Commission staff working document - Accompanying document to the Proposal for a DIRECTIVE OF THE Council imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products - Summary of the impact assessment {COM(2008) 775} {SEC(2008) 2858}
Date: 2008-11-13
Institutions: European Commission
Subjects: crude oil, disclosure of information, energy supply, minimum stock, petroleum product

EN 

EN 

   EN 

 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.11.2008 
SEC(2008) 2859 

COMMISSION STAFF WORKING DOCUMENT 

Accompanying document to the 

Proposal for a 

DIRECTIVE OF THE COUNCIL 

imposing an obligation on Member States to maintain minimum stocks of crude oil 
and/or petroleum products  

SUMMARY OF THE IMPACT ASSESSMENT 

{COM(2008) 775} 
{SEC(2008) 2858} 

EN 

   EN 

 
 
  
 
The Impact Assessment for which this Summary is presented relates to item 2008/TREN/001 
of the Commission Work Programme. It was prepared in the context of the preparation of a 
legislative proposal on the revision of the EU emergency oil stock legislation. 

The Impact Assessment builds on analysis undertaken within the Commission, supported by 
several structured (Oil Supply Group, Berlin Fossil Fuels Forum) and informal consultations 
with stakeholders and a formal public consultation. 

Background 

The March 2007 European Council underlined the need to enhance the security of supply for 
the EU as a whole and for each Member State, inter alia by developing more effective crisis 
response  mechanisms.  It  highlighted  in  this  context  the  need  to  review  EU  oil  stocks 
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 (IEA). 

Problem analysis 

The legal framework for establishing and using emergency oil stocks in the EU is based on 
rules  established  in  the  late  1960s  and  early  1970s.  In  recent  years  the  risk  of  oil  supply 
disruptions  has  grown  for  a  number  of  reasons,  including  the  increasing  global  demand 
coupled  with  limited  spare  production  capacity,  the  concentration  of  supply  in  a  handful  of 
(often  politically  unstable)  countries,  the  proliferation  of  geopolitical  conflicts  and  the 
growing  number  of  natural  disasters.  Current  global  trends,  coupled  with  the  EU's  internal 
development (such as successive enlargements, completion of the internal market, decreasing 
indigenous  production)  are  all  factors  calling  for  reviewing  of  the  existing  EU  stock 
legislation. 

In  addition,  analysis  of  the  current  system  reveals  weaknesses  which  might  prevent  it  from 
functioning suitably in case of an actual supply disruption. 

At  present  Member  States  are  free  to  choose  their  stockholding  arrangements.  This  has 
resulted in a diversity of systems and practices across the EU. There are doubts whether all 
national  systems  could  guarantee  that  the  stocks  held  for  emergencies  would  be  fully 
available and could be effectively mobilised as needed. For example, in some Member States 
the  current  practice  seems  to  allow  that  operational  stocks  of  commercial  operators  are 
counted as emergency stocks. The extensive use of "tickets" by several Member States might 
also cast doubt on the availability of stocks. 

The International Energy Agency, established in 1974, operates a parallel system. Although, 
in  general,  the  same  stocks  can  be  used  for  complying  with  the  EU  and  IEA  stockholding 
obligations,  the  differences  in  calculation  methodology  and  reporting  impose  substantial 
administrative burden on Member States which are also members of the IEA.  

The  EU  lacks  coordinated  intervention  procedures,  rendering  prompt  decision  making  and 
effective actions, which are crucial in a crisis, very difficult in practice. The role of the EU 
system vis-à-vis the IEA and its procedures is not clarified in the current legislation. 

Although  the  current  legislation  calls  for  "fair  and  non-discriminatory"  stockholding 
arrangements,  it  contains  little  concrete  provisions,  potentially  allowing  distortion  of 
competition between different categories of market operators.  

EN 

2 

   EN 

Finally, the composition of the stocks may not reflect what is really needed in a crisis. 

As a result of these flaws, the system may not deliver the desired results in a crisis, running 
the risk of exposing the economy to substantial damage.  

The  current  system  is  also  prone  to  free  riding:  Member  States  with  possibly  less  reliable 
systems  can  count  on  countries  with  sound  arrangements.  This  however  compromises  the 
emergency preparedness of the EU as a whole. 

Objectives 

The  overall  policy  objective  of  the  revision  is  to  further  strengthen  the  system  while 
optimising the administrative obligations on Member States. 

