Tuesday, July 11, 2023 - 14:30 in ZiF
A short-term model for the oil industry addressing commercial storage (with C. Bertucci, J.M Lasry, P.L Lions, A. Rostand, J. Scheinkman)
A talk in the SPDEs, optimal control and mean field games series by
Yves Achdou from Paris
| Abstract: |
We propose a plausible mechanism for the short-term dynamics of the oil market
based on the interaction of a cartel, a fringe of competitive producers, and
a crowd of capacity-constrained physical arbitrageurs that store the resource.
The model leads to a system of two coupled nonlinear partial differential equations,
with a new type of boundary conditions that play a key role and translate the
fact that when storage is either full or empty, the cartel has enhanced strategic
power. We propose a finite difference scheme and report numerical simulations.
The latter result in apparently surprising facts: 1) the optimal control of
the cartel (i.e., its level of production) is a discontinuous function of the
state variables; 2) the optimal trajectories (in the state variables) are cycles
which take place around the discontinuity line. These patterns help explain
remarkable price swings in oil prices in 2015 and 2020. (with C. Bertucci, J.M
Lasry, P.L Lions, A. Rostand, J. Scheinkman)
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