ARCHIVESHISTORIQUES
DELACOMMISSION
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DOCUMENTS "COM"
COM(81)533
Vol.1981/0160

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COMMISSION OFTHEEUROPEAN COMMUNITIES
COM(81)533 final
Brussels ,30th September 1981
MEASURES TOLIMIT THE EFFECTS OFALIMITED SHORTFALL INOIL SUPPLY
(Communication from the Commission tothe Council )
/'
VI' -^ •**\«~ ,ν'·ι ·
f
COM (81)533 final
4

,COMMUNICATION TOTHE COUNCIL
/ «
*
Measures tolimit the effects ofalimited shortfall inoil supply
A.Explanatory Introduction ;
1.Asubstantial shortage ofoilwould have serious effects ontheeconomy .
This isrecognised bygovernments ,andconsequently legislative procedures
have been established atnational ,Community and IEA level ,toallow proper
management ofthesituation .These procedures address theproblem of
inadequate overall volume byallocation bfavailable oil . * ,
2.Experience over recent years has shown that theeconomy can beasbadly
affected bymarket tension ,even when generated byavery small short
term shortage or,inextreme cases /bynomore than apprehension and lack
ofinformation . ■];
3.Between mid-1978 andmid-1981 there hasbeen nosubstantial shortage that
could be -called acrisis .There have ,however ,been periods of-severe
tension that .have ledtoanincrease intheaverage FOBcost ofCommunity
crude oilsupply_from I12.?5 /bblto836.50 /bbl .vTheeffects ofthis price
increase onthebalance ofpayments and ontheeconomy ingeneral are all
tooevident today .
4.Future periods oftension need nothave thesame effects onprices ,provided -
suitable actions aretaken intime ,when thefirst indications ofthe
likelihood oftension can beidentified .Ifmeasures areinadequate or
too long delayed ,there canbelittle doubt that history will repeat itself .,
This willingness toanticipate difficulties represents the key stone tothe
Community strategy recommended bytheCommission . .
5.Member States arewell aware ofthis danger and,inNovember 1980 ^.adopted
acourse ofaction toalleviate tension ,based essentially onapolitical
agreement that governments would ,onavoluntary basis ,undertake oradvocate
certain measures .Thedesired results were achieved even when ,for aperiod ,
thewarbetween Iran andIraq stopped allexports from these countries ;prices
inthespot markets forproducts andcrude oildidnotgoupasviolently
asonprevious occasions .

t
(
-2-
.i'i•
Itisrecognised,however,thatthestabilityofpriceswasalsotoa
%Largeextentduetoincreased ,production,declining demandandin
particular anoverallhighstockposition.Theconsequential ability
ofcompaniestodrawonstocksmadeitrelatively easyforthemto
abidebygovernment requeststoabstainfromabnormalpurchases.
Also,theoverallsupplysituationimprovedquicklyandtheagreed
international co-operation tocorrectimbalances betweencountries
didnothavetobeputintoforce.
r'*■'' ii .i J
6.Lookingtothefuture,whensupplydifficulties develop,itcannotbe
assumedthatsimilarsupportingconditionswillexistandconsequently
furtherpreparation isnecessary,including-followingCouncildiscussions
inMarchandJune1981-preparingforthepossible ,useofcompulsorystocks
asaconcomitant actionifgovernment measuressimilartothosetakenin
November1980aretobesuccessful.MemberStates ,recognisedthisneed
andItaly,inparticular,madespecificsuggestions .Inthiswayatrue
Communitysolidarity canbebuilt.
B.Objective " ,
7.Whiletheprecisenatureofanyfuturesupplyproblemcannotbeforeseen
i-
andconsequently theappropriate measurestobetakencanonlybeagreed
onwhentheproblemsoccur,thepurposeofthiscommunication istoobtain
MemberStates*agreementinprincipletotheprocedurestobefollowed
aftertheidentification ofsupplyproblemsintheoilsectorlikelyto
leadtopressureonworldmarketpricesoutoflinewithlongerterm
perspectives .Suchagreementwillprovidethebasisforco-ordination *
withotherindustrialised countries .
Inthiscontext,consideration isgiventothetypesofpossiblemeasures
•fromwhichaselection maybemadeinthelightoftheprevailing circumstances
andforwhichaflexibleapproachisessential.Itisequallynecessaryto
ensurenowthatgovernmentswillhavetherequiredflexibility,including
anynecessarylegislative instruments,eitherintheirnationalplanorby
reasonofaCouncilDecision,totakesuchactionasmaybeconsideredr
:neecssaryatthetime. *