The  emergency  response  system  needs  to  be  brought  more  into  line  with  the  European 
Union's needs concerning its capacity and readiness to react to oil supply disruptions, should 
they occur, efficiently and in a fully coordinated manner. Thereby the system has to minimise 
or at least mitigate the negative impacts of a disruption on the EU economy and society. 

At  the  same  time  and  to  the  extent  possible,  the  objective  is  to  simplify  the  regulatory 
environment and the compliance burden for Member States and the industry. 

Policy options 

Four policy options are considered in the impact assessment. These options basically address 
the problem of stock availability: 

•  Policy Option 0 envisages no policy change. 

•  Policy  Option  1  would  not  entail  a  change  to  current  stockholding  arrangements  but 
envisages  the  introduction  of  reinforced  public  control  of  the  availability  of  emergency 
stocks  and  of  emergency  mechanisms.  This  would  entail  audits  and  inspections  of 
emergency  stocks,  to  be  carried  out  by  or  on  behalf  of  the  Commission  and  the  regular 
review of Member States' emergency procedures. 

•  Policy Option 2 would require that all 90 days of emergency stocks are state-owned  and 
managed by an agency, possibly controlled at EU level. Stocks should be held separately 
from commercial stocks and at least part of the stocks should be in the form of products. 

•  Policy  Option  3  envisages  that  Member  States  hold  an  obligatory  portion  (30  days)  of 
emergency  stocks  in  the  form  of  dedicated  government-  or  agency-owned  stocks.  Such 
stocks  should  be  held  in  the  form  of  products,  reflecting  the  country's  consumption 
patterns.  If  an  industry  obligation  is  retained,  companies  would  be  given  the  right  to 
delegate their obligation to the government or the agency. 

•  In addition, Option 2 and 3 would introduce some restrictions on the use of "tickets". 

Since some of the problems identified are independent of the choice from the above options, 
they are tackled separately: 

EN 

3 

   EN 

•  Emergency procedures are to be clarified: in an IEA action, IEA member countries should 
be able to participate without explicit Commission approval while the Commission should 
co-ordinate the contribution of non-IEA Member States. 

•  It  is  proposed  to  align  the  stockholding  obligation  to  that  of  the  IEA  (based  on  net 

imports), while retaining an obligation for significant oil producing Member States.  

•  After doing some adjustments, the Monthly Oil and Gas (MOS) questionnaire already used 
by  the  IEA  and  Eurostat  could  replace  the  special  questionnaire  used  for  reporting 
emergency stocks. 

Impact analysis 

A  detailed  analysis  of  the  impacts  of  the  four  policy  option  has  been  performed, 
systematically checking the effects on: 

•  emergency  preparedness,  i.e.  the  capacity  of  the  EU  to  cope  with  a  possible  oil  supply 

disruption, 

•  financial  and  administrative  burden  faced  by  Member  States,  the  industry  and  the 

Commission. 

Other (environmental, social and economic) impacts were also investigated. 

The impact analysis of the individual options was complicated by the substantial differences 
between  the  Member  States'  stockholding  systems.  The  impacts  will  be  inevitably  different 
across  Member  States,  primarily  depending  on  whether  stocks  are  currently  maintained 
predominantly by public agencies/governments or by the industry. The way of implementing 
the possible options is also likely to affect the impacts, especially with respect to the size and 
focus of the financial burden.  

The results of the impact assessment can be summarized as follows: 

Policy  Option  0  (no  policy  change)  would  obviously  not  entail  additional  financial  or 
administrative  burden  but  cannot  guarantee  an  effective  EU-wide  emergency  preparedness. 
All weaknesses of the current system would remain in place, putting at risk the EU's ability to 
react to oil supply disruptions. This gives a cause for concern since disruptions might become 
more frequent and significant in the future. In view of EU's dependency on continuous supply 
of oil and petroleum products, impacts of such disruptions would be heavy. 

Policy Option 1 (reinforcing control and coordination mechanisms within the existing system) 
would not allow the full range of current shortcomings to be tackled, making it impossible to 
create a consistently robust system across the EU.  

Audits,  inspections  and  reviews  would  have  moderate  budgetary  implications.  Country 
reviews could help to disseminate best practices, reinforced controls would certainly help to 
unveil  cases  of  non-compliance  but  the  underlying  causes  of  insufficient  stock  availability 
would not be addressed directly. In case of a significant disruption, major impact similar to 
that with Option 0 would be still likely. 

