Oil Stockpiles and Import Reductions: A Dynamic Programming Approach

This paper analyzes oil stockpiling policies using models in which U.S. policy choices are restricted to just two instruments—stockpiles and disruption “tariffs.” The model considers the influence of U.S. (and, in general, OECD) import demands upon the OPEC price for oil, and the duration and severity of oil disruptions induced by disturbances among the OPEC nations. Our development is based upon a probabilistic view of disruptions analyzed by applying dynamic programming.