A swing producer or swing supplier is a supplier or a close
oligopolistic group of suppliers of any
commodity
In economics, a commodity is an economic goods, good, usually a resource, that specifically has full or substantial fungibility: that is, the Market (economics), market treats instances of the good as equivalent or nearly so with no regard to w ...
, controlling its global deposits and possessing large spare production capacity. A swing producer is able to increase or decrease commodity supply at minimal additional internal cost, and thus able to influence prices and balance the markets, providing downside protection in the short to middle term. Examples of swing producers include
Saudi Arabia
Saudi Arabia, officially the Kingdom of Saudi Arabia (KSA), is a country in West Asia. Located in the centre of the Middle East, it covers the bulk of the Arabian Peninsula and has a land area of about , making it the List of Asian countries ...
in oil,
Russia
Russia, or the Russian Federation, is a country spanning Eastern Europe and North Asia. It is the list of countries and dependencies by area, largest country in the world, and extends across Time in Russia, eleven time zones, sharing Borders ...
in
potash
Potash ( ) includes various mined and manufactured salts that contain potassium in water- soluble form. fertilizers, and, historically, the
De Beers Company in
diamond
Diamond is a Allotropes of carbon, solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Diamond is tasteless, odourless, strong, brittle solid, colourless in pure form, a poor conductor of e ...
s.
Modes
By modeling the swing producer behavior, John Morecroft describes two modes: normal swing mode and punitive mode. Usually in the normal mode, the swing producer responds to market price fluctuations by marginally increasing or decreasing its output in order to maintain stable prices for all producers. However, independent participants can take unjust advantage of the reduced supply and increase their output in order to win a larger market share. In such cases, the swing producer switches to the punitive mode and greatly increases its product output in order to reduce prices, causing losses for other producers and making them cooperate.
Swing consumers to nullify the exorbitant pricing power of the swing producers, regulate their consumption or utilize their reserve production capacity or depend on the stocks available to reduce imports till the prices reduce to comfortable level.
See also
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Elasticity (economics)
In economics, elasticity measures the responsiveness of one economic variable to a change in another. For example, if the price elasticity of the demand of a good is −2, then a 10% increase in price will cause the quantity demanded to fall by 2 ...
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Peak oil
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Price of petroleum
References
External links
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Russia eyes swing producer role to influence prices, Forbes, writing by Dmitry Zhdannikov, editing by James Jukwey, October 22, 2008
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Saudi Arabia will remain swing producer, Energy Press & Journal, 2008
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, E. Hunter Herron, July 2000, Petroleum Equities Inc.
{{Petroleum industry
Commodity markets
Imperfect competition
Market structure
Oligopoly
Petroleum economics