EN Official Journal of the European Union C 277/81

Opinion of the European Economic and Social Committee on the ‘Proposal for a Council Directive imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products’

COM(2008) 775 final — 2008/0220 (CNS)

(2009/C 277/16)

Rapporteur: Mr CEDRONE

On 10 December 2008 the Council decided to consult the European Economic and Social Committee, under Articles 100 and 262 of the Treaty establishing the European Community, on the

Proposal for a Council Directive imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products

COM(2008) 775 final - 2008/0220 (CNS).

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 15 April 2009. The rapporteur was Mr CEDRONE.

At its 453rd plenary session, held on 13-14 May 2009 (meeting of 13 May), the European Economic and Social Committee adopted the following opinion by 182 votes to three with eight abstentions.

1. Conclusions

1.1. The EESC feels that, in addition to its other qualities, the proposal has the great merit of simplifying existing legislation on the subject, in that instead of the three existing measures there will now be only one. In addition, it streamlines Member States' administrative procedures by bringing stockholding obligations into line with those of the International Energy Agency – IEA (in actual fact the alignment itself is not particularly substantial).

1.2. The proposal takes into account the subsidiarity principle and applies it correctly to a public good; the internal market must ensure that, in the event of a world crisis, any stocks released can flow freely to any buyer country concerned, whether or not it belongs to the International Energy Agency.

1.3. At the very least, as things stand, coordination would be the best way of preserving a high level of security of oil supply in the European Union and achieving adoption of common requirements.

1.4. The proposal facilitates adoption of more effective, rapid measures in the event of a crisis, including in respect of the relationship which has existed thus far between the EU and IEA systems, taking account of the genuine needs which may arise in the event of disruption.

1.5. The EESC feels that a global strategy is needed, to make the EU as self-sufficient in the field of energy as possible.

1.6. The proposal is a step in this direction but does not go far enough to achieve the desired goal.

1.7. The EESC believes that the main issue is not so much ownership of stocks, which could have very heavy financial consequences, at least for some EU Member States, as control, which must be extremely strict, public and preferably managed at European level.

1.8. Thus, dedicated and emergency stocks can be held by businesses too, provided that control stays in the hands of the Member States or, even better, in European hands. According to the proposal, only in the event that these controls prove ineffective could state ownership of dedicated stocks be imposed.

1.9. The EESC believes that an obligation to hold stocks corresponding to 70 days of consumption would be more appropriate than an obligation to hold stocks corresponding to 90 days of net imports.

1.10. The aim of converting part of commercial stocks into emergency stocks could also be pursued. To achieve genuine intra-European solidarity, a principle of rapid pooling of stocks in the event of a crisis could be introduced; for instance, the ‘use-it-or-lose-it’ rule, which is already applied in the European energy market, could be studied and adapted.

1.11. The EESC calls on the Commission to assess the possibility of making tax (excise duty) on petroleum stocks in the various countries uniform.

2. Proposals

2.1. The EESC calls for more substantial measures from the Commission on petroleum stocks, particularly in the area of coordination and control. Similar measures are required in the area of natural gas stocks.

2.2. This means that, with a view to working towards the completion of the single energy market, the EU must take on a greater role.

2.3. Each Member State should require their businesses to hold a sufficient volume of stock to cope with any crises.

2.4. Subsequently, the Commission must monitor the situation at Community level; where a Member State fails to comply, it must be required as a penalty to create state-owned dedicated stock. In all cases, financing of these stocks should be as transparent as possible.

2.5. Predominantly private stock management is preferable, maybe accompanied domestically by a revolving fund (which facilitates release of stocks by state-certified businesses while avoiding too much money being wasted), but it should be subject to strict control by the public authority.

2.6. However, the EESC sees EU involvement as essential, to ensure that Member States are on a level playing field and that, consequently, the obligation to create and maintain stocks and make them available is in effect met, in case of need in one or more Member States.

2.7. A Coordination Committee or agency needs to be set up with genuine power to act, or, even better, the Agency for the Cooperation of Energy Regulators could be used.

2.8. The EESC calls on the Commission to submit an annual report to the European Parliament on the state of stocks.

3. Introduction

3.1. In recent years, particularly of late, the threat of energy supply being disrupted has increased. In response to this oil stocks have been released. There have been a number of physical disruptions of supply around the world in the last forty years, and the use of stocks held in different countries has helped to alleviate these problems in an orderly way. Since Europe has a single unified market for oil products any disruptions of supply are likely to affect each country similarly, and it is appropriate and useful for Europe to establish co-ordinated arrangements for holding oil supplies and for managing their release in the event of future disruptions.