Itisnecessary toensure that Member States take allnecesse ysteps to
follow appropriate policies fordemand ,supply andsecurity .Member States
¥ '
performance will bemonitored inapermanent waybytheCommission ,which
y
will report onacontinuing basis totheCouncil and,ifnecessary ,make
recommendations .
Procedure within theCommunity
Itistherefore proposed that when early indications ofsupply difficulties
become apparent ,theCommission should ,after consultation with the
"OilSupply .Group ",onitsowninitiative oratthe request .ofa;
Member State ,askfor aspecial Council meeting tostart within three days .
Itshould also make anynecessary proposals totheCouncil .Ifthe'
Commission does not act,aMember Statue can asktheCouncil tomeet .
Γ.'
Atthis special Council meeting ,anyCommission proposals will besupported
byanexplanation ofthe reasons forwhich themeeting isconsidered tobe
necessary .The Council will review anddiscuss the situation anddecide
whether ,atthetime inquestion ,asituation hasarisen inwhich agreed
measures are necessary . , , ,
Intheaffirmative case theCouncil will ,byunanimity andwithin 5days ,
agree onboth those measures that canusefully betaken byindividual
Member States andthose that should beadopted byallMember States ,
whilst ensuring co-ordination atCommunity level andequivalence of
efforts ofMember States ,,After co-ordihation with other industrialised
countries ,such agreement canbeformalised where necessary inanactof
theCouncil (inparticular where itrelates totheuseofcompulsory
stocks ).
Thereafter ,theCouncil will ,byqualified majority ,agree onany K
necessary implementing modalities .
Theapplication ofanyagreed measures should bemonitored bythe
Commission ,inconsultation with the"OilSupply Group ",which will
report totheCouncil . '
Shoudl Circumstances change ,theCommission may,onit initiative or
I
attnerequest ofaMember State ,propose toamend orrepeal themeasures
introduced .

-4-
D.Consult?Honswithotherindustrialisedcountries
13.Itisproposedthatconsultations shouldnowtakeplacewithother
industrialised countries ,,withaviewtotheestablishment ,onawider
.international basis,ofproceduresbroadlyanalogoustothoseenvisaged
fortheCommunitylevel.Thereafter,theCommissionwilltransmita
draftDirectiveto-theCouncilsettingouttheagreedprocedures indetail
andrequiringthatgovernments disposeofthenecessarypowers.This
Directivewillnotinitselfdefinetheprecisecourseofactiontobe
takenifandwhenproblemsoccur:thiswillbedecidedbytheCouncil
inthelightofcircumstances .
g.Rangeofpossiblemeasures
14.Theactionsandmeasuresproposedwilldependupon,andbeappropriate
*totheparticular circumstances atthetime.However,amongmeasures
tQbediscussedwillundoubtedly bethosethathavebeeneffectivein
thepast,namely: 1"
-, iM
a),speedupinformation systemsandinparticular introducethe
questionnaire onthesupplysituation - (Commission Décision
'M
■79/639/EEC)bycountryand,ifnecessary,company;
"•b)-takeallnecessary measures,inconjunction withtheoilcompanies >
topreventimportpricesvaryingfromnormalprices
-orobtainanundertaking fromtheoilcompaniesthattheywill
refrainfrommaking .abnormalpurchases;
c)encourageadjustmentofsuppliesinsuchawayastocorrect
imbalances whichposeparticular problemsforsomeMemberStates
andencouragetheoilcompaniestoremedyspecificimbalances
whichmayoccurbetweenthem;
d)encouragethesavingofoilby,forexample,publicity,other
psychological measuresorvoluntaryreductionindeliveries
(butnottheheaviermeasuresrequiredforfullemergencies);
e)substitution ofoilbyotherformsofenergyinboththepublic
andtheprivatesectorinordertoreduceconsumption ;
ν
f)supportdomesticproduction atahighlevel; -'
g)encouragetheuseofcommercial stocksinpreferencetoadditional
purchases andauthorisetheuseofpartofcompulsory stocksin/
casecommercial stockswereexhausted,inaccordancewitha
specificcompulsory stockuseprogramme,including amutual
guaranteethatcompulsory stocksofindividualcountrieswill
notfallunder85days.

