Europe is set to change its 40 year old policy on reserves of oil. The change comes as the EU grows tired of being bullied by the whims of Russian energy policy, and sees the reprecussions of a coming spike in energy prices.
The plans are just in the discussion phase now, but they will force EU countries to keep oil stocks equal to at least 90 days of average imports or 61 days of average consumption. Whenever this kicks in, it could provide a short term jolt to oil demand, as the countries try to build up their stocks.
Reuters: Europe is close to revising 40-year-old rules on emergency oil reserves to cushion countries against unexpected crises, aligning it with the International Energy Agency (IEA) system, a draft document shows.
European Union member states have called for tough new measures to bolster energy security after the bloc inadvertently drifted into heavy dependence on Russian energy supplies over the last few decades.
This has led to repeated shocks when Moscow cut flows of gas through Ukraine and oil through Belarus in recent years. But proposals by the European Commission to bolster the security of oil stocks have met with some hostility internally.
“The Commission has had to give in on its demands for weekly reporting of oil stocks and to settle for monthly reporting,” an EU source said.
Total oil stocks must equal at least 90 days of average imports or 61 days of average consumption, said the draft document seen by Reuters ahead of a meeting of European ambassadors next week.
“The most important aim of the proposal is to get the EU system of oil stocks more in line with that of the IEA, which means more security and less administrative burden,” a diplomatic source said.
The European Union’s Czech presidency has also overcome a deadlock between member states, which opposed the Commission’s request that countries hold more stocks themselves and delegate less to industry.
The draft upholds the status quo of significant industry stockholding — the most economical method. The rules could be approved as soon as June 12, when EU energy ministers meet in Luxembourg.
The Commission was also aiming for control over the right of member states to release stocks, when advised by the IEA, but diplomatic sources said EU states strongly rejected this.
“Member states want to keep their sovereignty over the release of stocks,” one of the sources added.
The original directive was made in 1968 and strengthened at the time of the first major oil shock in 1973.
But since 1973, the European Union has moved from six to 27 member states and its oil needs have changed, with demand soaring for jet fuel and waning for heating oil — hence the need for revision.
EU member states must create a mechanism that would ensure stocks are quickly released in the event of a major supply disruption, and could also impose restrictions on consumption, the draft document showed.
Petroleum products could also be prioritised to strategic services and industries.
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