The model: The mechanics are the same as the financial network Eisenberg-Noe: Instead of banks, every country consumes oil interconnected via bilateral trading. Shocks propagate throughout the network, depleting oil reserves when bottleneck nodes (such as the Strait of Hormuz) are blocked.
Insights: The interesting part is the mechanics of how the crisis unfolds: for example, France receives 0 oil from Hormuz directly, yet their reserves are depleted faster because other countries reactively increase their safety oil stock, increasing oil price, making stockouts more expensive for everyone.
The model also gives price dynamics which are interesting on their own: the price increase is not immediate, it follows sequentially as countries reserves deplete.
Some caveats: 1. For producer nodes, depletion means their export slack is reduced/exhausted. 2. No sanctioned trade (UN Comtrade data)
Technical Details: The visualization is 600 lines of flask plus js frontend (LLM assisted visualization with ground-truth matching the original numerical exercise of the paper)
Paper with proofs/theory: https://arxiv.org/abs/2607.17491
HarHarVeryFunny•1d ago
What developments in pricing/other would indicate that your model is wrong or incomplete?
Nice website regardless, but I'm a bit skeptical that the dynamics of the global oil/energy market can be accurately predicted.
eliotho•1d ago
Well, the model is less of a prediction and more of a stress testing tool. But under the hypothetical closure scenarios it shows the timing the oil reserves of distant countries exhaust, as well as the systemic effects on pricing (the France paradox).
>What developments in pricing/other would indicate that your model is wrong or incomplete? The model has a stylized way of incorporating pricing as a function of the total supply. In practice, when countries ration their oil that's beyond the scope of the model. That being said, the implied pricing trajectory is estimated and could be tested (the staircase graph showing prices constant while countries absorb the shock with their reserves and rebalanced whenever there is a reserve depletion).
>Nice website regardless, but I'm a bit skeptical that the dynamics of the global oil/energy market can be accurately predicted. Thank you! Indeed, but I think having at least a stylized testing tool might be useful for policymakers :$ (assuming decisions are ever data-driven lol)