WRITTEN QUESTION E-3288/00

by Bart Staes (Verts/ALE) to the Commission

(25 October 2000)

Subject: Strategic oil reserves

Under Community law, Member States are required to maintain minimum reserves of crude oil and/or oil products. In order to comply with this Community obligation, the governments of the Member States require oil companies to maintain at all times a strategic reserve equivalent to ninety days' supply. The oil industry receives compensation from governments for the cost of maintaining the strategic reserve. In Belgium for example, such compensation is worth approximately BEF 3 billion per annum.

According to press reports, in recent months when oil prices were high the oil industry has sold large quantities of cheap oil from these strategic reserves at huge profit.

Does the Commission have exact figures on failure to comply with the requirement to keep strategic reserves and is it considering legislative proposals to (i) introduce effective penalties for such non-compliance and (ii) ensure that fuel bought and stored when prices are low cannot be speculatively released and sold at many times the real, original price, but instead is used to stem the price rise?

Answer given by Mrs de Palacio on behalf of the Commission

(8 December 2000)

Council Directive 68/414/EEC of 20 December 1968 imposing an obligation on Member States of the EEC to maintain minimum stocks of crude oil and/or petroleum products(1) as amended by Council Directive 98/93/EC of 14 December 1998(2), requires Member States to maintain stocks equivalent to 90 days' consumption for each of the three main categories of petroleum products(3) for energy uses, so that those stocks can be used in the event of supply disruptions to replace all or part of the shortfall. Member States have a great deal of flexibility as to how they implement these Directives. In practice, stockholding systems and the way in which they are funded vary greatly between Member States. For example, some Member States have set up bodies responsible for holding all or part of the stocks, while others have not. The question by the Honourable Member refers to the situation in Belgium. As Belgium has no stockholding agency, compliance with the Community stockholding obligation therefore depends entirely on the stocks held by the Belgian industry in accordance with the obligations imposed on it by the Belgian State. The cost of such stocks is borne by the industry and not by the Belgian State(4).

Belgium currently meets the Community stockholding requirement (i.e. holds stocks exceeding 90 days' consumption) for two of the three categories of products concerned. However, the Community 90 day requirement is not met for category II, namely middle distillates(5). This is mainly due to the fact that in the past, the Belgian system did not consider international aviation bunkers as giving rise to a stockholding obligation(6). Even taking account of the fact that the current situation on the oil market is not conducive to solving this problem, the Commission should examine it in accordance with the procedure provided for in Article 226 (ex Article 169) of the EC Treaty.

Finally, the Honourable Member refers to the problem of stocks purchased when prices are low and sold later at a higher price. Where the stocks form part of the mandatory stocks, they cannot be sold if no instructions are given by the government(7).

(1) OJ L 308, 23.12.1968.

(2) OJ L 358, 31.12.1998.

(3) The stockholding of crude oil in place of products is authorised under certain conditions.

(4) Moreover, as Belgium is one of the few Member States to still apply a maximum price regime to certain petroleum products, these maximum prices as determined by the programme contract take account of these stockholding costs.

(5) On 31.7.2000, Belgian stocks of category I represented 101 days' consumption, category II 83 days and category III 223 days.

(6) On 31.7.2000, stocks of jet fuel of the kerosene type were only 27 days (for other category II products: 91 days).

(7) Where the system of security stocks is based on stockholding obligations placed on industry, Member States are required under the Community Directives to introduce mechanisms for the regular verification of compliance and a regime of sanctions. In accordance with these mechanisms, a Belgian oil company was convicted by a Court of First Instance in December 1998 and the sentence upheld in the Court of Appeal in October 1999.