Did the illicit fentanyl trade experience a supply shock?

• In Event: Measuring Illicit Fentanyl Markets and Evaluating Overdose Intervention

Abstract

Many potential explanations have been offered for the dramatic decline in fatal drug Overdoses (ODs) (particularly fentanyl) in the United States that began in mid 2023 and extended through late 2024. The decline is particularly striking as ODs had been rising without remission for over 40 years previously at the rate of 7% per annum. This paper offers new evidence that an important factor may have been an interruption in supply. Newly released DEA Figures show that fentanyl purity declined at almost exactly the same time as ODs declined; purity declines for illegal drug markets have previously been reliably associated with increases in per pure gram prices. Seizures of fentanyl also declined in mid-2023. Data from the social media platform Reddit provide additional evidence: more users started reporting the presence of a fentanyl drought in late 2023; a detailed analysis of the Reddit data will expand on the published version of this paper. In addition we present findings on cryptocurrency movements of Chinese precursor firms, showing a downturn in activity just before the inflection point for fentanyl overdoses. Comparison with data from fentanyl indicators in Canada provide further insight as to the source of the supply shock. The Canadian market is supplied by domestic producers from precursors that are imported from China, whereas the US market is supplied by Mexican-based producers working with precursors also coming from China. The fact that Canadian fatal fentanyl ODs turned down at almost the same time as they did in the United States suggests that it was China’s increased precursor control efforts in 2023, rather than US-Mexican enforcement efforts, that principally accounted for the supply shock. Though a supply shock may be the major contributor to the decline in fentanyl overdoses, this does not imply that tough enforcement against domestic retailers and distributors will lead to a further decline.

Author

• Peter H. Reuter, University of Maryland, College Park
  Presenting Author