EU’s oil stocks under scrutiny

Date: 28/05/1998

By Chris Johnstone

THE European Commission is planning to make it easier for governments to fulfil their obligations to hold emergency stocks of oil, amid evidence that several countries have failed to meet existing EU demands.

"Several member states have not been able to maintain the minimum level of stocks according to their legal obligations for several months," states a Commission report covering the period from the start of 1995 to mid-1997.

Under a 1972 measure, EU countries must maintain 90 days of supplies in three categories: light products such as aviation fuel; gasoil, diesel, kerosene and heavier jet fuel; and heavier fuel oils.

However, a snapshot of supplies in October 1997 showed that Italy and Luxembourg were failing to meet the demands for the first category; Greece, Ireland, Italy, Luxembourg and the UK for the second; and Italy and Luxembourg for the third.

At the same time, industry stocks - which would be vital in an emergency - have continued to slip since the early 1980s and now stand at only around 25 days' consumption.

Italy has taken steps to improve its record, with Greece and the UK also taking corrective measures. However, more countries are now facing the threat of a reprimand from the Commission for failing to meet their obligations.

The Commission does not usually worry about a temporary dip below required levels, but becomes concerned if national stocks remain below requirements for several months.

A new proposal from the institution is aimed at giving existing EU members more flexibility to meet requirements and make life easier for the candidate countries lining up to join the Union.

"The obligation to build security stocks based on the previous year's consumption is a difficult task which is creating a heavy financial burden for these countries," says its report.

Some applicant countries, such as Hungary, have nearly met the EU requirements. However, Poland is only slowly building up its stocks and is a long way from complying with the rules. The reserves target is expected to climb steeply in tandem with these countries' increasing demand for oil.

Changes to the existing rules would allow member states to store oil products in other EU countries, as long as governments were sure they could draw on the reserves in an emergency. Some countries currently forbid this practice.

Governments would also be required to draw up sanctions against power companies which failed to meet obligations to report on the state of their supplies or keep the reserves they were contracted to maintain under national agreements.

EU oil producers, such as the UK and Denmark, would be given wider scope to use their extraction to reduce their reserve requirements. Under the new proposal, they would be able to cut these by up to 25%, as opposed to the current 15%.