A discussion on China's vehicle fuel policy: Based on the development route optimization of refining industry

In recent years, Chinese government has been accelerating the implementation of high-quality standard of petroleum products. National Standard V of gasoline and diesel will be put into effect by 2018. However, as most of the gasoline and diesel are supplied by domestic refineries, whether the domestic refineries are capable to produce National Standard V products remains a question. This paper develops a mix integer programming model for long-term development route of refining industry in China from 2015 to 2050. The model provides optimal route of refinery construction, upgrading and retirement under different scenarios. Three scenarios are designed to discuss the mutual influence between long-term development of refining industry and fuel quality standard implementation. In the three scenarios, the schedule of 100%-National-Standard-V refining capacity target should be realized by 2018, 2030 and 2040 respectively. Based on the modeling results, we conclude that the 100%-National-Standard-V target by 2018 is difficult to realize. Putting off the schedule to 2030 is more practical in consideration of the current situation in China. To realize the 2030 target, extra investment for building new refineries and upgrading existing ones is needed in short term. However, impulse investment will result in over-capacity problem in the future.