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 - Impact assessment {COM(2008) 775} {SEC(2008) 2859}
Date: 2008-11-13
Institutions: European Commission
Subjects: crude oil, disclosure of information, energy supply, minimum stock, petroleum product

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 13.11.2008 
SEC(2008) 2858 

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  

IMPACT ASSESSMENT  

{COM(2008) 775} 
{SEC(2008) 2859} 

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COMMISSION STAFF WORKING DOCUMENT 

Impact Assessment on the Revision of the Emergency Oil Stock Legislation 

Lead DG: DG TREN 

Other involved services: ECFIN, ELARG, ENTR, ESTAT, SG 

Agenda planning or WP reference: 2008/TREN/001 

1. 

PROCEDURAL ISSUES AND CONSULTATION OF INTERESTED PARTIES 

1.1.  Organisation and timing 

This  Impact  Assessment  was  produced  in  the  context  of  the  preparation  of  a  legislative 
proposal on the amendment of the EU emergency oil stock legislation.  

The  preparation  of  the  Impact  Assessment  started  with  some  preliminary  analyses  and 
consultations  in  late  2006  and  was  intensified  in  spring  2007  after  the  importance  of  the 
subject was confirmed in the conclusions of the 8-9 March European Council which called for 
"improving  oil  data  transparency  and  reviewing  EU  oil  supply  infrastructures  and  oil  stock 
mechanisms,  complementary  to  the  IEA  crisis  mechanism,  especially  with  respect  to 
availability  in  the  event  of  a  crisis".  The  analysis  feeding  into  the  Impact  Assessment  was 
performed internally by the Commission services, partly with the use of external sources of 
information and expertise. 

1.2.  Consultation and expertise 

An Inter-Service Group (ISG) was established in December 2006 by the Directorate-General 
for  Energy  and  Transport  (DG  TREN)  with  participation  from  the  Secretariat  General  and 
DGs  ENTR,  ECFIN  and  ELARG.  The  ISG  met  in  December  2006,  May  2007,  September 
2007,  March  2008,  April  2008  and  July  2008  for  discussions  of  the  scope,  of  interim 
analytical results and of draft texts for individual elements of this Impact Assessment report, 
as well as the consultation document published in April 2008 (see below). Moreover, bilateral 
consultations  with  EUROSTAT  were  undertaken  on  issues  related  to  reporting,  most 
intensively in late 2007 and early 2008. 

In  addition  to  the  internal  Commission  consultative  process  involving  the  above  mentioned 
services,  the  Impact  Assessment  study  drew  on  consultations  with  external  experts  and 
stakeholders  who  were  consulted  throughout  the  preparation  of  the  work  and  provided 
invaluable expertise.  

An  on-line  public  consultation  was  carried  out  between  22  April  and  17  June  2008  to 
ascertain the views of interested parties on the possible revision of the existing legislation on 
emergency oil stocks. The consultation was based on a document outlining the key issues in 
the  current  regime  that  the  Commission  regards  as  in  need  of  addressing  and  suggesting 
possible changes to the current legislation. The annex of the consultation document provided 
additional  details  on  the  characteristics  and  shortcomings  of  the  current  system  and  the 

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objectives to be achieved through a possible revision. It also served as the basis of the first 
chapters of this impact assessment. 

The public consultation resulted in a set of reactions and contributions from Member States, 
industry  associations  and  individual  enterprises  concerning  the  proposed  changes  and  the 
various  questions  raised  in  the  consultation  document.  The  contributions  also  proved  to  be 
instrumental in developing the impact assessment and the legislative proposal. 

Apart  from  the  on-line  public  consultation,  the  main  platforms  for  the  consultation  of 
stakeholders  were  the  Oil  Supply  Group  and  the  Commission's  Fossil  Fuels  (also  known  as 
Berlin) Forum. 

The  Oil  Supply  Group  is  a  consultative  body  comprising  the  experts  of  national 
administrations  dealing  with  emergency  stocks  and  measures,  chaired  by  the  Commission. 
Although it was set up to facilitate the coordination of practical measures taken or proposed in 
the  context  of  difficulties  arising  with  regard  to  the  supply  of  crude  oil  and  petroleum 
products, its meetings are also used for presenting and discussing energy-related Community 
initiatives. The Group was consulted during the preparation of the Impact Assessment in its 
meetings  in  February  2007,  September  2007,  December  2007,  March  2008  and  June  2008. 
Members of this Group also answered two dedicated questionnaires: one on the composition 
and  availability  of  emergency  oil  stocks,  the  other  on  the  resources  used  for  emergency 
stockholding  in  Member  States  under  the  current  rules.  The  results  of  these  surveys  are 
referred to throughout the document. 

The  Fossil  Fuels  Forum  is  an  annual  event  which  was  first  convened  in  October  2005  in 
Berlin.  The  membership  of  the  Forum  is  formed  by  over  100  representatives  of  European 
energy  corporations,  industry  associations,  national  administrations  of  Member  States, 
Norway  and  candidate  countries,  and  members  of  civil  society  (non-governmental 
organisations).  The  Forum's  Security  of  Supply  Working  Party  has  been  consulted  on  the 
issue throughout the preparation of the Impact Assessment (the Working Party met in March 
2007, May 2007, July 2007, September 2007, February 2008 and June 2008)1. 

In addition to the above structured dialogues, Member States, the stakeholder community and 
external  experts  were  consulted  through  several  specialized  ad-hoc  consultative  events  and 
meetings  organized  on  a  bilateral  basis  between  the  Commission  (DG  TREN)  and  the 
individual  stakeholders  and  stakeholder  groups  (e.g. 
industry  associations).  These 
consultations  provided  unique  access  to  up-to-date  industrial  expertise  and  know-how.  The 
International Energy Agency (IEA) also provided a vital source of information and external 
expertise. 

