Cost Horizons and Certainty Equivalents: An Approach to Stochastic Programming of Heating Oil

TLDR

Scheduling heating oil production is a complex management problem that must account for weather, demand, refinery allocation, by‑product relationships, storage limits, and maintenance. The study aims to enhance heating oil production scheduling within an integrated series of operations research investigations. The authors focus on the core mathematical model, incorporating institutional aspects only when necessary.

Abstract

Scheduling heating oil production is an important management problem. It is also a complex one. Weather and demand uncertainties, allocation of production between different refineries, joint- and by-product relations, storage limitations, maintenance of minimal supplies and many other factors need to be considered. This paper is concerned with one of an integrated series of operations research studies directed toward improvement in such scheduling methods. Emphasis is on essentials of the mathematical model. Institutional features and other phases of the OR studies are brought in only as required.