A Dynamic Programming Model of the U.S. Strategic Petroleum Reserve

This article develops a stochastic dynamic programming model which may be used to obtain optimal acquisition and sale strategies for the U.S. oil reserve. The model incorporates quota or tariff policies which may be used in conjunction with the stockpile policy. Although the main focus is on U.S. stockpile policy, a joint consumer country policy is also considered. The analysis indicates the importance of the degree of oil supply response in determining the effectiveness of a stockpile policy.