Most  stakeholders  supported  the  objectives  of  the  revision  spelled  out  in  the  consultation 
document.  In  particular,  efforts  to  decrease  administrative  burden,  to  establish  coherent 
emergency procedures complementary to the IEA and to strengthen compliance by reinforced 
verification and control received general support. However, the stakeholder community, both 
Member  States  and  industry,  proved  to  be  divided  with  regard  to  the  proposals  aimed  at 
improving  stock  availability.  While  some  stakeholders  insisted  that  all  emergency  stocks 

1 

Further  details  of  this  Forum,  including  the  minutes  of  the  working  party  meetings  can  be  obtained  via  its  dedicated  website: 
http://ec.europa.eu/energy/oil/berlin/index_en.htm. 

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should be government-owned to ensure maximum availability, others argued that government 
ownership is not necessary and Member States should be able to adapt their systems to their 
special  circumstances.  The  majority  of  stakeholders,  even  those  advocating  full  government 
ownership,  opposed  the  idea  of  a  strict  physical  separation  of  emergency  stocks  and 
commercial stocks. They argued that commingling (storing emergency and commercial stocks 
in  the  same  facilities  or  even  the  same  tanks)  has  clear  advantages:  it  reduces  the  costs 
associated  with  the  change/refreshment  of  products  and  stocks  are  located  close  to  industry 
logistics.  However,  proper  accounting  and  strict  control  is  necessary  to  ensure  that 
commingled emergency stocks are not used for commercial purposes. This was an important 
lesson  from  the  public  consultation  which  was  taken  into  account  in  the  conclusions  of  the 
Impact Assessment, in chapter 6. 

Finally,  the  draft  of  the  Impact  Assessment  was  examined  by  the  Commission's  Impact 
Assessment  Board  which  provided  useful  comments  and  recommendations  for  the 
improvement of the text. As suggested by the Board, additional information was included on 
the relationship between the EU and IEA emergency oil systems and the added value of the 
EU  system  compared  to  the  IEA  mechanism  (including  a  new  section  numbered  2.1.3.).  At 
the request of the Board, the considerations behind Option 3 and its implications were further 
elaborated  in  chapter  4  and  5.  In  addition,  the  policy  options'  impacts  on  reporting  were 
clarified. 

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2. 

WHAT IS THE PROBLEM? 

2.1. 

Oil Supply Security in EU Member States 

2.1.1.  Historical background 

The  origins  of  emergency  oil  stockholding  lie  in  early  20th  century  Europe2.  In  the  second 
half  of  the  20th  century,  oil  became  the  most  important  fuel  in  the  European  energy  mix, 
making  the  economy  crucially  dependent  on  its  continuous,  reliable  and  affordable  supply. 
European administrations became aware of the necessity to maintain oil reserves in order to 
mitigate the economy's exposure to a disruption of oil supply. Oil emergency stocks emerged 
as  the  best  protection  to  cope  with  supply  disruption  as  they  can  swiftly  and  effectively 
replace missing barrels. 

Consequently,  in  1968  (well  before  the  oil  price  shocks  of  1973-74  and  1979-80)  the 
European Communities adopted legislation obliging Member States to maintain minimum oil 
and/or  oil  product  stocks.3  Originally,  the  obligation  was  equivalent  to  65  days  of  domestic 
consumption of three distinct product categories (gasoline, middle distillates4 and fuel oil). In 
1972 this was raised to 90 days. 

After the oil price shock of 1973 seriously damaged the world economy and created a period 
of high inflation and stagnation, the International Energy Agency (IEA) was created in 1974 
with a mission to protect oil consuming countries. The IEA took over the 90-day stockholding 
obligation from the European Communities but introduced different rules to make allowance 
for  the  oil  production  of  some  of  its  member  countries,  particularly  the  United  States.  The 
IEA emergency system is basically geared to addressing large global disruptions. 

In  2002,  the  Commission  proposed  a  directive  to  increase  the  volume  of  stocks  to  be 
maintained  in  each  Member  State  to  120  days,  and  to  give  the  EU  the  possibility  to  decide 
how these stocks are used, not only in the event of a physical disruption but also in the event 
of  a  perceived  risk  which  would  trigger  dangerous  market  volatility.  Although  the 
Commission  failed  to  convince  the  European  Parliament  and  the  Council  and  subsequently 
decided  to  withdraw  the  proposal,  the  political  debate  resulted  in  several  consensual 
conclusions,  including  the  need  for  a  closer  link  between  Community  crisis  procedures  and 
IEA mechanisms. 

2.1.2.  Characteristics of the EU stockholding system 

The  EU  legislation  puts  the  stockholding  obligation  on  the  Member  States,  who  are  free  to 
choose  their  specific  stockholding  arrangements.5  As  a  result,  the  transposition  of  the  stock 

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Already  in  1917  the  United  Kingdom  introduced  specific  requirements  on  the  stockpiling  of  energy  fuels.  France  introduced 
similar provisions in 1925. 
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, OJ L 308, 23.12.1968, p. 14 
Middle distillates include gas oil, diesel oil, kerosene and jet fuel. 
Directive 2006/67/EC mentions that Member States may recourse to the creation of a “stockholding body or entity” to hold all or 
part of their oil stocks. 

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directive  in  different  Member  States  has  brought  about  very  diverse  stockholding  systems 
across  the  EU.  Some  Member  States  have  set  up  government-owned  stocks,  others  have 
established government-supervised agencies responsible for holding the emergency stocks, in 
a  number  of  Member  States  stocks  are  entirely  kept  by  the  oil  companies  while  yet  others 
have opted for a mixed system (with an agency plus an obligation of a different extent on the 
industry). Today, 6 EU Member States rely entirely on mandatory industry stocks while in the 
other Member States all or part of the emergency stocks are held directly by the government 
or an agency. Management and ownership of stocks may be  separated. For example, stocks 
held by agencies are often owned by the oil companies. 

Although  the  stock  directive  allows  holding  stocks  in  the  form  of  crude  oil  or  intermediate 
products,  on  average,  56%  of  European  emergency  stocks  are  held  in  the  form  of  finished 
products. The share of product stocks in individual Member States ranges from 20% to 100%. 

