causes considerable inventory accumulation. The model also supports the assumption that SPR can be helpful in an oil emergency.

Crude petroleum and natural gas, United States, Supply and demand, Energy policy, Petroleum industry, Petroleum products, Political aspects, Inventory control

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Internal finance and investment: evidence from the undistributed profits tax of 1936-37

Article Abstract:

Analyses of the financing costs under asymmetric information suggest the existence of a shadow price differential between companies' internal funds and investment spending. These models have been difficult to test because of the absence of firm-level data on retained earnings (internal finance) and debt and stock flotations (external finance). This problem was resolved by calculating surtax margin on undistributed corporate earnings in the 1930s. With firms' relative cost of internal and external funds identified, it was shown that, with investment opportunities constant, changes in cash flow had a significant effect on the investment of high-surtax-margin companies. This effect was not observed in other companies examined.

Research, Finance, Investments, Corporations, Corporate finance, Accumulated earnings tax

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Long-term contracting and multiple-price systems

Article Abstract:

The movement of prices in commodity markets which offer both fixed-price contracts and flexible-price spot transactions is analyzed using an optimizing model that provides a framework by which to examine the degree of price flexibility within and across these multiple-price markets. The variations in price flexibility across markets are observed to be related to differences in the type of commodity traded. On the other hand, the variations in price flexibility within markets are observed to be linked to spot price changes, supply and demand fluctuations and the extent of reliance on long-term contracting.

Prices and rates, Commodity futures, Spot market

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