Sincetheuseofcompulsorystocksisanewelementtoallowstockuse
whencommercialstocksarenotatahighenoughleveltosupportthe
othermeasures,,consideration mustbegiventohowsuchstocksmaybe
used., .
F.Suggestedprogrammefortheuseofcompulsorystocks- •
a)Basisforimplementation
15.Ifitcannotbeconfidently foreseenthatarun-downofcommercial
stockswillbesufficienttosupportOthermeasuresadoptedby
MemberStates,itisimportantthatthedecisionto'eiilowtheuse
ofsomepartofcompulsorystocks ,istakenat.theoutsetandthatthe
industryis-informed.Onlyifthisis'donewillexpectations in*the
marketbemodifiedtoreducetension,,sineetheassessmentofthe
companiesontheirsupply,,sityationwjllbe.changed.Itshouldalso
berecognisedthatauthorising areductionincompulsorystocksdoes
notmeanthattheywillberundowninpracticeunlesstotalstocks
declinetothe90-daylevel.
b)Effectsofimplementation
16.Theeffectofsuchadecisionwouldbethatallcompaniesinallmarket
wouldhavemorestockavailableforUse.Thiswouldreducetheirneed
•tobuy.Takingpressureoffthemarketinthiswaywouldnotmean
thatmarketactivitywould"cease.Onthecontrary,thespotm^rkat
wouldmaintaini*scontributiontonormalsupply^but,sincethere
wouldbelesscompetitionforavailableoiI,itshouldbepossiblefor
normaltradetocontinuewithoutstartingapricespirals. ■*'
< * -■* '■*
c)Thefollow-upsituation / ,
17.Itseemsthat5daysofcompulsorystockswouldbesufficienttodealwi
limitedsupplyinterruptions,bearinginmindthatforinstance,\
5daysof.compulsorystockswould-covera4%overallsupplydeficit
for4to5,months;moreover,commercialstockswouldinitiallycover
thedeficitforaconsiderabletime,dependingupontheirsizeat'4
thetime,itisthereforereasonabletoexpectthatthesupplyproblem
wouldbeoverandsupplyreturnedtonormalbeforeanoverall85-day

