Sustainable petroleum supply chains created during economic crisis in response to US Government policies

Davoud Ghahremanlou and Wieslaw Kubiak

International Journal of Sustainable Economy, 2020, vol. 12, issue 3, 205-232

Abstract: Coronavirus disease (COVID-19) and the Saudi Arabia-Russia Oil Price War have created economic catastrophe. This crippled the US sustainable petroleum supply chain (SPSC), which is created in response to government policies, as a solution to global warming and achieving energy independency. Government and investors are striving to rescue the SPSC from bankruptcy. This motivated us to investigate creating a robust SPSC. Thus we extended the risk neutral study performed by Ghahremanlou and Kubiak (2020a) for regular economic conditions. To that end, we propose a risk averse approach by applying conditional value-at-risk (CVaR) and developing a two-stage stochastic programming model. We conduct a case study in Nebraska and provide investment decisions that can withstand economic crises. Our results show that for the survival of the SPSC, government must at least consider 2.151 $/gal tax credit for US cellulosic bioethanol blended with gasoline, and push the blend wall to at least 15%.

Keywords: COVID-19; Saudi Arabia-Russia Oil Price War; conditional value-at-risk; CVaR; sustainable petroleum supply chain; SPSC; two-stage stochastic programming; government policies. (search for similar items in EconPapers)
Date: 2020
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