EC Proposes Revising Emergency Oil Stocks Legislation

November 14, 2008 // Published as a news service by IHS

The revisions seek to improve coherence with the International Energy Agency (IEA) regime, reliability and transparency on available stocks plus to clarify emergency procedures.

EU citizens and the European economy are crucially dependent on the continuous supply of oil and petroleum products. Dependence on imports of oil is growing and so does the risk of supply disruptions.

Therefore, the EC says it is important that the EU's internal crisis mechanisms and security standards be as effective as possible. By updating directive 2006/67/EC, the EC seeks to strengthen the system of emergency oil stocks in the EU and the mechanisms for their use in case of a crisis.

In order to ensure that EU member states maintain minimum stocks of oil or petroleum products destined for use in case of a supply disruption, a mandatory regime of emergency oil stocks has existed since 1968.

Member states have implemented different mechanisms: some rely on government held stocks, others established special stockholding agencies, while yet others rely on stocks held by industry. The current system has proven effective to deal with disruptions to date, but can certainly be improved.

Greater coherence with the system administered by the IEA can simplify compliance and reduce the administrative burden for member states, particularly those currently facing a double obligation on the basis of their membership in both the EU and the IEA.

The EC maintains that, while maintaining a degree of flexibility and discretion for member states to arrange the management of the stocks as best fits their local conditions, the availability of such emergency stocks has to be further improved.

Therefore, the EC proposes that at least some emergency stocks should be preferably owned by governments or national stockholding agencies. Constitution of such dedicated emergency stocks would be optional, but after a period of three years the EC might assess whether an obligation is necessary.

At present, the EU publishes data on the level of emergency oil stocks for each member state. In order to improve oil market transparency and limit the effects of uninformed speculation, the EC proposes that the level of commercial oil stocks held outside of the scope of the stockholding obligation should also be disclosed weekly, on an aggregated basis.

The EC also proposed simplifying and clarifying procedures for emergency situations and the rules for use of emergency stocks in order to facilitate timely European Community response in case of supply disruptions in the future.

The EC believes all this will make oil supplies more certain for European citizens and ensure that emergency stocks are fully available and can be mobilized when needed. It will help mitigate the harmful effects, such as fuel shortages and price rises, resulting from a possible supply disruption.

The revised directive would come into effect at the end of the second year, after adoption by the European Council of Ministers, assumed to be in 2009 or 2010.

For more information, see the EC's web sites on Second Strategic Energy Review - Securing our Energy Future and on Energy Policy for a Competitive Europe.

Source: European Commission.