Measuring Energy Supply Risks: A G7 Ranking

The security of energy supply has again become a similarly hot topic as it was during the oil crises in the 1970s, not least due to the recent historical oil price peaks. In this paper, we analyze the energy security situation of the G7 countries using a statistical risk indicator and empirical energy data for the years 1978 through 2007.We find that Germany’s energy supply risk has risen substantially since the oil price crises of the 1970s, whereas France has managed to reduce its risk dramatically, most notably through the deployment of nuclear power plants. As a result of the legally stipulated nuclear phase-out, Germany’s supply risk can be expected to rise further and to approach the level of Italy.Due to its resource poverty, Italy has by far the highest energy supply risk among G7 countries.Herfindahl Index, Energy Supply Risk Indicator

Systemic trade-risk of critical resources

In the wake of the 2008 financial crisis the role of strongly interconnected markets in fostering systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to deleterious cascades of supply shocks that increase systemic trade-risks and pose a threat to geopolitical stability. On a global and a regional level we show that supply risk, scarcity, and price volatility of non-fuel mineral resources are intricately connected with the structure of the world-trade network of or spanned by these resources. On the global level we demonstrate that the scarcity of a resource, as measured by its trade volume compared to extractable reserves, is closely related to the susceptibility of the trade network with respect to cascading shocks. On the regional level we find that to some extent the region-specific price volatility and supply risk can be understood by centrality measures that capture systemic trade-risk. The resources associated with the highest systemic trade-risk indicators are often those that are produced as byproducts of major metals. We identify significant shortcomings in the management of systemic trade-risk, in particular in the EU

Measuring Energy Security – A Conceptual Note

Along with the oil price, concerns about the security of energy supply have soared once again in recent years.Yet, more than 30 years after the OPEC oil embargo in 1973, energy security still remains a diffuse concept. This paper conceives a statistical indicator that aims at characterizing the energy supply risk of nations that are heavily dependent on energy imports. Our indicator condenses the bulk of empirical information on the imports of fossil fuels originating from a multitude of export countries as well as data on the indigenous contribution to the domestic energy supply into a single parameter. Applying the proposed concept to empirical energy data on Germany and the U.S. (1980–2004), we find that there is a large gap in the energy supply risks between both countries, with Germany suffering much more from a tensed energy supply situation today than the U.S.Herfindahl index, energy supply risk indicator

POLICY DIRECTIONS TO MITIGATE WATER-SUPPLY RISK IN IRRIGATED AGRICULTURE: A FEDERAL PERSPECTIVE

Water reallocation to meet mandated flow requirements and trust responsibilities, established in Federal law and water authority, can result in large uncompensated losses to irrigated agriculture. This paper discusses the nature and potential cost of water-supply interruptions due to Federal actions, and provides a comparative assessment of alternative risk-mitigation measures.Resource /Energy Economics and Policy,

Liquidity effects in the bond market

The authors find that supply risk in the market for Treasury bills adds between 10 basis points and 40 basis points to the standard deviation of the T-bill interest rate. The risk will probably increase unless the Fed expands the set of assets that it uses to conduct open market operations.Liquidity (Economics) ; Treasury bonds ; Treasury bills ; Treasury notes

Valuing Options in California Water Markets: A Laboratory Investigation

Risk and reliability dominate water supply discussions in the arid western United States. In the past, water managers built additional storage to mitigate supply risk. The optimal, least expensive storage sites have now been taken, and there are strong, environmental objections to new facilities. Reliability of existing supplies is further diminished due to concerns about endangered species and global climate change. Thus water agencies increasingly turn to contractual mechanisms such as dry-year options to manage supply risk in advance of need. However, although a few water agencies across the West have implemented dry-year options, sufficient data for conventional econometric analysis do not yet exist. We thus utilize experimental economics to analyze the effect of annual dry-year options on water markets. How do market structure (competitive versus market power) and option contract availability affect water price and allocation within a market? Experiment participants trade stochastic realizations of water in a non-uniform double auction parameterized to resemble the California water market. We find that realized gains from trade are on average higher when options can be traded, by 11% in competitive markets and by 21% in dominant buyer markets. Findings in this analysis may assist policymakers in preparing for the next multi-year drought in California.Resource /Energy Economics and Policy,