Emergency  oil  stocks  can  be  held  on  the  territory  of  another  Member  State,  provided  a 
bilateral intergovernmental agreement exists between the Member States. At present, there are 
about 40 bilateral agreements in force and another 10 or so are under consideration or in the 
process  of  being  agreed.  Several  Member  States,  especially  in  Northwest  Europe,  have  a 
number  of  such  agreements  in  force.  However,  seven  Member  States  have  refrained  from 
concluding bilateral agreements and some of them expressly prescribe that all their stocks are 
located on the national territory. 

Most of the stocks are owned by the entity which has the stockholding obligation. However, 
11% of the emergency stocks are held through so-called "ticket" arrangements. Such stocks 
are owned and physically stored by another, typically commercial entity for a pre-determined 
fee. The holder of the "ticket" has an option to buy the stock in a crisis situation at the price 
set out in the agreement. "Ticket" agreements are usually concluded for a short (typically 3 
months)  period.  This  form  of  stockholding  is  used  in  several  Member  States,  primarily  for 
cost  reasons.  It  may  also  give  a  certain  flexibility  to  exchange  oil  products  for  reasons  of 
aging/degradation or changing specifications. 

Member States have to report their stock levels to the Commission (DG TREN) on a monthly 
basis. The tables showing stock levels at the end of each month have to be submitted at the 
latest by the 25th day of the second month after the month to be reported. According to the 
data reported, emergency stocks held by EU Member States amounted in spring 2008 to 143.4 
million tons which is equivalent to 119 days of internal consumption. For Member States with 
a 90-day obligation (EU-15 plus Hungary, the Czech Republic, Slovenia, Cyprus and Malta) 
the coverage was 121 days while for countries with a transitional period6 it was 94 days. 

2.1.3.  The EU system vs. the IEA system 

While the oil stock systems of both the EU and the IEA require maintaining stocks of 90 days, 
they are independent of each other and apply  different methodologies. In particular, the EU 
obligation  is  based  on  the  consumption  of  three  specific  product  groups  while  the  IEA 
obligation is based on the net import of oil and oil products.7 

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Some  of  the  new  Member  States  are  still  benefiting  from  a  transitional  period  for  building  up  their  emergency  stocks  before 
having to comply with the full 90-day obligation. 
See more details on calculation methodology in section 2.2.3.1. 

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The  independence  of  the  two  systems  does  not  mean  that  Member  States  with  IEA 
membership have a double (180-day) obligation. In general, the same stocks can be used for 
complying with the EU and IEA obligations. However, as a result of the different calculation 
methodology, some of the stocks qualify in one system but not in the other.8 A convergence in 
this respect appears to be desirable. 

Nevertheless, an independent EU system is deemed necessary because it is not likely that all 
EU  Member  States  will  join  the  IEA  in  the  foreseeable  future.9  In  addition,  there  may  be 
smaller, regional disruptions which affect one or more Member States but do not trigger the 
IEA  mechanism  which  is  focused  on  disruptions  with  a  global  impact.  For  example,  the 
disruption of supplies through an oil pipeline would potentially cause serious problems to the 
country(ies) concerned. If such a disruption has no significant effect on the global market, it is 
unlikely  to  trigger  an  IEA  action  but  an  EU  action  might  still  be  required  to  mitigate  the 
negative regional impacts.  

The  above  justification  for  an  independent  EU  system  should  not  lead  to  a  competition 
between the two systems. Instead, they should function in a complementary way, reinforcing 
each other in case of a disruption. 

Similarly  to  the  EU  system,  IEA  member  countries  are  free  to  choose  their  specific 
stockholding arrangements. Nevertheless, there is a clear tendency among the IEA countries 
towards public (government and agency) stocks. Today, 18 of the 27 member countries have 
public stocks (as opposed to 10 out of 21 in 1984), the share of which increased from 23% in 
1984 to 37% in 2007.10 

2.1.4.  Other measures to cope with a supply disruption 

Although oil stocks are seen as the most efficient tool to cope with an oil supply disruption, 
possible measures to mitigate economic harm include: replacement of oil by other fuels (fuel 
switching), increase of indigenous production (production surge) and reduction of demand by 
administrative measures (demand restraint measures). 

As  an  example  of  fuel  switching,  oil  used  for  electricity  generation  or  for  heating  purposes 
may be easily replaced by other fuels, provided that technical systems are in place to allow 
the  switch  to  the  alternative  fuel  (e.g.  natural  gas).  In  the  transport  sector,  where  oil  is  the 
dominant fuel, it is much more difficult or almost impossible to replace significant amounts of 
oil in the short term. The same holds for the petrochemical sector. It is indicative that none of 
the  IEA  member  countries  used  this  measure  to  deal  with  the  supply  disruption  following 
hurricane Katrina in 2005. 

Similarly  to  stockdraw,  a  temporary  increase  of  indigenous  oil  production  can  make 
additional oil available to the market. However, for technical, economic and business reasons, 
it  is  difficult  to  increase  oil  production  quickly.  Furthermore,  only  a  limited  number  of  oil 
producing  countries  such  as  the  United  Kingdom,  Denmark  and  Romania  would  be  able  to 
resort to this instrument in the EU and most of them have little or no spare capacity.  

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For example, LPG and bitumen stocks are approved by the IEA but not by the EU. 
See details on membership in section 2.2.2.1. 
Public  stocks  have  an  even  bigger  role  in  emergency  response:  56%  of  the  stocks  released  in  the  Katrina  action  were  public 
stocks. 

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Demand  restraint  measures  have  increasingly  been  applied  in  cities  to  quickly  reduce  air 
pollution levels and a similar approach may be useful in case of a supply disruption. Measures 
such as car-pooling, speed limits, driving bans, ecodriving, bus prioritising, telecommuting or 
compression  of  the  working  week  can  offer  substantial  additional  savings.  Most  of  these 
measures  can  be  introduced  at  relatively  low  cost  and  at  short  notice  but  do  require  public 
acceptance  which  may  sometimes  be  difficult  to  obtain.  In  addition,  extensive  demand 
restraint in the transport sector may hamper business and industry activities and would then be 
counterproductive. 

