EU Energy Council Approves Emergency Oil Stocks Directive

June 13, 2009 // Published as a news service by IHS

EC Energy Commissioner Andris Piebalgs welcomed the decision, saying "Whilst the Council did not retain some elements of our original proposal, I'm satisfied that the new legislation will bring the EU system of oil stocks closer to current international practices and strengthen the Community's capacity to use the stocks effectively so as to minimize the negative effect on consumers in case of a supply crisis."

The EC's proposal sought to reinforce current legislation, originating in 1968, with a set of up-to-date rules aligning EU methodologies and usage with those of the International Energy Agency (IEA). IEA members should hold emergency oil stocks that can be released under the coordination of the IEA.

Since some EU member states are not members of the IEA, the new directive will assure a coordinated EU-IEA response in case of an oil crisis.

The overall stockholding obligations of most EU member states will not substantially change in custom, continuing to be based on the "90-days" rule. In line with the IEA practice, member states will now be required to hold emergency reserves equivalent to at least 90 days of net oil imports.

However, the availability of such emergency stocks will be improved, as the new directive makes it very clear that stocks may not be pledged or otherwise encumbered.

The new directive also requires that at least one-third of the emergency stocks must be composed of products in proportions corresponding to consumption patterns of the member states. These stocks will have to be owned by the member state or its stockholding agency, or held in arrangements ensuring the same level of public control.

The new legislation also gives the EU additional powers, such as allowing it to review and audit the stockholdings maintained by the different member states, which will enable it to react more efficiently in crisis situations since, in practice, no significant use of stocks will be possible without an agreement at the EU level on its appropriateness.

In case of an IEA action, the EC will be able to ensure a coordinated and timely contribution of the whole EU to the IEA efforts on equal terms.

The new directive will enter into force shortly after its publication in the EU's Official Journal. Member states will have to transpose its provisions in their national laws by Dec. 31, 2012. Some member states who are not members of the IEA on that date will dispose of an additional two years to bring their stocks to the newly required levels.

Source: European Commission (EC).