Strategic oil stockpiling for energy security: The case of China and India

- A dynamic game to investigate the SPR policies of China and India.
- The total oil insecurity costs would be higher for a worse initial market state.
- A larger initial SPR size will also benefit the other countries in the world oil market.
- A larger acquisition capacity may harm other countries due to the raised oil prices.
- More important to keep some stockpiles when the disruptions are more likely to persist.

Compared with the developed countries, the developing countries could be more vulnerable to oil supply disruptions due to their lack of strategic petroleum reserves (SPRs). Several developing countries, including China and India, are establishing their SPRs to ensure energy security. In the common world oil market, one country's SPR decisions can be affected by the decisions of other countries. This paper investigates the SPR policies of China and India, two of the largest developing countries, in a game-theoretic framework, where the interactions between the two countries are taken into account. The results show that players' equilibrium stockpiling strategies and total expected costs could vary significantly with the initial oil market state, stockpile acquisition capacity and the probabilities for disruptions to persist.