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Comment by bragr | Hacker News Reader

>In practice, when countries ration their oil that's beyond the scope of the model.

Does your model assume that demand is constant regardless of price? We're already seeing a reduction in demand over the last several months.

https://finance.yahoo.com/energy/articles/global-oil-demand-...

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> China's decrease of 1.5 million barrels per day, representing a 9% decline, was by far the largest globally, the report said.

Some global demand destruction is occurring, but that of China is them switching to large internal strategic reserves.

https://youtu.be/BkA0bkb6ZO0 (whole video is worth the watch)

And this is what the model price formation assumes, and in fact, the silent mechanism that makes the crisis worse. Reserves silently deplete for each country, and each epoch where they exhaust is when the price rebalancing occurs IN A SUDDEN SPIKE, affecting other nodes that are not even connected to Hormuz, which is one of the conclusions of the paper. Either directly or indirectly all countries feel the pain: the question is who can stand the game of chicken the longer before intervening

The suspense is terrible, I hope it lasts. Great work on the project!

Thank you! Much appreciated. On the suspense, we are all riding the same train :$

If the sudden spike is so bad, why would a country fail to taper their reserves?

this is an interesting market design question: the point is that tapering would require everyone knowing everyone else's depletion clocks. As they are unknown (sanctioned trade, non-public state figures), the opacity is the game itself (that I called game of chicken in other comments). Surely the main players are trying hard to guess each other's numbers by every mean possible

There are two versions of the model: -The one rendered by default (called Endogenous), with endogenous price that affects the demands according to the price elasticity slider. Reflecting how reactive are the nodes demand wrt price -With fix price (called Fixed): that in the oil market doesn't apply, but it's an interesting baseline to consider oil purely as flow. And as a modeling tool, this allows the model to capture small supply chains that don't have price setting power.

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