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 good, usually a resource, that has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them.
The price of a co ...
, 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 Western Asia. It covers the bulk of the Arabian Peninsula, and has a land area of about , making it the fifth-largest country in Asia, the second-largest in the Ara ...
in oil,
Russia
Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-ei ...
in
potash
Potash () includes various mined and manufactured salts that contain potassium in water- soluble form. fertilizers, and, historically, the
De Beers
De Beers Group is an international corporation that specializes in diamond mining, diamond exploitation, diamond retail, diamond trading and industrial diamond manufacturing sectors. The company is active in open-pit, large-scale alluvial and ...
Company in
diamond
Diamond is a solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Another solid form of carbon known as graphite is the chemically stable form of carbon at room temperature and pressure, b ...
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 percentage change of one economic variable in response to a percentage change in another. If the price elasticity of the demand of something is -2, a 10% increase in price causes the demand quantity to fall b ...
*
Peak oil
Peak oil is the hypothetical point in time when the maximum rate of global oil production is reached, after which it is argued that production will begin an irreversible decline. It is related to the distinct concept of oil depletion; whil ...
*
Price of petroleum
The price of oil, or the oil price, generally refers to the spot price of a barrel () of benchmark crude oil—a reference price for buyers and sellers of crude oil such as West Texas Intermediate (WTI), Brent Crude, Dubai Crude, OPEC R ...
References
External links
Russia eyes swing producer role to influence pricesSaudi Arabia will remain swing producer
{{Petroleum industry
Commodity markets
Imperfect competition
Market structure
Oligopoly
Petroleum economics