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A dynamic programming model of China's strategic petroleum reserve: General strategy and the effect of emergencies


  • Wu, Gang
  • Wei, Yi-Ming
  • Nielsen, Chris
  • Lu, Xi
  • McElroy, Michael B.


To protect the security of energy supply, China is building national strategic petroleum reserve (SPR). We present a dynamic programming model to determine the optimal stockpiling and drawdown strategies for China's SPR under various scenarios, focusing on minimizing the total cost of reserves. In contrast to previous research, the oil price given in our model is exogenous on a monthly instead of annual basis, with a view to more realistic simulation of optimal strategies each year. Our model results show that in the case where stockpiling affects oil prices, a given SPR size will be achieved earlier than when stockpiling does not affect oil prices. In different emergency conditions, the optimal stockpiling and drawdown strategies of China's SPR are very different. When an emergency occurs, the shock of stockpiling on the oil price per barrel could range $0.49–$6.35, while the impact of drawdown on the oil price per barrel could range −$6.22 to −$0.48.

Suggested Citation

  • Wu, Gang & Wei, Yi-Ming & Nielsen, Chris & Lu, Xi & McElroy, Michael B., 2012. "A dynamic programming model of China's strategic petroleum reserve: General strategy and the effect of emergencies," Energy Economics, Elsevier, vol. 34(4), pages 1234-1243.
  • Handle: RePEc:eee:eneeco:v:34:y:2012:i:4:p:1234-1243
    DOI: 10.1016/j.eneco.2011.11.008

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    References listed on IDEAS

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    Cited by:

    1. Murphy, Frederic & Oliveira, Fernando S., 2013. "Pricing option contracts on the strategic petroleum reserve," Energy Economics, Elsevier, vol. 40(C), pages 242-250.
    2. Yu, Shiwei & Gao, Siwei & sun, Han, 2016. "A dynamic programming model for environmental investment decision-making in coal mining," Applied Energy, Elsevier, vol. 166(C), pages 273-281.
    3. Zhang, Xiao-Bing & Qin, Ping & Chen, Xiaolan, 2017. "Strategic oil stockpiling for energy security: The case of China and India," Energy Economics, Elsevier, vol. 61(C), pages 253-260.
    4. Ilyes Abid & Stéphane Goutte & Farid Mkaouar & Khaled Guesmi, 2019. "Optimal strategy between extraction and storage of crude oil," Annals of Operations Research, Springer, vol. 281(1), pages 3-26, October.
    5. Xie, Nan & Yan, Zhijun & Zhou, Yi & Huang, Wenjun, 2017. "China's optimal stockpiling policies in the context of new oil price trend," Energy Policy, Elsevier, vol. 105(C), pages 332-340.
    6. Bai, Y. & Dahl, C.A. & Zhou, D.Q. & Zhou, P., 2014. "Stockpile strategy for China׳s emergency oil reserve: A dynamic programming approach," Energy Policy, Elsevier, vol. 73(C), pages 12-20.
    7. Bai, Yang & Zhou, Peng & Tian, Lixin & Meng, Fanyi, 2016. "Desirable Strategic Petroleum Reserves policies in response to supply uncertainty: A stochastic analysis," Applied Energy, Elsevier, vol. 162(C), pages 1523-1529.
    8. Ji, Qiang & Zhang, Hai-Ying & Zhang, Dayong, 2019. "The impact of OPEC on East Asian oil import security: A multidimensional analysis," Energy Policy, Elsevier, vol. 126(C), pages 99-107.
    9. Zhang, Nan & Shi, Xilin & Wang, Tongtao & Yang, Chunhe & Liu, Wei & Ma, Hongling & Daemen, J.J.K., 2017. "Stability and availability evaluation of underground strategic petroleum reserve (SPR) caverns in bedded rock salt of Jintan, China," Energy, Elsevier, vol. 134(C), pages 504-514.
    10. Zhang, Xiao-Bing & Zheng, Xinye & Qin, Ping & Xie, Lunyu, 2018. "Oil import tariff game for energy security: The case of China and India," Energy Economics, Elsevier, vol. 72(C), pages 255-262.
    11. Mei-Mei Xue & Gang Wu & Qian Wang & Yun-Fei Yao & Qiao-Mei Liang, 2019. "Socioeconomic impacts of a shortage in imported oil supply: case of China," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 99(3), pages 1415-1430, December.
    12. Chen, Xin & Mu, Hailin & Li, Huanan & Gui, Shusen, 2014. "Using stockpile delegation to improve China׳s strategic oil policy: A multi-dimension stochastic dynamic programming approach," Energy Policy, Elsevier, vol. 69(C), pages 28-42.
    13. Jiao, Jian-Ling & Han, Kuang-Yi & Wu, Gang & Li, Lan-Lan & Wei, Yi-Ming, 2014. "The effect of an SPR on the oil price in China: A system dynamics approach," Applied Energy, Elsevier, vol. 133(C), pages 363-373.
    14. Zhang, Xiao-Bing, 2014. "Optimal strategic oil stockpiling and import tariffs: The case of China," Energy Economics, Elsevier, vol. 45(C), pages 463-474.
    15. Gao, Dan & Li, Zheng & Liu, Pei & Zhao, Jiazhu & Zhang, Yuning & Li, Canbing, 2018. "A coordinated energy security model taking strategic petroleum reserve and alternative fuels into consideration," Energy, Elsevier, vol. 145(C), pages 171-181.

    More about this item


    Dynamic programming model; Strategic petroleum reserve; Stockpile strategy; Drawdown strategy; Oil supply emergency;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis


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