Simulating the impacts of a strategic fuels reserve in California

This paper describes a simulation analysis of the impacts of a strategic fuels reserve (SFR) designed to limit the increase in gasoline prices in the days following a refinery disruption. The analysis is based on a computer simulation model developed for the California Energy Commission. The model simulates the supply of gasoline as the sum of refinery production, cargoes arriving from outside California, withdrawals from private storage and the release of gasoline from the SFR. The demand for gasoline is the sum of the retail demand and the wholesale demand to rebuild inventory. The paper presents simulations to illustrate the impact on California consumers of refinery disruptions of different size and duration. The simulations are repeated with a strategic reserve operated with the time-swap mechanism proposed for California. The simulations demonstrate large intended benefits of a SFR in the event of a major refinery disruption. The simulations are then repeated with an unintended impact. The new simulations show that the SFR could lead to negative impacts on California consumers in the event of small disruptions. The paper concludes that the overall impact of the SFR is likely to be dominated by the frequency of large disruptions.