Overall,  these  measures  are  of  different  effectiveness  in  a  crisis.  A  non-producing  country 
obviously cannot increase production, fuel switching may be limited to sectors where this is 
technically feasible (e.g. power plants which are able to switch to gas) while demand restraint 
measures often have a limited impact (e.g. speed limit reductions) and/or take some time to 
have  an  impact  on  consumption  (e.g.  encouraging  public  transport).  Experience  has  shown 
that  emergency  stockholding  and  the  ability  to  draw  down  such  stocks  are  the  easiest  and 
fastest  way  of  making  large  volumes  of  additional  oil  and/or  oil  product  available  to  the 
market, thereby alleviating market shortage. 

2.2. 

Reasons to review and revise the current legislation 

2.2.1. 

Increasing risk of oil supply disruptions 

Oil  is  the  most  important  energy  source  globally  and  its  demand  continues  to  rise  in  all 
regions of the world. The IEA World Energy Outlook 2007 foresees in its reference scenario 
that total world oil consumption in 2030 would be 37% higher than it was in 2006. The EU 
also relies heavily on oil. The share of this fuel in the energy mix amounts to approximately 
37%. Oil supply disruptions thus represent an important threat to the EU economy. In recent 
years  the  risk  of  disruptions  has  grown  for  a  number  of  reasons.  These  include  the  strong 
global demand growth, the concentration of supply and the diminishing spare capacities. 

Not only is oil a key energy source both globally and in the EU, but the global demand for it 
is expected to increase further in the coming decades. If future oil supplies are not sufficient 
to meet the rising demand in the next couple of years – as suggested by a recent IEA study11 – 
this is likely to tighten the supply-demand balance, forcing spare production capacities down. 

Spare production capacity provides flexibility to the international oil market when it faces a 
supply disruption. If such capacities are low, as can be seen today12, they may not be enough 
to  make  up  for  a  larger  disruption.  As  a  result  of  the  tightening  market,  the  EU  is  more 
vulnerable  to  oil  supply  disruptions.  Also,  any  future  supply  disruption  may  have  a  bigger 
impact than in the past and even smaller disruptions may have serious consequences. 

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. As a result of the 
uneven  distribution  of  oil  reserves  across  the  world,  it  is  expected  that  a  growing  share  of 
global  production  (and  of  EU  oil  imports)  will  come  from  the  Middle  East.  This  raises 
concern  about  the  risk  of  major  oil  supply  disruptions  because  of  the  instability  in  many 

11 
12 

Medium-Term Oil Market Report, July 2008 
According to the IEA, effective OPEC spare capacity stood at 1.5 million barrels per day (mbpd) in July 2008. 

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countries of the region and past experience of disruptions from some countries in the last few 
decades13. 

The EU is particularly dependent on oil imports. In 2006, nearly 85% of the oil used in the 
EU  was  imported  from  third  countries.  Total  EU  oil  production  stood  at  2.4  million  barrels 
per day (mbpd) in 2006, down from a peak of 3.7 mbpd in 1999. The most important sources 
of  import  were  OPEC  countries  (37%  of  extra-EU  imports),  Russia  (33%)  and  Norway 
(15%). With the decreasing indigenous production, the EU's dependence is expected to reach 
93% by 2030, and – due to the uneven distribution of reserves – a growing part of imports is 
expected to come from traditionally unstable regions. 

Figure 1: EU-27 Imports of Crude Oil and Feedstocks 

Source: Eurostat 

Supply from some producing countries can be threatened by wars, internal conflicts, export or 
import embargos and terrorism. In addition, oil movements from these countries often involve 
transport  along  long  and  vulnerable  maritime  and  pipeline  routes,  susceptible  to  wars  and 
other conflicts, terrorism, piracy and accidents. These risks are exacerbated by the resurgence 
of "resource nationalism" in several producing countries, raising the risk that these countries 
could  use  their  market  dominance  to  influence  prices  and/or  "select"  recipients  of  their 
supplies. 

13 

From  the  17  serious  oil  supply  disruptions  involving  a  loss  of  at  least  0.5  mbpd  crude  oil,  listed  by  the  IEA  World  Energy 
Outlook 2005, 12 was related to events in the Middle East (see Table 2 in section 5.2.4.). 

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Not only it is difficult to diversify oil supplies due to the uneven distribution of oil reserves, 
but it is also hard to substitute it with other fuels. While oil has been mostly phased out from 
European  electricity  production  and  its  role  is  decreasing  in  heating,  it  still  dominates 
transport, where it has limited viable alternatives.14 Without a technological breakthrough, oil 
may continue to have a dominant role in this sector in the next decades. Oil is also replaceable 
with  difficulty  as  the  feedstock  for  the  chemical  industry.  Furthermore,  for  the  lack  of 
alternatives,  oil  demand  appears  to  be  increasingly  unresponsive  to  oil  price,  at  least  in  the 
short run15, aggravating the potential impact of a disruption on oil prices. 

A disruption can certainly occur not only in producing countries or intercontinental transport 
routes but also within Europe. Many of the inland refineries, supplied by pipeline, have no or 
limited  possibility  to  switch  to  another  supply  route  if  the  pipeline  is  blocked  for  whatever 
(political,  technical,  etc.)  reason.  In  January  2007,  the  Druzhba  pipeline  carrying  oil  from 
Russia to Europe was halted due to a conflict between Russia and Belarus, cutting oil supplies 
to  many  refineries  in  the  EU.  Refineries,  inland  waterways  and  ports  receiving  oil  tankers 
may  also  be  vulnerable  to  accidents,  terrorist  attacks  or  strikes.  In  March  2007,  an  18-day 
strike at France's Fos-Lavera oil hub threatened to shut down a number of refineries in France, 
Germany and Switzerland and cause a regional fuel shortage. Storage facilities might be also 
exposed to the above risks but their large number and geographical spread makes them less 
vulnerable than e.g. refineries or pipelines. 