Reducing supply risk caused by the stockwhip effect in supply chains

To enhance today's supplier relationship management, it requires collaborative relationship information especially supplier's capability intelligence. Intimate knowledge about the supply network leads to the collective synergy to overcome supply uncertainties. Incompatible relationships create supply risk caused by the stockwhip effect. The challenge to procurement managers is to ensure that there are no supply disruptions. This paper investigates and proposes a conceptual model for reducing supply risk caused by 'stockwhip effect'. Stockwhip effect is the domino effect of constraints in the higher order supplier network. This conceptual model lays the foundation for future action research in better mitigation of supply risk

Supply risk mitigation and its impact on operational performance of small- and medium-sized enterprises: A social capital approach

Supply risk has become a key concern for manufacturing small- and medium-sized enterprises (SMEs) because of its frequent occurrence and profound impact on SME performance. As such, it is imperative to understand how SMEs can alleviate this hazard. While previous studies have identified various supply risk mitigation measures for big firms, little corresponding research has been done for SMEs especially from an empirical perspective. Underpinned by the Social Capital Theory and the Theory of Swift, Even Flow, this study investigates how SMEs can leverage social capital gained via networking with their key suppliers and with peers located within a geographical cluster to mitigate supply risk, thereby improving operational performance. Through a literature review, a framework that posits the direct and indirect effects of buyer-supplier social capital, cluster social capital, supplier integration, and cluster cooperation on supply risk of SMEs and consequently their operational performance is developed. To test the framework and the hypotheses, a questionnaire survey is used to gather data from apparel-manufacturing SMEs in Bangladesh. The psychometric properties of the questionnaire are developed based on a rigorous process of content validity. In total, 487 complete responses are collected from the respondents for analysis using structural equation modelling. Analysis of the collected data reveals that supply risk, in the form of variations in upstream supply characteristics such as quality, quantity, lead time or overall requirements, can considerably weaken the ability of SMEs to meet customer needs and substantially undermine their operational performance. Buyer-supplier social capital plays a crucial role in enabling SMEs to mitigate their supply risk directly and indirectly through enhancing supplier integrative practices, such as exchange of information and resources, joint actions and flexible arrangements. It also transmits the impact of cluster social capital and assists in mitigating supply risk. Similarly, cluster social capital can mitigate supply risk of SMEs indirectly through promoting cooperative practices among peers and improving social capital with key suppliers. The results also confirm that both supplier integration and cluster cooperation can mitigate supply risk directly. Apart from the direct impacts, their mediating roles in the relationships between social capital and supply risk are also confirmed. This study contributes to both knowledge and practices. For academic contribution, it establishes and validates a risk mitigation model focusing on SMEs, which are less studied in the current supply risk literature. The findings affirm the feasibility and importance of leveraging social capital resources to mitigate supply risk in the case of SMEs. The observations that cluster social capital serves as a bridge to connect with key suppliers, and different types of social capital of SMEs have different levels of reliance on network integration or cooperation to impact on supply risk, are some unique contributions. The study also extends the scope of supply risk literature by considering the factors impacting on supply risk and its effect on operational performance in a single framework. The study uses the theoretical lens of the Social Capital Theory and the Theory of Swift, Even Flow to conceptualise the relationships among network resources, supply risk and operational performance. It is the first attempt to apply these two theories in a survey-based risk mitigation model focusing on SMEs, thereby extending the applications of the theories. For practical contribution, the findings of the study also provide insight for SME practitioners and policy makers to effectively exploit this risk mitigation approach. They can assist practitioners and policy makers in identifying practices for the development and implementation of supply risk mitigation strategies to enhance operational performance

Equilibrium Storage in a Markov Economy

We model an economy that alternates randomly between abundance and scarcity episodes. We develop an original method to characterize in detail the structure of the Markovian competitive equilibrium. Accumulation and drainage of stocks are the main focuses. Economically appealing comparative statics results are proved. We also characterize stationary distribution of states. We extend the model to discuss price stabilization policies, injection and release costs, and limited storage capacity. Overall, the analysis delineates the notion of “flexible economy.”Price stabilization; strategic stocks; supply risk