Optimization of China's strategic petroleum reserve policy: A Markovian decision approach

Authors:
Ziming Zhu;Liwen Liu;Jiamin Wang
Affiliations:
Department of Management Science and Engineering, School of Economics and Management, Tsinghua University, Beijing 100084, China and Department of Rear Services, Logistics Academy, Beijing 100858, ...;Department of Management Science and Engineering, School of Economics and Management, Tsinghua University, Beijing 100084, China;College of Management, Long Island University, C.W. Post Campus, 720 Northern, Blvd., Brookville, NY 11548-1300, USA
Venue:
Computers and Industrial Engineering
Year:
2012

Citing 4
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Optimal strategic petroleum reserve policies: a steady state analysis

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A stochastic dynamic Nash game analysis of policies for managing the strategic petroleum reserves of consuming nations

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A dynamic Nash game model of oil market disruptions and strategic stockpiling

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Markov Decision Processes: Discrete Stochastic Dynamic Programming

Markov Decision Processes: Discrete Stochastic Dynamic Programming

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Abstract

China is in the process of building Strategic Petroleum Reserve (SPR) as a utility for its oil supply security. In this paper we develop a stochastic dynamic programming model to optimize China's stockpile policy with the objective of minimizing the discounted SPR policy costs over a finite time horizon. It is shown that a deterministic and Markovian policy is optimal to the model. A recursive procedure is designed to construct the value functions and derive the optimal stockpile acquisition and release rates over time. Post-optimality analysis is performed to investigate sensitivities of the optimal policy to primary parameter assumptions.