The above factors and examples imply that the threat of oil supply disruptions is real and the 
risks  are  growing,  as  is  the  EU's  vulnerability.  In  order  to  cope  with  such  a  disruption,  the 
European  Union  has  to  have  a  robust  and  reliable  system  in  place  which  is  able  to  react 
coherently  and  credibly  in  the  event  of  a  supply  crisis.  However,  analysis  of  the  current 
system  presented  below  reveals  flaws  which  might  prevent  it  from  functioning  suitably  in 
case of an actual supply disruption. 

2.2.2.  Current policy tools are not adequate for disruption response 

The current system developed in the EU over the last four decades has served Europe well so 
far  but  is  certainly  not  ideal  and  fully  up  to  date.  Although  the  legislation  underwent  an 
overhaul in 199816 and a codification exercise in 200617, it suffers from some shortcomings 

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17 

In 2005, the market share of biofuels, the most credible alternative to oil in the transport sector reached an estimated 1% in EU-
25. 
A  recent  study  by  Jonathan  Hughes,  Christopher  R.  Knittel  and  Dan  Sperling,  Evidence  of  a  Shift  in  the  Short-Run  Price 

Elasticity of Gasoline Demand (NBER Working Paper No. 12530, September 2006, http://www.nber.org/papers/w12530.pdf; The 

Energy  Journal,  vol.  29,  no.  1),  found  that  US  demand  for  gasoline  is much  less sensitive  to  price  increases  than  it  was  in  the 

1970s. The study found that the price elasticity of demand for gasoline ranged from -0.034 to -0.077 during the period 2001-2006, 

compared to -0.21 to -0.34 for 1975-1980 – a decrease of a factor of almost 10. John C. B. Cooper's study entitled Price elasticity 

of  demand  for  crude  oil:  estimates  for  23  countries  (OPEC  Review,  2003,  Volume  27,  Issue  1,  http://www.blackwell-

synergy.com/doi/pdf/10.1111/1468-0076.00121) found short-run price elasticity for examined EU Member States ranging from -
0.016 to -0.087. 
Council Directive 98/93/EC of 14 December 1998 amending Directive 68/414/EEC imposing an obligation on Member States of 
the EEC to maintain minimum stocks of crude oil and/or petroleum products, OJ L 358, 31.12.1998, p. 100 
Resulting  in  Council  Directive  2006/67/EC  of  24  July  2006  imposing  an  obligation  on  Member  States  to  maintain  minimum 
stocks of crude oil and/or petroleum products, 0J L 217, 8.8.2006, p. 8; 

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which  might  prevent  the  system  built  on  it  from  functioning  suitably  in  case  the  EU  or  the 
global oil sector comes to face a real supply difficulty. 

Below is a brief description of the aspects of the current system which seem most in need of 
addressing.  At  present,  they  limit  either  the  EU's  ability  to  react  to  an  emergency  with  the 
highest efficiency and to the desired effect, or the EU's capacity to participate most efficiently 
in  collective  global  efforts  to  minimize  impacts  of  a  supply  crisis.  The  limitations  and 
shortcomings  of  the  current  European  system  of  emergency  oil  stocks  also  jeopardize  the 
much needed trust that, in case of a disruption, the reported stocks are indeed available and 
sufficient to fill in the gap and ensure consistent supply. Finally, it is questioned whether the 
current structure of emergency stocks suits the need of the economy in a crisis. 

2.2.2.1.  Lack of rules for common action 

Current EU legislation does not provide for a special decision making process at EU level to 
respond to oil emergencies. In case of a supply disruption, the Commission's role is confined 
to  consultation.  It  convenes  the  Oil  Supply  Group,  on  its  own  initiative  or  at  the  request  of 
any Member State, to "carry out the necessary consultations in order to ensure coordination of 
the measures". However, the emergency measures including the drawing on emergency stocks 
are decided and executed by the individual Member States. The only restriction is that, prior 
to the consultation in the Oil Supply Group, they should refrain from drawing stocks to below 
the compulsory minimum level. 

The IEA system, on the other hand, is clearly geared toward a swift and effective response to 
disruptions  having  a  global  effect.  While  the  EU  legislation  merely  foresees  a  consultation 
between Member States in case of a supply disruption, the International Energy Program, the 
founding  document  of  the  IEA,  establishes  specific  and  well  defined  tasks  for  member 
countries  and  the  Secretariat  in  an  actual  oil  emergency.  The  same  holds  for  emergency 
response based on voluntary agreements such as the IEA collective action in response to the 
oil supply disruptions in 2005 caused by hurricanes Katrina and Rita. 

Alas, there is no reference in the EU legislation to the IEA and to what should happen if the 
Agency  proposes  a  collective  action.  Nine  of  the  EU  Member  States  (Bulgaria,  Cyprus, 
Estonia, Latvia, Lithuania, Malta, Poland, Romania and Slovenia) are not members of the IEA 
and  most  of  them  are  not  likely  to  join  in  the  foreseeable  future.18  (Potential  future  EU 
Member  States,  with  the  exception  of  Turkey,  are  not  members  of  the  IEA  either.)  These 
countries are obliged to hold stocks under the EU system but are not seen as participants in 
broader crisis management in the IEA framework and have no experience or training in how 
to  handle  emergency  issues.  If,  in  the  spirit  of  solidarity,  the  EU  wants  these  countries  to 
participate in an IEA-led action to cope with a severe global supply disruption, this calls for 
an enhanced role for the Commission and improved coordination with the IEA. 

An  adequate  crisis  management  in  future  supply  disruptions  is  possible  in  Europe  with 
difficulty unless the EU and the European Commission clarify their roles and relationship to 
the  IEA  and  its  emergency  policy.  The  lack  of  clear  rules  indeed  caused  some  confusion 
during  the  implementation  of  the  2005  collective  action  of  the  IEA,  when,  although  the 
Commission publicly supported the action, some Member States were uncertain whether they 

18 

Poland is likely to become a member country in 2008. 

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were allowed to draw stocks below their 90-day obligation. This certainly was the case, but it 
took the Commission some time to announce a formal derogation. 

