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Optimal Seasonal Distillate Inventory

This paper summarizes an investigation of the seasonal inventory of distillate (heating) oil. My object was to determine the extra amount of distillate stock (usually called seasonal stock) to be held at the primary echelon at the beginning of the heating season (about October 31).It began with the usual belief that some traditional amount of heating oil stock be available at the beginning of the heating season. This traditional amount had been based on trends of seasonal stocks adjusted for weather and other demand changes and overlooked such things as optima price theory. Even so, this approach was flawed because seasonal patterns had become so much less severe that conventional, even careful extrapolation produced misleading and inconsistent results.

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Energy Specializations: Petroleum – Refining and Products

JEL Codes: L71: Mining, Extraction, and Refining: Hydrocarbon Fuels, C58: Financial Econometrics, D22: Firm Behavior: Empirical Analysis, D21: Firm Behavior: Theory, Q35: Hydrocarbon Resources, G31: Capital Budgeting; Fixed Investment and Inventory Studies; Capacity, Q02: Commodity Markets

Keywords: Distillate heating oil stock, Optimal seasonal inventories, , Weather, oil demand

DOI: 10.5547/ISSN0195-6574-EJ-Vol7-No3-6

Published in Volume 7, Number 3 of the bi-monthly journal of the IAEE's Energy Economics Education Foundation.


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