Empirical analysis of optimal strategic petroleum reserve in China

The Chinese government began to prepare for the establishment of strategic petroleum reserve in March 2004. Therefore, answering the question of what level of strategic petroleum reserve would be suitable for China's future economic development becomes essential. Using a decision tree model based on a cost function, this paper quantifies China's optimal strategic petroleum reserve for the period 2005-2020. This approach provides a methodology reference for further quantified discussion on China's SPR. Our results show that: for economic development and security of the energy supply, the strategic petroleum reserve should be the equivalent of 30-60 days of net oil import for an optimal solution, when the oil price is $ 50/bbl; with a reserve of an equivalent of 60-90 days of net oil import to have an optimal solution when oil price is $ 20-35/bbl.