A Mathematical Model For The Determination Of An Optimal Stockpile To Counteract Foreign-Induced Commodity Actions

The OPEC oil embargo and the subsequent higher prices for oil have drawn public attention to the critical problems associated with security of supply of oil and other key industrial materials, especially nonfuel minerals. This concern has stimulated the interest of decisionmakers in analyzing policy options to cope with the emergency situations resulting from a sudden foreign- induced supply interruption or a cartel price increase. Several policy options are available to counteract foreign-initiated embargoes or cartel price actions. The type of response will differ depending on the commodity action intiated. A mathematical model that measures the impact of foreign-induced commodity actions on the domestic economy is formulated. The paper also presents a computer method that can be used to determine the optimum policy response to counteract such actions.