Evaluation and optimization of pipeline pricing strategies on oil product logistics in China

Abstract

In the early stage of pipeline network reform in China, it is still controversial to formulate an appropriate pipeline freight pricing strategy. Focusing on this issue, this paper puts forward an integrated framework to analyze the impact of different pipeline pricing strategies on the economic-environmental benefits of China’s oil product logistics. A basic mathematical programming model is developed to simulate the planning of nationwide oil product logistics at the tactical level. On this basis, five pipeline pricing strategies are customized for comparative analysis, including pricing as usual (PAU), pricing by benchmarking railway (PBR), pricing by discounting on excess (PDE), tiered pricing by mileage (TPM), and tiered pricing by volume (TPV). Then, the basic logistics optimization model is upgraded accordingly. The real-world case study in China in 2019 is carried out in detail and the results demonstrate that (i) Except for TPM, the other pricing strategies can achieve coordination between oil shippers and pipeline carriers compared with PAU; (ii) Ranked by economic performance as follows: PDE >PBT>TPV> PAU>TPM; (iii) As for PDE, it also helps to reduce carbon emissions by 0.5% annually. The proposed method can be a theoretical guide for oil and gas logistics managers and decision-makers within and beyond China.