EN 

4 

   EN 

 
Policy Option 2 (establishing a centralised EU system with mandatory state/public ownership 
of emergency stocks) would ensure that all 90 days of dedicated emergency stocks are state-
owned,  managed  by  an  agency,  possibly  controlled  at  EU  level,  and  held  separately  from 
commercial  stocks.  Such  stocks  would  be  unquestionably  available  for  emergency  purposes 
but some of the benefits associated with commingling  (automatic  turnover of stocks, stocks 
closer to consumers) would be inevitably lost. 

The  current  diversity  of  national  systems  would  disappear,  thereby  removing  potential  free 
riding.  Furthermore,  this  option  would  facilitate  the  monitoring  of  the  stocks  held  and 
released.  

Today  only  two  Member  States  have  all  their  emergency  stocks  in  government  ownership. 
Therefore, this option would represent a significant change to the current stockholding system 
of most Member States, requiring substantial public expenditure in the order of €55 billion (at 
market prices in the second half of October 2008). This may not be justified by the experience 
of  past  disruptions  and  may  be  questioned  from  the  point  of  view  of  proportionality  and 
subsidiarity. 

Policy  Option  3  (creating  some  dedicated  EU  emergency  stocks  within  a  revised  version  of 
the  existing  system)  would  result  in  dedicated  stocks  unquestionably  available  as 
supplementary volumes in case of a disruption; the proposed 30-day level would be sufficient 
to  cope  with  disruptions  experienced  in  the  past.  Member  States  would  have  considerable 
flexibility in choosing how to satisfy the rest of the stockholding obligation, with due regard 
to their geographical situation, refining capacities and other specific factors. 

Most Member States are reasonably close to complying  with  this  option.  However,  the  five 
Member States completely relying on mandatory industry stocks today  would need to make 
substantial  efforts:  they  would  need  to  establish  12.5  million  tons  of  government/agency 
stocks. Buying these stocks would cost about €5 bi llion (at market prices in the second half of 
October  2008).  Nevertheless,  they  would  not  necessarily  have  to  purchase  the  stocks;  the 
extent of the financial burden would depend on the practical arrangements chosen. As regards 
the running costs of the stockholding, a survey of storage costs in Member States found that 
government/agency stockholding can be considered cheaper than industry stockholding. 

This option provides reasonable protection against supply disruptions but its implementation 
costs would fall primarily on a few Member States. 

As  far  as  the  possible  distortion  of  competition  is  concerned,  under  Option  0  and  1  the 
existing  distortions  would  not  be  addressed.  By  completely  removing  mandatory  industry 
stocks,  Option  2  would  help  to  remove  possible  competitive  distortions  between  different 
categories of market operators. According to Option 3, the companies would have a right to 
delegate  their  obligation  to  the  government  or  the  agency.  As  a  result,  the  potential 
discrimination  between  market  operators  would  be  significantly  reduced.  In  particular, 
smaller  companies  with  no  access  to  sufficient  storage  capacity  could  comply  with  their 
obligation in an easy and cost-efficient way.  

The  occurrence  of  social  impacts  depends  on  the  individual  options'  ability  to  react  to 
disruptions.  If  the  emergency  oil  stock  system  fails  to  mitigate  the  negative  economic 
consequences (e.g. high energy prices), this is likely to hurt particularly the most vulnerable 
parts of the society.  

EN 

5 

   EN 

An  impact  on  environment  might  occur  if  a  policy  option  requires  the  construction  of  new 
storage  facilities.  As  the  total  obligation  would  not  substantially  change  under  any  of  the 
options,  in  principle  no  additional  storage  capacities  would  be  required.  However,  if  the 
practice of commingling emergency and commercial stocks would be ceased, as proposed by 
Option  2  and  (for  the  dedicated  stocks)  Option  3,  this  may  require  the  construction  of  new 
facilities in some Member States. 

The proposed changes in crisis management, calculation and reporting are independent of the 
four options and therefore their impacts were assessed separately. 

The  proposed  crisis  management  rules  and  procedures  will  allow  the  EU  to  be  able  to 
contribute better to an IEA action, by avoiding delays and confusions experienced in the past 
and by being able to coordinate and channel the actions of non-IEA Member States. 

A better alignment with the internationally accepted rules of the IEA would not only decrease 
administrative burden (at least for IEA member countries) but would also allow the use of EU 
stocks to have a better impact in an IEA action. 