stocklevelwasreached.Ifso,prudentrebuildingofstockscouldtake !
place,toreturnfirstlytothe90daysofcompulsorystocksandlaterto
buiIdupcommercialstockstotheleveldesiredbyindustry. *r
'■; ' !
~ i
18.Itis,however,alsopossiblethatthesituationmightdeteriorate sofar .■
thatcontinuedcompulsorystockdraw-downwouldbringcountriesunderthe85~daylevel.;
Itisincasethissituationisreachedthatthecompulsorystockuse.
ί
programmemustbebased,fromtheoutset,onamutualguaranteethat
compulsorystockswillnotbeallowedtofalltoofarinindividualcountries.
Thisguaranteewouldreflectthefactthat,inco-operating toreducemarket
tension,itcouldbenecessaryforsomecountries,forreasonsbeyond .their
control,todigdeeperintotheircompulsorystocksthanothers.
19.Itisproposedthattheguaranteeshouldcomeintooperationifthesituation
developsintoafullemergency,sothatbytransferofsuppliesatthatstageall
countriesentertheallocationprocedurewithcomparablelevelsofcompulsorystocks.
Itshould,inanyevent>comeintooperationattherequestofanycountryif,in
accordancewiththeprovisionsofDirective68/414/EEC,itsoverallcompulsory
stocksreachthe80-aaylevel.AllocationinsideanyMemberStatewouldbeamatterforthe
governmentconcerned.Deliveries wouldbemadefromoilavailabletoMemberStates '
withcompulsorystocksinexcessof85daystobringth,eothercountries'80-daystockback
upto85,providedthatbysodoing,theMemberStatesmakingoilavailablewould
1
not'reducetheirownstockpositiontoalowerlevelthanthatachievedinthe
receivingMemberState(s).afterthetransfer.Thetransferwouldnormallybe
achievedbythedeviationofsomeincomingsuppliestothosewiththe !
loweststockposition.
AMemberStatethathasnottakenallactionspossibletoassureitsownsecurity
whenithadtheopportunitycouldbeexcludedfromthebenefitofthisguarantee
byCouncilDecision. .
d)Requirements forimplementation .
20.Considerablereliancemustbeplaceduponthevoluntarycooperationofindustry.
Withoutsuchcooperationthedeviationofincomingcargoeswould,forexample,
notbepossible.However,forthe.guaranteestobeeffective,theymustbe
totallycredible.Governmentsmustthereforebeabletodirectthemovement
ofcertainquantitiesofoilifnecessary.
/

Suchpowersareavailabletoallgovernmentsintiroesofmajor.crisis
orwar,butonlyaspartofawide-ranging packageofpowers.Inmany.,
casesitwould"notbelegallypossibletoactivatesuchapackagefor
themodestrequirements andobjectivesunderconsiderati on,andinany
casesuchactivationwouldgomuchfurtherthannecessary.Whatare
requireda»estrictlylimitedpowerssufficient,,forthesituationof
limitedsupplydisruption.-Discretionary-powers todirecttheusemade
of5ofthe90daysofcompulsorystockwouldappeartobesufficient..
Itistobehopedthatthesewouldnotneedtobeused;buttheymust
beseentoexist,soastomaketheguaranteeseffectiveandensurethat
imbalances couldandwouldbecorrectedatbothnationalandinternational
i J
levels. ■--
21.Ifanagreementcouldbe?reachedbetweentheindustrialised countrieson
suchapolicytodealwithfuturelimitedsupplydifficulties,the
participating countries'wouldneedtotakethenecessaryimplementation
measures.FortheMemberState?oftheCommunity,thisshouldbeby
Communitylegislation,fortheothersbynationallegislation.
e)Pricesfortransferred oil -
22.Inthecaseoftransferofoil,pricesshouldbenegotiatedbetweenthe
companiesconcernedonthebasisofpriceconditionsprevailingfor
comparableCommercialtransactions.-Nevertheless,argumentcouldarise'
.and,inconsultation withtheoilindustry,aspecificarbitration
procedureneedstobeestablishedtoallowrapidsettlementbasedon
agreedcriteria. ,\\- .■■*.
G.Conclusions ■
23.TheCouncilisaskedtpapprovetheattachedconclusions.r

