Work

The Macroeconomics of Strategic Petroleum Reserve

Year: 2025

Type: article

Abstract: The existing literature insufficiently addresses how Strategic Petroleum Reserves (SPR) policy should be adjusted to ensure energy security in a macroeconomic context. This paper focuses on the implications of SPR policies within such stochastic environments. Using an occasionally binding constraint Dynamic Stochastic General Equilibrium (DSGE) model, we uncover how SPR influences economic stability amidst international oil price shocks and domestic demand uncertainties. Our findings suggest that optimal SPR policies share similarities with traditional fiscal policies in their ability to mitigate the negative economic impacts of oil price shocks by stimulating domestic oil demand. Furthermore, we find that optimal SPR policies are heavily influenced by two key factors: the government’s access to accurate information about domestic oil demand and its objective in addressing oil crises. Specifically, the extent to which the government wants to prevent the oil crisis from occurring, as well as its willingness to stabilize domestic oil prices, plays a crucial role in determining the effectiveness of SPR policies. • The macroeconomic effect of Strategic Petroleum Reserve (SPR) is studied. • An occasionally binding constraint DSGE approach is used to model the effects. • SPR policies can be used to stimulate aggregate demand against oil shocks. • Information accuracy on oil demand has significant impacts on the optimal SPR policy. • The effectiveness of SPR policy is affected by the government objectives functions.

Source: International Review of Economics & Finance

DOI: 10.1016/j.iref.2025.103997

Authors: Ying Tung Chan, Qiang Ji, Dayong Zhang

Institutions: Beijing Normal University, Zhuhai, Chinese Academy of Sciences, Institutes of Science and Development, University of Chinese Academy of Sciences, Southwestern University of Finance and Economics

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: gold

Estimated APC paid: $1,930

Funders: National Natural Science Foundation of China, National Office for Philosophy and Social Sciences, National Social Science Fund of China