A natural gas trading company wants to develop an optimal trading plan for the next 10 days. The following table summarizes the estimated prices (per thousand cubic feet (cf)) at which the company can buy and sell natural gas during this time. The company may buy gas at the “Ask” price and sell gas at the “Bid” price.

The company currently has 150,000 cf of gas in storage and has a maximum storage capacity of 500,000 cf. To maintain the required pressure in the gas transmission pipeline system, the company can inject no more than 200,000 cf into the storage facility each day and can extract no more than 180,000 cf per day. Assume that extractions occur in the morning and injections occur in the evening. The owner of the storage facility charges a storage fee of 5% of the market (bid) value of the average daily gas inventory. (The average daily inventory is computed as the average of each day’s beginning and ending inventory.)
a. Create a spreadsheet model for this problem and solve it.
b. What is the optimal solution?
c. Assuming price forecasts for natural gas change on a daily basis, how would you suggest that the company in this problem actually use yourmodel?

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2 3 4 5 6 9 10 Day Bid $3.06 $4.01 $6.03 $4.06 $4.01 $5.02 $5.10 $4.08 $3.01 $4.01 Ask $3.22 $4.10 $6.13 $4.19 $4.05 $5.12 $5.28 $4.23 $3.15 $4.18