3.2. There is thus a need to increase security of supply in the European Union and individual Member States, looking for better, more effective systems to cope with disruption.

3.3. Europe has had legislation requiring Member States to maintain minimum oil stocks for a number of years, based on the IEA's general recommendation to maintain 90 days' supply at all times. In March 2007, however, the Council, in reviewing energy security issues, asked for a review of EU oil stock mechanisms, with special reference to the availability of oil in the event of a crisis, stressing complementarity with the crisis mechanism of the International Energy Agency.

3.4. This is even more necessary because of the flaws in the current system: these flaws could prevent suitable supply in the event of need, with serious implications for the economy.

3.5. As oil is still the EU's main energy resource, the stock system needs to be made more reliable, bearing in mind that the energy sector is still NOT operating as a single market; what is more, there are no coordinated intervention procedures and no relationship between the EU and IEA systems.

3.6. In practice, in the EU everyone does as they please; there are a wide variety of systems and practices which, inter alia, can also lead to competition between economic operators being distorted.

4. Gist of the proposal

4.1. Before drawing up the proposal, the Commission carried out numerous consultations and, drawing on experts, drafted an impact assessment.

4.2. Four options were considered in the impact assessment:

— option 0: no changes made to the current situation, which is wholly unsatisfactory;

— option 1: provides for reinforcement of control and coordination mechanisms within the existing system, leaving existing legislation unchanged; thus, the same flaws would remain as at present without any substantial improvements being made;

— option 2: provides for the establishment of a centralised EU system with mandatory public ownership of 90 days of emergency stocks, held separately from commercial stocks; this would provide greater capacity to cope with disruption but at higher costs;

— option 3: provides for the creation of dedicated EU emergency stocks within a revised version of the existing system; this option would ensure that supplementary volumes are available in case of need, and therefore seems the most suitable solution.

4.3. The Commission's proposal is based on the third option. However, Member States are only required to create emergency stocks corresponding to the greater of 90 days of imports and 70 days of consumption. They are not required to create dedicated stocks unless they undertake to do so voluntarily. Rules are introduced to reinforce controls and each Member State is also required to draw up an annual report specifying the location and ownership of the emergency stocks.

4.4. It is planned to bring the general stockholding obligations closer into line with IEA requirements.

4.5. Member States will have greater flexibility in choosing specific arrangements for complying with the stockholding obligations, and will even be able to delegate management of stocks among themselves.

4.6. The proposal establishes rules and procedures to be followed in the case of an IEA-led action (effective international decision to release stocks). The EU will coordinate the contribution of non-IEA Member States.

4.7. After three years, the Commission may propose that part of the emergency stocks of each Member State is to be owned by the government or an agency.

5. General comments

The EESC shares the Commission's preference for option 3 of the impact assessment, as it requires less investment than option 2, which at present seems excessive, particularly in terms of cost; indeed, it believes, taking into account the survey referred to in the documents accompanying the proposal, that creating dedicated stocks – volumes of petroleum products owned by Member States – may conflict with the need to maintain emergency stocks and commercial stocks together, possibly even in the same tanks.

5.1.1. From a technical point of view, this seems the best option, notwithstanding, of course, the absolute necessity of guaranteeing ongoing availability of emergency stocks held together with commercial stocks. In any case, both the social and environmental implications of each of the measures listed should be taken into consideration.

5.2. The EESC endorses the proposal's objective, which is to deal with disruptions in supply of oil and/or petroleum products.

5.3. Available stocks, as the Commission rightly states, are the best possible means of dealing with the severest effects of any disruption on the petroleum market (although the key role currently played by the gas market - not covered in the proposal - should not be overlooked).

5.4. The EESC does not endorse the proposal for physical separation of emergency and commercial stocks. These stocks can be held in the same facilities or tanks.

The EESC feels that the other three strategies referred to by the Commission, followed by the International Energy Agency since 1974, should be pursued and enhanced.

5.5.1. Domestic production should be increased. (Some Member States are not doing this, seeking to preserve strategic reserves in the ground or to keep crude oil prices higher.)

5.5.2. Alternative technologies should be used more widely in energy applications, particularly following the approach of increasing the range of alternatives to using primary fuels in electricity production; this can be achieved by replacing fuel oil, where technically, environmentally and financially feasible, with natural gas especially, coal (there seem to be good prospects for ‘clean’ use of coal) and nuclear fuel (latest-generation technology here, too).

