Mitigating Disruptions: Assessing the Role of Regulatory Measures in Fuel Supply Chain Resilience During Floods in Brazil

Climate change has emerged as one of the most pressing global challenges, with extreme weather events increasingly disrupting supply chains worldwide. In April 2024, catastrophic floods in Rio Grande do Sul, Brazil, severely affected the fuel distribution infrastructure, prompting regulatory intervention through temporary relief measures. This paper presents a spatial competition model to assess the resilience of the fuel supply chain and to evaluate some of the regulatory responses. We develop a three-echelon supply chain model that incorporates diesel and biodiesel suppliers, distributors, and retailers, and simulate market dynamics through iterative price updates while considering transportation costs, capacity constraints, and mandatory biofuel blend requirements. Our analysis reveals that supply overcapacity significantly influences price stability, with tighter capacity leading to higher prices. When simulating the removal of a major biodiesel supplier - mirroring occurred real events - our results suggest that reducing mandatory biodiesel content may have had unintended consequences, potentially increasing overall fuel costs to retailers. These findings demonstrate the complex interplay between regulatory interventions and market dynamics during supply chain disruptions, offering insights for policymakers and industry stake-holders in developing more effective resilience strategies.

Keywords: Supply chain, Resilience, Fuel, Biodiesel, Extreme weather event, Regulatory measures.