The Role and Behaviour of Oil Inventories
The purposes of this paper ape to explain the economics of inventory behaviour, to describe and analyse the changes in oil inventories since the beginning of the Gulf crisis, and to discuss issues of public policies relating to stocks, In Section 2 we emphasize the different economic function petformed by inventones in times of crisis, when incremed unceeainty
and larger variance of expectations tend to increase desired inventoory levels. Section 3 describes the evolution of petruleurn inventories over the course of the 198Us, aping that the drive to reduce product holdirzgs especially over the decade has reduced their buffer role and therefore increased the vulnerabilify of the supply system when refining capacity is stretched Section 4 evaluates the uvcaiIable evidence on stockholding behaviour since last August, focusing on the difsrent pattern that emerged in three major areas: the USA, Europe and Japan. Finally, Section 5 addresses the issue of public policies and discusses the motivations and perfomance of the major institutional players (EC, EA, DUE) in the context of the current crisis.