IDEAS home Printed from https://ideas.repec.org/a/eee/appene/v133y2014icp363-373.html
   My bibliography  Save this article

The effect of an SPR on the oil price in China: A system dynamics approach

Author

Listed:
  • Jiao, Jian-Ling
  • Han, Kuang-Yi
  • Wu, Gang
  • Li, Lan-Lan
  • Wei, Yi-Ming

Abstract

This paper builds a system dynamics model to simulate the effect of China’s strategic petroleum reserve (SPR) on stabilizing the domestic oil price. By setting the sensitivity of the market to the domestic oil price and the increase in international oil price, this paper discusses three different SPR sizes, namely, 30days, 60days and 90days SPR, and analyzes the effects of releasing the three different sizes of SPR on domestic oil price in 2015 at three international oil price scenarios: low, baseline and high. The results show that the suppress effect of SPR release on domestic oil price is not obvious under a low oil price scenario. Only when the increase in the international oil price is greater than 81% in an insensitive domestic market and 94% in a highly sensitive domestic market, 90days SPR release can suppress the rising domestic oil price. In the baseline scenario, the SPR fails to suppress rising oil prices when the increase in the international oil price is less than 25%. However, in the high international oil price scenario with a notably small fluctuation in the international oil price, the SPR can arrest the rising oil price. In addition, the suppressing effect of SPR is related to the sensitivity of the domestic market to oil price. The greater the sensitivity of the domestic markets to oil price, the weaker the effect of the SPR on suppressing oil price. Finally, the SPR size should reach to 90day in China.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:appene:v:133:y:2014:i:c:p:363-373
    DOI: 10.1016/j.apenergy.2014.07.103
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0306261914007946
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.apenergy.2014.07.103?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Samouilidis, JE & Berahas, SA, 1982. "A methodological approach to strategic petroleum reserves," Omega, Elsevier, vol. 10(5), pages 565-574.
    2. Samouilidis, J. E. & Magirou, Vangelis F., 1985. "On the optimal level of a small country's strategic petroleum reserve," European Journal of Operational Research, Elsevier, vol. 20(2), pages 190-197, May.
    3. Hung-Po Chao & Alan S. Manne, 1983. "Oil Stockpiles and Import Reductions: A Dynamic Programming Approach," Operations Research, INFORMS, vol. 31(4), pages 632-651, August.
    4. Bambawale, Malavika Jain & Sovacool, Benjamin K., 2011. "China's energy security: The perspective of energy users," Applied Energy, Elsevier, vol. 88(5), pages 1949-1956, May.
    5. Zhang, Xiao-Bing & Fan, Ying & Wei, Yi-Ming, 2009. "A model based on stochastic dynamic programming for determining China's optimal strategic petroleum reserve policy," Energy Policy, Elsevier, vol. 37(11), pages 4397-4406, November.
    6. R. Glenn Hubbard & Robert J. Weiner, 1986. "Inventory Optimization in the U.S. Petroleum Industry: Empirical Analysis and Implications for Energy Emergency Policy," Management Science, INFORMS, vol. 32(7), pages 773-790, July.
    7. Wu, Gang & Fan, Ying & Liu, Lan-Cui & Wei, Yi-Ming, 2008. "An empirical analysis of the dynamic programming model of stockpile acquisition strategies for China's strategic petroleum reserve," Energy Policy, Elsevier, vol. 36(4), pages 1470-1478, April.
    8. Wei, Yi-Ming & Wu, Gang & Fan, Ying & Liu, Lan-Cui, 2008. "Empirical analysis of optimal strategic petroleum reserve in China," Energy Economics, Elsevier, vol. 30(2), pages 290-302, March.
    9. Kuenne, Robert E. & Blankenship, Jerry W. & McCoy, Paul F., 1979. "Optimal drawdown patterns for strategic petroleum reserves," Energy Economics, Elsevier, vol. 1(1), pages 3-13, January.
    10. Shmuel S. Oren & Shao Hong Wan, 1986. "Optimal Strategic Petroleum Reserve Policies: A Steady State Analysis," Management Science, INFORMS, vol. 32(1), pages 14-29, January.
    11. 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.
    12. Fan, Ying & Zhang, Xiao-Bing, 2010. "Modelling the strategic petroleum reserves of China and India by a stochastic dynamic game," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 505-519, July.
    13. Liang, Zengying & Ma, Xiaoqian & Lin, Hai & Tang, Yuting, 2011. "The energy consumption and environmental impacts of SCR technology in China," Applied Energy, Elsevier, vol. 88(4), pages 1120-1129, April.
    14. Ford, Andrew, 2005. "Simulating the impacts of a strategic fuels reserve in California," Energy Policy, Elsevier, vol. 33(4), pages 483-498, March.
    15. Bai, Y. & Zhou, D.Q. & Zhou, P., 2012. "Modelling and analysis of oil import tariff and stockpile policies for coping with supply disruptions," Applied Energy, Elsevier, vol. 97(C), pages 84-90.
    16. Bai, Y. & Zhou, D.Q. & Zhou, P. & Zhang, L.B., 2012. "Optimal path for China's strategic petroleum reserve: A dynamic programming analysis," Energy Economics, Elsevier, vol. 34(4), pages 1058-1063.
