Research

Our research papers have been commissioned with the aim of improving understanding of the commodity trading industry and of the environment in which we operate.

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TRADE FINANCE AND REGULATION: THE RISK OF UNINTENDED CONSEQUENCES

Trafigura White Paper

December 2016

Trade finance is part of the life blood of the global economy as well as a vital tool in commodities trading. But there is growing concern in the banking and trading community that changes in financial regulation could put that life blood at risk. This concern prompted Trafigura to commission the economics firm Llewellyn Consulting to produce a study entitled “Trade finance and regulation: the risk of unintended consequences”.

The study, written on the basis of interviews with policy-makers, banks and users of trade finance, suggests trade finance is often taken for granted as a well-functioning and liquid market driven by demand. But it highlights how some of the detailed changes to banking rules now under discussion among regulators could call those assumptions into question. At worst, the paper argues, these changes could make trade finance more expensive for traders, producers and consumers, and even prompt some important trade finance banks to quit the market.

“Disruptions to trade finance, while infrequent, are highly damaging when they occur since one form or another of trade finance underpins around 90 percent of world trade,” the authors argue. “All the data shows that trade finance is an inherently low-risk activity featuring very low historic credit losses, and as such it warrants being handled with care. But there is now growing concern over the possibility that trade finance could be adversely affected by over-heavy, insufficiently nuanced regulation, particularly in an area like commodity trade finance where policy-makers may perceive the risks involved to be greater than they are. In particular, it is important that separate regulations in the areas of capital, leverage and liquidity do not add up to more than the sum of their parts.”

Commodities demystified: a guide to trading and the global supply chain

September 2016

Commodities trading is one of the oldest forms of economic activity, yet it is also one of the most widely misunderstood. Trafigura has decided to continue its efforts to explain the business by producing a new publication: “Commodities Demystified – a guide to trading and the global supply chain”. This guide is an attempt to explain to a wide audience the functions and modus operandi of commodity trading firms, and the way they help organise the supply chains that underpin today’s global economy.

Visit the website http://www.commoditiesdemystified.info

The Changing Oil Landscape

Puma Energy White Paper

February 2016

This concise report looks at the structural transformation of the oil industry and trends in the price of oil. It highlights five common oil market misapprehensions and describes the new global oil refinery landscape, in which refinery operations are consolidating into regional ‘mega’ hubs. It also outlines developments in refined product markets and describes the outlook for midstream and downstream operations and the implications for trade, storage and infrastructure. 

The white paper is written by Llewellyn Consulting, an independent economics advisory firm specialising in macroeconomic, policy, and political issues.

The Changing Face of Latin America

Puma Energy White Paper

February 2015

Puma Energy has commissioned the latest study in a series of in-depth reports in collaboration with independent economic advisory firm Llewellyn Consulting.  This report centres on the prospects for Latin America, a region with over 30 countries, and the world’s second-most urban region, home to around 10% of the global population, which has become ever more integrated in the global economy. It focuses on the region’s sources of future growth, its potential, and the various challenges it faces, including importantly meeting substantive infrastructure and energy supply needs. In so doing, it maps out investment and broader business opportunities for companies such as Puma Energy.

The Economics of Commodity Trading Firms

Trafigura White Paper (abridged version)

August 2015

Commodity trading is one of the oldest forms of human activity. It is central to the global economy. Yet up to now there has been remarkably little research into this important area. The Economics of Commodity Trading Firms demystifies the commodity trading business through a combination of description and analysis.

The white paper is written by Craig Pirrong, professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. His research focuses on the economics of commodity markets. Business commentator and broadcaster Michael McKay recently interviewed the professor about the contents of his white paper.

Not Too Big To Fail – Systemic Risk, Regulation, and the Economics of Commodity Trading Firms

Trafigura White Paper

March 2015

In the aftermath of the Great Financial Crisis, regulatory authorities have undertaken a searching review of firms throughout the financial markets to identify those that could pose systemic risks. This review has extended to include firms not typically thought of as part of the financial sector, even broadly construed such as Commodity Trading Firms (CTFs).

Some regulators have questioned whether some of these firms are “too big to fail,” and hence pose a threat to the stability of the financial system, necessitating subjecting them to additional regulation akin to that imposed on banks.

This white paper explains the functions of these firms and evaluates whether they pose systemic risks that would justify subjecting them to regulations (notably capital requirements) similar to those imposed on other entities such as banks which are deemed to be systemically important.

Fifty Years of Global LNG: Racing to an Inflection Point

Trafigura White Paper

September 2014

LNG has experienced remarkable developments in commercialization and export capacity in a span of just 50 years. In this paper produced for the 2014 LNG Asia Pacific Summit in Singapore, Professor Craig Pirrong probes where the industry is headed as oil-based pricing becomes a relic of the past. His analysis and insights describe a potential revolution in LNG pricing and contracting mechanisms that will rely on trading firms and commodity markets to secure supply and manage risk.

The white paper is written by Craig Pirrong, professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. The white paper was written with the funding and support of The Trafigura Group.

The Changing Face of Asia Pacific

Puma Energy White Paper

April 2014

This white paper centres on the prospects for Asia Pacific, home to 50% of the world’s population, and for several decades the most dynamic region of the global economy. It focuses on the region’s sources of future growth, its potential, and the various challenges it faces, including meeting substantive infrastructure and energy supply needs. It maps out investment and broader business opportunities for global energy companies such as Puma Energy.

The Economics of Commodity Trading Firms

Trafigura White Paper

March 2014

Commodity trading is one of the oldest forms of human activity. It is central to the global economy. Yet up to now there has been remarkably little research into this important area. The Economics of Commodity Trading Firms demystifies the commodity trading business through a combination of description and analysis.

The white paper is written by Craig Pirrong, professor of finance and the Energy Markets Director for the Global Energy Management Institute at the Bauer College of Business at the University of Houston. His research focuses on the economics of commodity markets. Business commentator and broadcaster Michael McKay recently interviewed the professor about the contents of his white paper.

The Changing Face of Africa

Puma Energy White Paper

October 2013

The white paper centres on the transformation that is taking place in Africa, the outlook, and challenges faced, including importantly the transformation of its infrastructure and the vital role that this plays in meeting potential.

The Changing Face of the Oil Industry

Puma Energy White Paper

June 2013

This white paper looks at the oil industry over the past century; current developments; and the period ahead. The industry is, once again, undergoing much change, and this report’s analysis of the historical development of the industry helps not only to explain how the industry came to be what it is today, but also how businesses such as Puma Energy are well positioned to thrive in the years ahead.

Foundations for Growth: Infrastructure Investment in Emerging Markets

Trafigura White Paper

March 2015

This white paper looks at how investment in infrastructure is of vital importance for the global economy, and in particular for developing nations. 

Equally, if a widening emerging-economy ‘infrastructure gap’ is to be adequately bridged, there is a requirement for much greater involvement of the private sector in the design and delivery of these assets. With government finances increasingly constrained, and the various competing claims on them are only likely to multiply, tapping the financial resources and broader experience and expertise of private investors and producers is a major priority.

Trafigura has long demonstrated competence in trading and transportation of commodities, and is also aware of global citizenship responsibilities that go some way beyond those owed to its immediate shareholders. It stands to be at the leading edge of the future expansion of global infrastructure which supports trade. 

It is our hope that this white paper will contribute to an informed debate about the important role of infrastructure in fostering development, and will encourage the search for innovative public-private partnerships in this area. Since the emerging-market growth that is fuelling demand is unlikely to abate in the foreseeable future, solutions will be at a premium in coming years.