2.2.2.2.  Doubts about stock availability/reliability 

One of the problems of the current system is that not all Member States may be implementing 
all the provisions of the existing legislation as required. If Member States report insufficient 
stock  levels  or  report  systematically  late,  the  Commission  does  not  hesitate  to  pursue 
infringement  procedure  against  such  countries.  For  example,  in  2005  Commission  services 
examined  5  infringement  cases,  of  which  4  resulted  (at  least)  in  the  issuance  of  a  letter  of 
formal notice as the first formal step of the procedure, while in 2006, 7 cases were examined, 
5 of which resulted in issuing a letter of formal notice. The Commission also decided to issue 
a reasoned opinion in a number of these files and to refer one case to the Court of Justice19, 
although most procedures have since been closed. However, some practices not in compliance 
with  the  existing  legislation  are  relatively  difficult  to  recognize  and  prove.  The  situation  is 
exacerbated by the fact that some provisions of the current directive (notably Article 3) give 
rise  to  different  interpretations,  resulting  in  different  compliance  practices  across  Member 
States.20  Meeting  the  stockholding  obligation  by  the  use  of  "tickets"  also  gives  rise  to 
concerns with respect to both the availability of such stocks and the correct reporting of stock 
levels. These issues are further elaborated below. 

The  diversity  of  Members  States'  stockholding  systems  makes  it  very  difficult  to  assess  the 
correct  application  of  the  directive.  At  present  the  Commission  can  only  check  the  figures 
reported by Member States. In addition, the IEA emergency response reviews – if available – 
can  help  to  understand  the  specific  stockholding  structure  used  in  the  given  country. 
Infringement procedures can give the Commission further insights as to where Member States 
are  at  fault.  Another  insight  to  an  emergency  system  can  be  provided  by  an  actual  supply 
disruption in which Member States have to show how robust their stockholding systems are. 
The  emergency  response  action  of  IEA  and  EU  Member  States  in  2005  to  cope  with  the 
damages caused by Hurricane Katrina in the Gulf of Mexico was such a test. The outcome of 
this  action  which  used,  on  an  average,  less  than  three  days  of  emergency  stocks  indicated 
some problems, in particular related to stock availability and stock release management.21 

A  stockholding  system  for  emergency  oil  stocks  has  to  ensure  that  such  stocks  are  actually 
held and are available for release in the event of an emergency. Doubts about the availability 
of  stocks  in  the  context  of  an  actual  or  potential  crisis  may  lead  to  market  speculation  and 
increased  price  volatility.  An  effective  stockholding  system  thus  acts  as  a  deterrent  to 
speculation.  Doubts  may  also  undermine  the  expected  positive  effects  of  an  emergency 
response. 

19 

20 

21 

In  its  judgement  of  17  July  2008,  the  Court  of  Justice  declared  that  Belgium  had  failed  to  fulfil  its  obligations  under  the  EU 

legislation. 

For example, it seems that current interpretations or legislations in some Member States may allow the pledging of emergency 

stocks. 

IEA  document  "Emergency  Preparedness:  Lessons  from  the  Hurricanes"  (IEA/GB(2006)4/REV1)  emphasized  the  lacking 

accountability of industry stocks "taken up" by the market. Some countries using industry stocks to fulfil their participation in the 
concerted action failed to demonstrate how additional oil was made available to the market by their actions.  

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In this context, the main question is not the extent of the obligation but the volume of stocks 
which is really available in a crisis. The answer to this question is related to the stockholding 
system  which  has  been  chosen  by  individual  Member  States.  A  stockholding  system  which 
relies  on  government  or  agency  stocks  and  in  which  public/state  ownership  of  stocks  is 
compulsory may have the full amount of 90 days at its disposal. A stockholding system which 
relies  on  mandatory  industry  stockholding  may  have  less  oil  available  as  in  this  case 
emergency  stocks  are  typically  commingled  with  working  or  commercial  stocks.  Such 
arrangements do not appear to fulfil completely the objectives of the Directive, one of which 
is  to  ensure  the  stocks'  full  availability  and  their  accessibility  to  the  consumer  (Article  3). 
However,  in  some  Member  States  the  current  practice  allows  that  Minimum  Operational 
Requirements22  (MOR)  and  more  generally  any  of  the  operational  stocks  are  counted  as 
emergency stocks. Apparently, some administrations have no full knowledge of such stocks, 
putting doubt on how a government control over emergency stocks could be put into practise 
if needed. 

The use of "tickets" can also limit the availability of emergency stocks in a supply disruption, 
in particular when stocks held under such arrangements are located abroad. Critical expertise 
confirms that "tickets" are not very transparent and are difficult to monitor with the frequently 
used  three-month  validity  period.  "Tickets"  do  not  provide  additional  oil  to  the  security 
system and, in addition, there is no guarantee for the renewal of expiring "ticket" contracts. In 
2007-2008,  a  number  of  Member  States  reported  scarcity  of  "tickets", making  it  difficult  to 
buy such instruments under reasonable conditions.23  

In the public consultation, a stakeholder claimed that "ticket" stocks are often encumbered by 
forward sales contracts. Again, this practice undermines the availability of such stocks in the 
event of a crisis. 

Furthermore, there is practically no experience with the use of "tickets" in a supply disruption. 
Critics may assume that, depending on the specific supply disruption, it will be very difficult 
or  even  impossible  to  purchase  the  reserved  oil.  When  such  stocks  are  held  abroad,  the 
information  on  the  specific  "tickets"  is  sometimes  unclear  because  of  double  counting 
problems or delays in administrative procedures. An analysis of the IEA shows that in Europe 
total stocks reported to be held abroad under bilateral agreements are well above the level of 
total  stocks  reported  to  be  held  domestically  for  other  countries,  suggesting  that  10-20%  of 
stocks could be counted more than once (see Figure 2). Clearly, there is a need to address this 
problem and avoid such discrepancies. 

22 

23 

EN 

There is no universally accepted definition of the Minimum Operational Requirements (MOR). Nevertheless, the concept is often 

used, referring to the minimum amount of oil and oil products which is needed for the day-to-day operation of the oil industry. It 

is  affected  by  a  number  of  factors,  including  the  size  of  the  refining  industry  and  whether  oil  is  supplied  by  pipeline  or  ships. 