Consumption should be reduced, not so much in domestic heating or the chemical industry as, rather, the private transport sector, as part of a global strategy of promoting public transport.

5.5.3.1. Taking into account the fact that energy supplies could soon be running low in Europe, even though the crisis which seemed to be looming last summer has not yet come to pass, this strategy is also justified by the fact that, in many respects (particularly environmental), private transport seems to have reached limits which call for careful reflection on possible ways of redressing the balance.

6. Specific comments

6.1. The proposal should make a clearer distinction between dedicated stocks (Article 9) and emergency stocks (Article 3), stating whether the difference between the two categories lies solely in whether Member States have the obligation to create them, or whether the different definitions also cover the kind of petroleum product stocks being held, leaving it to the discretion of each Member State to choose whether or not to take on the obligation to build up stocks of other petroleum products, which, in this case, would not be emergency stocks. The grounds for including some oil products or qualities in the list of stocks, to the exclusion of others, are not clear.

6.2. The location (Article 3) in which the emergency stocks must be held is not properly defined, given the use of the term ‘within the European Community’. It might be appropriate in addition to identify the geographical and climate conditions necessary for the site, as well as for connections to TEN-E in case they are to concern oil too in the future, to ensure that the stocks are properly available to all Member States in case of need. It would be appropriate for responsibility for stockholding to be allocated to a number of different Member States, even in rotation.

6.3. The content of Article 5 needs to be clearer, as it is ambiguous as it stands. In particular, paragraphs 1 and 2 seem to be contradictory. Article 5(1) requires Member States to ensure that emergency and dedicated stocks held within their national territory are physically accessible and available at all times, while under paragraph 2 it seems that these same Member States are free to decide on the allocation and release of stocks, with no uniform arrangement.

6.4. It might be wise to set uniform requirements with which each central stockholding entity must comply when fixing the conditions subject to which the stocks are offered (Article 7(4)).

6.5. The tasks assigned to the Coordination Group (Article 18) are relatively modest, as they are limited to contributing to analysing the situation within the Community (where, however, the Commission is responsible for control) with regard to security of oil supply and facilitating the coordination and implementation of measures in that field. The Group should be given a further-reaching role, for example, in verification and control of stocks and procedures (maybe becoming a genuine agency).

6.6. The ‘necessary’ measures which Member States have to adopt (Article 21) in the event of a major supply disruption are not clearly defined. It would be appropriate to specify in advance the percentage of crude oil and petroleum products that each Member State has to release, or by how much consumption should be reduced in each Member State; these should preferably be equal or at least proportionate to the volume of stocks available or to stocks consumed. Moreover, given that the reason for the stocks is to ensure mutual support in the European Union, forms of mutual support and remuneration among Member States in the event of disruption should be better defined, in particular EU producer countries' obligations. In addition, the European public should be informed about such key issues to bring them closer to the EU.

6.7. The EESC believes that, in the event of disruption, supply should not be reduced to public passenger transport or carriage of goods; heating supplies for the general public, in particular public services such as schools and hospitals, should be guaranteed. Supply to the petrochemical industry should also be guaranteed.

6.8. To ensure harmonisation of the procedures (Article 21(3)) laid down in the IEA Agreement, countries which are members of both the European Community and the IEA can use their dedicated stocks (where created) and respective emergency stocks to meet international obligations. In this case, however, a situation could arise where only countries which are members of both the EU and the IEA take action. To avoid this, it might be better to make it mandatory for all EU Member States to create dedicated stocks or use stocks already created, which should be put at the disposal of the Commission alone, in line with the subsidiarity principle, and handled by the Coordination Group.

6.9. It is not quite clear to whom the penalties laid down in Article 22 are to be applied: if they are only to be applied to businesses, it seems right for Member States to establish the size of the penalties and to be responsible for collecting them. However, if fines are to be imposed on the Member States themselves, these should be specified and regulated at Community level.

6.10. Setting up a special Committee (Article 24) to assist the Commission would serve no purpose unless it were the Committee or Coordination Group already provided for. Furthermore, Article 24 does not specify the Committee's responsibilities, nor arrangements for selecting its members, still less how many members it should have, and it does not make any mention of funding arrangements. The proposal does not specify clearly the differences between Commission employees carrying out controls (Article 19), ‘Coordination Group’ (Article 19) and ‘Committee’ (Article 24). The EESC condemns this as it does nothing whatsoever to increase transparency or democracy.