3rd April 2003

EU COMMISSION PROPOSALS ON COMPULSORY OIL STOCKS “AN EXPENSIVE SOLUTION LOOKING FOR A PROBLEM”

In its consultation response to the UK Government, UKPIA, the trade association representing the main oil refining and marketing companies in the UK, is asking that the EU Commission re-think proposals for a further directive governing compulsory stocking of petroleum products.

At present the UK, as a net exporter of crude oil, is not required to hold any stocks of petroleum products under International Energy Agency (IEA) rules. However, under existing EU arrangements, the UK is, nevertheless, required to hold substantial contingency stocks of various petroleum products, such as petrol, diesel and heating oil.  These stocks held by, and at the expense of, UK refiners currently amount to 67 1/2 days of UK inland consumption.

Under recently published proposals from the European Commission the amount required to be held by the UK would be significantly increased. The draft EU Regulation also envisages the EU having overall control of the stocks and using them in times of crisis to influence the market in oil and oil products.

The UK Government has consulted on these proposals and a copy of the full UKPIA response to that consultation can be found on our website www.ukpia.com under the heading “Publications”

UKPIA Director General Malcolm Webb commented:-

“ These proposals appear to be a solution in search of a problem. Overall they would result in significant additional cost for the UK and the UK Downstream Oil Industry. We estimate the start up costs at a minimum of £900 million, plus significant maintenance costs each year thereafter. Furthermore any notion that the European Commission could use a part of these stocks to control the international oil market in time of crisis is, in our opinion, mistaken.  Existing internationally agreed IEA arrangements work well and there is no need for these proposed regulations.”