Annex
Draftconclusions oftheCouncilconcerning measuresto
limittheeffectsofalimitedshortfallinoilsupply
1.TheCouncilhasconsidered theCommunication oftheCommission
«
concerning measurestolimittheeffectsofalimitedshortfall
inoilsupply.
2.TheCouncilendorsestheviewoftheCommission thatfurther
preparation incloseconsultation withtheotherindustrialised
countriesisnecessarywiththeaimofensuringthatanyfuture ..
limitedshortfallsinoilsupplydonotleadtounrealistic
pressureonworldpriceswhichwouldseriouslyaffectthe
worldeconomy. j
3.TheCouncilisoftheopipipn _that,"althoughtheprecisenature
ofanyfuturesupplyprpblemcannotbeforeseenandconsequently
theappropriate measurestobetak®1"1canonlybeagreedonwhen
theproblemsoccur,,itisnecessarytoagreeontheprocedures
tobefollowedandtoidentifyarangeofmeasuresfromwhicha
selection maybemadeinthelightoftheprevailing circumstances ,
inordertoensureCommunitysolidarity.
A.TheCouncilthereforeagreesinprinciple onthefollowing
procedure andrangeofmeasures,Vfhichwillbesubjectto
consultations withotherindustrialised countrieswitha
viewtotheestablishment ,onawiderinternational basis,
ofprocedures broadlyanalogoustothoseenvisagedforthe
Community. ,
I,ts
Procédure: ..^t■
y.\*
Ifoilsupplyproblemsarelikel.yj'toleadtounrealistic pressures
onworldmarketprices:
-TheCommission should,afterconsultation withthe"OilSupply
Group",onitsowninitiative orattherequestofaMemberState,
askforaspecialCouncilmeetingtostartwithinthreedays.
ItshouldalsomakeanynecessaryproposalstotheCouncil.'
IftheCommission doesnotact,MemberStatescasaskthe
Counciltomeet;

.< '■ ' - . 1
-IntheLightofthecircumstances,theCouncilshould,by
unanimityandwithin5days,agreewhetherandwhatcourse
ofactionisnecessary,whileensuringco-ordination with,
inparticular,otherindustrialised countries;
-Implementingmodalitiesofthemeasuresadoptedwillbe
decidedonseparatelybytheCouncilbyqualifiedmajority;
-Ifcircumstances change,theCommissionshould,onitsown
initiativeorattherequestofaMemberState,proposeto
amendorrepealthemeasuresintroduced;
-Theapplicationofanyagreedmeasureswillbemonitored
bytheCommission,inconsultationwiththe"OilSupply ,Group",
whichwillreporttotheCouncil;
-TheCommissionwillmonitor,inapermanentway,MemberStates'
policiesconcerningdemand,supplyandsecurity.Itwill
reporttotheCounciIandmakerecommendations ifnecessary.
-AnyMemberStatemaybedeclaredineligibleforthebenefitofthesolidarity
measuresdecidedbytheCouncilifithasnottakenallactionsnecessary
toensureitsownsecuritywhenithadtheopportunity .
Rangeofpossiblemeasures
a)Speedupinformation systemsandinparticular introduce
thequestionnaire onthesupplysituation
CCommissionDecision79/369/EEC)bycountryand,if .
: \
nefcessary,company;
b)-Takeallthenecessarymeasures,inconjunction,
withtheoilcompanies,topreventimportprices
varyingfromnormalprices
-orobtainanundertaking fromtheoilcompanies ^
thattheywillrefrainfrommakingabnormal
'r !\■ ■-
purchases; '..
c)Encourageadjustmentofsuppliesinsuchawayasto
correctimbalances whichposeparticular problemsfor
someMemberStatesandencouragetheoilcompanies
toremedyspecificimbalanceswhichmayoccurbetween
them; •

d)Encouragethesavingofoil;
e)Substitution ofoilbyotherformsofenergyinboth
thepublicandtheprivatesectorinordertoreduce-
consumption;
f)SupportdomesticproductionatahighLevel;
g)Encouragetheuseofcommercialstocksinpreference
toadditionalpurchases;andauthorisetheuseof5daysof
compulsorystocksincasecommercialstockswereexhausted,
includingamutualguaranteethatcompulsorystocksof
individualcountriesfacingsupplyproblemsforreasons
outsidetheircontrolwillnotfallunder85days.
Physicaltransferwilltakeplacebydecisionofthe
Councilifthesituationdevelopsintoafullemergency
or-attherequestoftheMemberStateconcerned-if
theoveralllevelofstocksreaches80days.
TheCouncilinvitestheCommission,inthelightoftheoutcome
oftheconsultations withotherindustrialised countries,to
makefurtherproposals.