MOR is narrower than working/operational stocks; the latter may include stocks held for other business purposes. 

A Member State invoked this explicitly in connection with a recent situation of non-compliance. 

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Figure 2: Bilateral Reporting Discrepancies 

Source: IEA 

2.2.2.3.  Stock Composition 

The existing product categories must be adapted to changing demand patterns and the needs 
in a crisis situation. It may be necessary to integrate new and to delete obsolete products from 
the current categories. A complete change or deletion of product stockholding does not appear 
appropriate, based on the experience of the Katrina disruption which, in addition to closing oil 
production facilities, also shut down a number of refineries in the United States. 

The  current  system  establishes  fairly  aggregated  product  categories,  endangering  the 
availability  of  potentially  key  oil  products.  For  example,  jet  fuel  belongs  to  category  II 
(middle distillates) but it is significantly more expensive to store than other middle distillates 
and therefore stored in relatively small volumes as part of the emergency stocks. In addition, 
some important products (e.g. naphtha) are not covered in the current product categories. 

Product category 3 (fuel oils) in particular needs revision due to its decreasing importance in 
Europe. The consumption of fuel oil today amounts to about a quarter of what it was in the 
early 1970s as it has been continuously phased out from both electricity production and other 
sectors. 

The use of naphtha (a light distillate) as a feedstock for the petrochemical industry and for its 
use in energy must be also taken into consideration. 

The increasing share of biofuels also raises some questions with respect to emergency stocks. 
In particular, it is to be clarified whether the use of biofuels, either in pure or blended form, 

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impacts  on  the  stockholding  obligation.  It  is  also  necessary  to  determine  the  extent  and 
conditions in which biofuels or biocomponents can qualify or may be mandated for inclusion 
in emergency stocks. 

2.2.3.  Other shortcomings 

The shortcomings described in this subchapter are not necessarily undermining the efficiency 
of the emergency oil stock system but might have undesirable (side) effects which could be 
avoided or mitigated.  

2.2.3.1.  Administrative burden on Member States 

EU  Member  States  with  IEA  membership  have  to ensure that their  stocks comply with two 
different  obligations,  one  set  by  the  EU,  another  by  the  IEA.  Member  States  sometimes 
complain about the administrative burden of complying with these two distinct obligations. 

While the IEA stockholding obligation is based  on net oil imports (including both crude oil 
and  products  but  excluding  naphtha),  the  EU  obligation  is  based  on  the  consumption  of  3 
specific product groups (gasoline, middle distillates, fuel  oil),  covering about 80-90%  of all 
petroleum products. EU Member States are required to hold products (90 days for each of the 
three product categories) but can also hold crude oil which is then recalculated  to products. 
The  IEA  obligation  in  turn  does  not  specify  whether  stocks  should  be  held  on  the  form  of 
crude  oil  or  specific  products.  As  a  result  of  the  discrepancies,  some  stocks  are  taken  into 
consideration in one system but not in the other.  

Concerning  the  calculation  of  stock  levels,  in  the  EU  system  crude  oil  is  converted  into 
products,  usually  based  on  refinery  yields.  Conversely,  the  IEA  converts  product  stocks  to 
crude oil equivalent. In addition, according to the IEA methodology a 10% deduction is made 
in order to account for unavailable stocks, such as tank bottoms. Another important difference 
is that the IEA explicitly allows the inclusion of working stocks. 

The deadline of compliance to the previous year's consumption/net imports is 31 July in the 
case of the EU and 1 January in the case of the IEA. 

In  order  to  decrease  the  burden  of  responding  to  two  different  90-day obligations,  a  review 
and possible harmonization should be undertaken concerning: 

•  the calculation base (consumption or net imports), 

•  eligibility of crude and/or products (since it covers only three product categories, 
the  EU  stockholding  obligation  is  currently  lower  than  that  of  the  IEA,  which 
covers all categories of oil except naphtha), 

•  deadline  of  adjusting  the  obligation  to  the  previous  year's  consumption/net 
imports (immediately at the beginning of the following year or with a delay of 7 
months), 

•  a deduction for unavailable stocks. 

Another issue resulting in undue administrative burden is related to stocks held abroad. The 
existing  EU  legislation  provides  for  the  possibility  for  Member  States  to  hold  stocks  in  the 

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territory of other EU Member States. From the perspective of a functioning internal market, 
some  of  the  rules  might  seem  rather  restrictive.  Stockholding  in  other  countries  is  only 
allowed on the basis of bilateral agreements between Member States and is subject to specific 
conditions  and  notifications.  This  imposes  additional  burden  on  both  administrations  and 
companies. In addition, it can restrict the possibility of a company to choose the location of its 
stocks (if there is no bilateral agreement between the countries concerned). Similarly, the IEA 
takes stocks held abroad into account on the condition that a bilateral agreement is in place 
between the member countries concerned. 

2.2.3.2.  Distortion of competition 

Although  the  current  legislation  calls  for  "fair  and  non-discriminatory"  stockholding 
arrangements, this is difficult to realize if all or part of the emergency oil stocks are held by 
the  industry.  This  is  due  to  the  fact  that  the  level  of  operational  stocks  (i.e.  stocks  kept  for 
commercial or logistical reasons) held by importers is generally lower than for refiners. Thus, 
imposing on everybody the obligation of keeping e.g. 90 days of stocks turns out to be more 
costly for importers since they have to top up their stock above the normal “operational” level 
by a higher amount of days than refiners. In addition, small importers may face difficulties in 
finding access to storage facilities. 

Some Member States have tried to address these issues by setting a lower obligation for non-
refiners  or  by  establishing  a  turnover  threshold,  under  which  companies  are  not  obliged  to 
hold  emergency  stocks.  However,  these  solutions  are  unlikely  to  end  the  discussion  of 
different market players over a "level playing field" and may encourage companies to evade 
the  law  (e.g.  by  dividing  a  company  up  into  smaller  ones  which  are  not  subject  to  the 
obligation). 