    17. Thomas J. Teisberg, 1981. "A Dynamic Programming Model of the U.S. Strategic Petroleum Reserve," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 526-546, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hong, Taehoon & Jeong, Kwangbok & Koo, Choongwan, 2018. "An optimized gene expression programming model for forecasting the national CO2 emissions in 2030 using the metaheuristic algorithms," Applied Energy, Elsevier, vol. 228(C), pages 808-820.
    2. Armin Leopold, 2016. "Energy related system dynamic models: a literature review," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 24(1), pages 231-261, March.
    3. Kim, Myung Suk, 2018. "Impacts of supply and demand factors on declining oil prices," Energy, Elsevier, vol. 155(C), pages 1059-1065.
    4. Zhao, Lu-Tao & Wang, Yi & Guo, Shi-Qiu & Zeng, Guan-Rong, 2018. "A novel method based on numerical fitting for oil price trend forecasting," Applied Energy, Elsevier, vol. 220(C), pages 154-163.
    5. Qudrat-Ullah, Hassan, 2017. "How to enhance the future use of energy policy simulation models through ex post validation," Energy, Elsevier, vol. 120(C), pages 58-66.
    6. Jia, Shuwei & Liu, Xiaolu & Yan, Guangle, 2019. "Effect of APCF policy on the haze pollution in China: A system dynamics approach," Energy Policy, Elsevier, vol. 125(C), pages 33-44.
    7. Zhihua Chen & Hui Wang & Tongxia Li & Ieongcheng Si, 2021. "Demand for Storage and Import of Natural Gas in China until 2060: Simulation with a Dynamic Model," Sustainability, MDPI, vol. 13(15), pages 1-19, August.
    8. Hendalianpour, Ayad & Liu, Peide & Amirghodsi, Sirous & Hamzehlou, Mohammad, 2022. "Designing a System Dynamics model to simulate criteria affecting oil and gas development contracts," Resources Policy, Elsevier, vol. 78(C).
    9. Tarek Bouazizi & Zouhaier Hadhek & Fatma Mrad & Mosbah Lafi, 2021. "Changes in Demand for Crude Oil and its Correlation with Crude Oil and Stock Market Returns Volatilities: Evidence from Three Asian Oil Importing Countries," International Journal of Energy Economics and Policy, Econjournals, vol. 11(3), pages 27-43.
    10. Pan, Lingying & Liu, Pei & Li, Zheng, 2017. "A system dynamic analysis of China’s oil supply chain: Over-capacity and energy security issues," Applied Energy, Elsevier, vol. 188(C), pages 508-520.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. 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.
    3. Zhang, Xiao-Bing, 2014. "Optimal strategic oil stockpiling and import tariffs: The case of China," Energy Economics, Elsevier, vol. 45(C), pages 463-474.
    4. 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.
    5. 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.
    6. 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.
    7. Bai, Y. & Zhou, D.Q. & Zhou, P. & Zhang, L.B., 2012. "Optimal path for China's strategic petroleum reserve: A dynamic programming analysis," Energy Economics, Elsevier, vol. 34(4), pages 1058-1063.
    8. 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.
    9. 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.
    10. Bai, Y. & Zhou, D.Q. & Zhou, P., 2012. "Modelling and analysis of oil import tariff and stockpile policies for coping with supply disruptions," Applied Energy, Elsevier, vol. 97(C), pages 84-90.
    11. Zhang, Xiao-Bing & Fan, Ying & Wei, Yi-Ming, 2009. "A model based on stochastic dynamic programming for determining China's optimal strategic petroleum reserve policy," Energy Policy, Elsevier, vol. 37(11), pages 4397-4406, November.
    12. Fan, Ying & Zhang, Xiao-Bing, 2010. "Modelling the strategic petroleum reserves of China and India by a stochastic dynamic game," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 505-519, July.
    13. Huanan Li & Xin Chen, 2016. "Dynamic game analysis on China’s public and private oil stockpiles," 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. 84(1), pages 715-723, October.
    14. Murphy, Frederic & Oliveira, Fernando S., 2013. "Pricing option contracts on the strategic petroleum reserve," Energy Economics, Elsevier, vol. 40(C), pages 242-250.
    15. Wu, Gang & Fan, Ying & Liu, Lan-Cui & Wei, Yi-Ming, 2008. "An empirical analysis of the dynamic programming model of stockpile acquisition strategies for China's strategic petroleum reserve," Energy Policy, Elsevier, vol. 36(4), pages 1470-1478, April.
    16. 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.
    17. Liu, Zhen & Tang, Yuk Ming & Chau, Ka Yin & Chien, Fengsheng & Iqbal, Wasim & Sadiq, Muhammad, 2021. "Incorporating strategic petroleum reserve and welfare losses: A way forward for the policy development of crude oil resources in South Asia," Resources Policy, Elsevier, vol. 74(C).
    18. 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.
    19. Zhu, Bo & Deng, Yuanyue & Lin, Renda & Hu, Xin & Chen, Pingshe, 2022. "Energy security: Does systemic risk spillover matter? Evidence from China," Energy Economics, Elsevier, vol. 114(C).
    20. Zhao, Chunfu & Chen, Bin, 2014. "China’s oil security from the supply chain perspective: A review," Applied Energy, Elsevier, vol. 136(C), pages 269-279.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:appene:v:133:y:2014:i:c:p:363-373. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/405891/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.