Stuck in a Phantom Traffic Jam
March 15, 2021
Author: Guy Soreq
You’re cruising down the highway when all of a sudden endless rows of brake lights appear ahead. There’s no sign of an accident, no stoplight, no change in speed limit or narrowing of the road. So why is there so much traffic? This frustrating phenomena is called a phantom traffic jam.
Phantom traffic jams form when cars on the road exceed a critical density, generally when cars are spaced less than 35 meters apart. In this dense, but flowing, traffic, minor disturbances can set off a chain reaction. One driver brakes slightly. Each successive driver then brakes a bit more, creating a wave that propagates backwards. These stop-and-go waves can travel along a highway for miles. Schools of fish and flocks of birds are adept at maintaining a constant space between each member of the group while moving in densely packed groups, but humans are far worse judges of distance.
We saw the same stop-and-go traffic pattern in raw material supply chains over the last year. In August 2020, much of the world was in lockdown, and suppliers saw orders come to a halt. Between factory workers not coming in to work and freight container shortages, production stopped. Stocks dwindled. Then from September 2020, as road congestion resumed, suppliers too saw their orders flowing in. As more and more customers ordered products to fill up their low stocks, prices began to rise.
This, in turn, creates a positive feedback loop pushing prices further upward. As prices rise, more buyers buy more stock to protect against rising prices. How much of this is a result of actual structural changes in demand or just a phantom effect? Or perhaps both are happening concurrently? Without a clear view on actual market demand, we can only speculate as to the answer.
That’s why we built Glowlit. Glowlit offers an unprecedented level of demand side market data on specialty products. In analyzing the Glowlit data over the past 6 months, we can clearly see that the average volume per user has increased. Some are buying and selling as much as twice their previous volume. There are of course many potential reasons for such an increase. We’re not here to speculate; we’re just here to review the data. And maybe alleviate some traffic jams along the way.