A  switch  to  the  MOS  questionnaire  as  the  main  reporting  tool  would  reduce  administrative 
burden  and  provide  a  common  basis  with  the  IEA  for  evaluating  emergency  preparedness. 
However, this questionnaire will probably need some fine-tuning so that it is fully in line with 
the updated EU rules and in order for the data to be valid in possible infringement procedures. 
It is also to be investigated whether the reporting lag could be shortened in order to have more 
timely data on emergency stocks (e.g. by using the JODI questionnaire). 

The  impacts  of  a  possible  introduction  of  weekly  reporting  of  commercial  stocks  were  not 
addressed  by  the  impact  assessment.  These  will  be  addressed  by  a  separate  analysis  when 
detailed implementing provisions for such reporting are drafted. 

Conclusion 

Since  Option  1  would  not  directly  tackle  the  shortcomings  of  the  current  system,  it  is  not 
expected to significantly improve the availability of emergency stocks. Option 2 would bring 
about a significant improvement of emergency preparedness, but at a cost which is difficult to 
justify. Considering the balance of benefits and costs, Option 3 appears to be the most suitable 
choice, especially if complemented by practical provisions for verifications (audits, reviews). 
Consideration  however  needs 
the 
implementation  costs  which  may  make  this  option  politically  less  acceptable  to  the  few 
Member States most heavily impacted. 

the  disproportionate 

to  be  given 

impact  of 

to 

EN 

6 

   EN 

Option 0: No policy 
change 

Option 1: 
Reinforcing 
control 

Option 2: 
Centralised system 

Total obligation 

90 days 

90 days 

90 days 

Option 3: 30 days of dedicated stocks 

90 days 

min. 30 days 

the rest 

Calculation basis 

consumption 

net imports 

Ownership of stocks 

no specific rule 

no specific rule 

government 

 government/agency 

no specific rule 

Management of 
stockholding 

Commingling with 
commercial stocks 

no specific rule 

no specific rule 

government or agency 

agency or specific 
government control 

no specific rule 

Not explicitly prohibited 

allowed 

not allowed 

not allowed 

allowed 

"Tickets" 

no restriction 

no restriction 

limited 

limited 

 "intermediated" (through 
agency) 

Minimum product 
share 

Regular audits and 
reviews 

no 

no 

no 

yes 

yes 

no 

yes 

no 

no 

no 

Reporting 

monthly, based on special 
questionnaire 

Monthly, based on MOS/JODI 

Crisis management 

Consultation in the Oil 
Supply Group 

Complementarity to the IEA emergency policies and measures, clear stock release mechanisms, 
increasing role of the Oil Supply Group for crisis management 

Table 1: Summary of the policy options

EN 

7 

EN 

 
  
 
Criteria 

Option 0: No policy change 

Option 1: Reinforcing 
control 

Option 2: Centralized system 

Option 3: 30 days of 
dedicated stocks 

Impact on 
emergency 
preparedness and 
stock availability 

Doubts about the availability 
of stocks in certain 
stockholding systems 

Financial burden 

No change 

Stock availability is expected 
to improve after conducting 
infringement procedures but 
other problems would remain 

Some additional cost for the 
Commission (for MS only if 
inspections/audits unveil non-
compliance) 

Full availability of emergency 
stocks as “fresh oil” in an 
emergency in all MS 

Immense additional costs for 
most governments, while 
burden on industry ceases 

Sufficient dedicated 
emergency stock to address 
disruptions experienced in the 
past  

Additional cost for 
government/agency in about 
half of MS, while lower burden 
on industry 

Administrative 
burden 

No change 

Commission’s administrative 
burden increases (reviews, 
inspections/audits) 

Increasing burden on most 
governments, while the burden 
on industry ceases 

Increasing burden on some 
governments (establishing 
stockholding agencies) 

Economic impact 

Possible competitive 
distortions 

Possible competitive 
distortions 

Discrimination between market 
players is fully eliminated 

Mitigation of competitive 
distortions 

Social impacts 

Environmental 
impacts 

Increasing risk of social 
tensions 

Reduced risk of social tensions  Reduced risk of social tensions  Reduced risk of social tensions 

No impact 

No impact 

Additional storage capacities 
might be necessary 

Additional storage capacities 
might be necessary 

Table 2: Comparison of the options' impact 

EN 

8 

EN