The European Commission has launched a public consultation on whether changes should be made to the management of emergency oil stocks held by EU member states as oil prices edged closer to $120 a barrel on Tuesday (22 April).
The consultation will seek input into the “shortcomings” of the current system in the face of the growing risk of oil supply disruptions caused by rising global demand for oil, the Commission said on Tuesday. The consultation is open until 17 June.
“While oil consumption is increasing worldwide, supply is more and more concentrated in a handful of countries, many of which are exposed to high geopolitical risks,” the Commission said in an annex to the consultation document. These, it added, include “wars, internal conflicts, export or import embargos and terrorism”.
On Monday, armed militants attacked two Shell pipelines in Nigeria, lowering the country’s oil output and fuelling an oil price surge. Prices on US and European markets approached $120 a barrel on Tuesday.
Many EU countries, especially in Eastern Europe, are ill-equipped to deal with potential crises. Under current rules, all countries are requested to hold 90 days worth of oil in order to cope with a possible supply disruption. But member states in Central and Eastern Europe, which joined the bloc more recently, were granted a transitional period to comply with the rule.
According to the Commission, there is a need to clarify roles between the Commission, member states and the Paris-based International Energy Agency (IEA). While the IEA foresees clear tasks in cases of supply disruptions, nine EU countries (Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Malta, Poland, Romania and Slovenia) are currently not members of the Paris-based agency, the Commission underlined.
It said such “confusion” on the distribution of roles may lead to delays in making emergency oil stocks available. “In three countries, all stocks are held by the government or an agency. In eight countries, all stocks are held by the oil companies, while the majority of member states have a mixed system,” the Commission said.
“Doubts about the availability of stocks in the context of an actual or potential crisis may lead to market speculation and increased price volatility.”
In that context, the overall level of stocks may also need to be raised, the Commission added. “If the difference between the ‘nominal’ 90 days stocks and the really available level of stocks in a crisis is significant, the request of the Parliament to increase the stock obligation to 120 days might be a very reasonable proposal.”
Meanwhile, a report by ex-IEA chief Claude Mandil for the French government, called for more solidarity between EU countries on energy security. The report made a series of recommendations on the issue in view of the French EU Presidency, which is to start on 1 July.