Title: Optimal operating strategies coping with uncertainties of world oil prices for China's strategic petroleum reserve

Authors: Xin Chen; Hailin Mu

Addresses: School of Energy and Power Engineering, Dalian University of Technology, Dalian, 116023, China ' School of Energy and Power Engineering, Dalian University of Technology, Dalian, 116023, China

Abstract: Since 2003, China has begun to establish its own strategic petroleum reserves (SPR) to strengthen its oil supply security. Due to the unpredictable feature of the oil supply interruption or sudden price rising, questions about operating the SPR become an important issue for China's policy makers. This paper analysed the operating strategies for China's SPR by developing a stochastic dynamic programming model, which considered uncertainties of the world oil prices and the construction process of China's SPR sites. Different situations, including normal world oil prices, short-term world oil price rising, continuously high world oil prices and continuously oil price decrease were considered and discussed. Optimal SPR operating strategies coping with uncertainties of world oil prices for China were derived and relevant policy implications were obtained. The influence effects on world oil price caused by the acquisition or drawdown actions of China's SPR were considered, too.

Keywords: optimal models; operating strategies; oil price uncertainties; China; SPR; strategic petroleum reserves; dynamic programming; oil supply; energy security; construction process; energy supply; stochastic modelling; oil prices.

DOI: 10.1504/IJGEI.2013.065191

International Journal of Global Energy Issues, 2013 Vol.36 No.5/6, pp.347 - 368

Received: 15 Jan 2014
Accepted: 18 Jul 2014
Published online: 21 Nov 2014 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article