Abstract
AbstractThis paper addresses the question of whether an (S, s) inventory management model, combined with a stockout‐avoidance mechanism, is appropriate for explaining the inventory process for oil refining. The analysis uses a fixed‐proportion production function to model dynamic profit maximisation in crude oil refining. The model distinguishes the use of production crude oil from crude oil inventories as inputs into oil refining. The result is a relationship between oil production, oil inventory and the difference between the prices of crude oil and refined petroleum products. Estimation results indicate that the (S, s) model is consistent with data measuring crude oil inventory management and results also imply a modest stockout‐avoidance mechanism.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
