Strategic Petroleum Reserve Strategy Modeling Based On Supply Risk Analysis

In recent years, the security situation of oil supply has kept getting worse, which is reflected bythe facts of frequent price shocks and disruptions, political instability of major exporters, terrorismand piracy on shipping routes.As long as China is concerned, the development of industrializationprompts oil consumption growing fast. Meanwhile, as a result of production and consumptionimbalance, the oil import dependence has increasing rapidly sincenever.As an direct countermeasure against disruption, Strategic Petroleum Reserve (SPR) can servenational energy security, guarantee continuous oil supply and depressing prices fluctuation. Chinastarts to build its SPR in2003and aims to hold a reserve capacity of8.5million tonnes till2020. Eventhough, China SPR construction is far behind developed countries. In comparison, China’s SPRcapacity is smaller and the management system is still incomplete. Also, we find there is few studieson the field of SPR acquisition, release and rotation.Therefore, in this thesis, we employ the methods of economics and operational research to studythe topics of SPR implementation strategies under market uncertainties. The major uncertaintiesconsidered here includes supply, demand, price, disruption as well as other factors. Based on thewhole research, the following questions are answered, how and to what extent the disruption affectsmacro-economy, What is the optimal SPR capacity for China, how should we acquire, release andrecover SPR in a disruption, how would the implementation of SPR affect oil price?The majorinnovative work and conclusions are as follows:(1) The impact of disruption on economy. Based on the theories of welfare economics andindustrial economics, We analyzed the impact of disruption and price shock on production input,economic output, employment, social welfare and economic structure. According to the literaturereview, we summarized three major disruption loss, for which the functional forms are also specified.(2) Optimal tariff rate and SPR capacity. We constructed a Tariff-Stockpile model based on thebenefit-cost analysis oftariff and SPR implementation. Given the Tariff-Stockpile model and actualdata, China’s optimal tariff rate and SPR capacity are calculated. We also compared the efficiency ofthe two polices from the perspective of net benefit in a disruption. It is found that the moreconsumption demand is inelastic to price, the higher tariff net benefit is in a disruption. Though thenet benefit decreases rapidly with the increasing of demand elasticity. Moreover, we findcombinational benefit of two polices is higher than that of single one. (3) SPR acquisition strategy. A dynamic programming model is constructed to study the SPRacquisition strategy. Given several specific scenarios, we simulated the optimal SPR acquisition andrelease strategies for China. It’s found that the cost of establish SPR will become much higher if theimpact of oil acquisition on price is considered. when the consumption demand is inelastic to price,the optimal acquisition rate of SPR is insensitive to price, though the acquisition might drive the pricehigher in this situation.(4) SPR release and restock strategies. We constructed a stochastic programming program modelto study the optimal SPR release and restock strategies. A simulation analysisis promoted, givenseveral price and disruption scenarios. It is found that the oil price and disruption probabilitydetermine the marginal cost of SPR which further impacts the optimal SPR capacity. We suggest thegovernment expand the SPR stockpile sizewhen the oil price is high, otherwise reduce it. The optimalstockpile acquisition time extends with the increase of optimal stockpile size. Additionally, when adisruption is likely to continue for several months, the decision maker should allocate the stockpilescientifically to minimize the total expect lose during this period.