2.2.4.  Other issues to be addressed 

2.2.4.1.  Sufficiency of 90 days 

The  EU  introduced  a  stockholding  obligation  of  65  days  in  the  1960s,  before  the  IEA  had 
been created. Later, in the 1970s, the stockholding obligation was fixed in both the EU and 
the IEA at 90 days. The choice of the 90-day level is arguably arbitrary. It is probably based 
on tradition24 rather than on economic or risk analysis. However, it has become the accepted 
standard  worldwide  and,  for  example,  China  has  recently  decided  to  copy  the  obligation  to 
hold 90 days of stocks. 

Doubts about the sufficiency of stocks had been expressed by the European Parliament which, 
in a report adopted in February 200725, called for an increase in the stockholding obligation 
from 90 to 120 days. Doubts were also expressed in the press, related to the capability of EU 
Member  States  to  support  the  United  States  after  hurricane  Katrina  in  2005.  However, 
analyses show that present stock levels would last for a reasonably long period even in case of 
a serious supply disruption26.  

24 

25 
26 

In 1925 France imposed the requirement on its oil industry to reserve stock representing 25% of the declared amount delivered 
during the last 12 month. 
2006/2247(INI) European Parliament resolution on the macro-economic impact of the increase in the price of energy 
See chapter 5 for more details 

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2.2.4.2.  Diversity of national systems 

Directive 2006/67/EC requires Member States to keep crude oil or petroleum product stocks 
equivalent to a minimum of 90 days’ internal consumption for each of three main categories 
of petroleum products (gasoline, middle distillates and fuel oils) but does not specify in which 
way  Member  States  should  organise  the  holding  of  these  stocks  (apart  from  declaring  that 
they may make recourse to the creation of a “stockholding body or entity” to hold all or part 
of their oil stocks). Thus, the transposition of the above directive in different Member States 
has brought about very diverse stockholding systems across the EU. 

This diversity in itself does not constitute a problem. However (as it is explained in 2.2.5.1. 
below  in  more  detail),  if  the  systems  provide  a  widely  different  quantity  and/or 
quality/availability of stocks, this may jeopardise the emergency preparedness of the EU as a 
whole. 

2.2.4.3.  Transparency/reporting 

In comparison with other parts of the world, Europe's stock reporting is infrequent and has a 
long reporting lag. Emergency stock levels are reported to the Commission (to DG TREN) on 
a monthly basis with a lag of nearly 2 months, based on a special Commission questionnaire. 
Stock data are collected on the basis of Council Directive 2006/67/EC. Reporting is confined 
to the volume and form (product category) of stocks; no information is provided on the exact 
location of stocks and the entity holding/owning them. Although the Commission continues to 
enforce the reporting discipline foreseen in the current legislation, it is not unusual that some 
Member States repeatedly fail to comply with this fairly long deadline. 

There are no provisions on the publication of the stock data. Nevertheless, emergency stock 
levels are frequently published on the website of DG TREN, but the regularity and timeliness 
of this publication is largely dependent on Member States' reporting discipline. 

Beyond the above, specific supply of stock data, Member States provide to the Commission 
(to  Eurostat)  responses  to  the  Monthly  Oil  and  Natural  Gas  Statistics  (MOS)  questionnaire 
which, among others, comprises extensive information on oil and petroleum products stocks. 
The MOS questionnaire is common with the IEA which uses it to calculate the compliance of 
its member countries. Submission deadline is three months after the reference month (M-3)27 
and  the  data  is  subject  to  revisions  in  conjunction  with  the  IEA  Secretariat.  In  addition,  oil 
stocks  related  information  –  not  as  detailed  as  in  the  MOS  –  is  also  provided  to  the 
Commission (to Eurostat) via responses to the Joint Oil Data Initiative (JODI) questionnaire. 
This  questionnaire  is  common  not  only  with  the  IEA,  but  with  other  international 
organisations as well. Submission deadline is 25 days after the reference month (M-1). 

MOS information is currently collected from EU Member States on a gentlemen's agreement 
basis  but,  together  with  JODI  information,  it  is  also  included  in  the  Energy  Statistics 
Regulation which has been adopted by the European Parliament in its plenary session on 12 
March 2008. With its entry into force, Member States will have a legal obligation to provide 
this data. 

27 

MOS is reported to the IEA Secretariat two months after the reference month (M-2). 

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It  is  worth  mentioning  that  the  Commission  is  currently  setting  up  the  Energy  Markets 
Observation System (EMOS), a database containing data and information relating to the oil, 
gas and electricity sectors. EMOS will also provide the possibility for external entities to send in 
data through the filling in of internet-based forms. Utilizing this feature, a module of the system 
is developed to simplify the reporting, analysis and publication of emergency stock levels. 

Although the reporting of commercial stocks is not directly related to emergency stocks, it has 
to  be  recognized  that  in  an  emergency,  commercial  stocks  might  also  contribute  to  an 
emergency  response.  Therefore,  it  can  be  argued  that  better  data  on  commercial  stocks  can 
contribute  to  better  emergency  preparedness  and  definitely  help  to  achieve  better  market 
transparency.  Insufficient  transparency  or  reliability  of  market  data  is  often  claimed  to 
contribute to volatile prices. 

Commercial  stocks  are  viewed  as  an  important  indicator  of  prices  and  are  one  of  the  most 
closely watched aspects of the oil market. However, it is hard for the industry to follow global 
stocks as closely as it would like, because the United States and Japan are the only countries 
to  publish  comprehensive  weekly  stock  data.  China  and  Korea  have  also  declared  their 
intention to publish weekly stock levels. 

European commercial stock data are reported monthly by Euroilstock which was set up by the 
oil  industry  and  the  European  Commission  in  1984.28  Stock  data  are  based  on  input  from 
more than 80 participating companies in EU-15 and Norway, arriving on the 5th working day 
of each month. Participation is voluntary. Stock data are published through Reuters (available 
to subscribers), on the 7th working day of each month, reflecting stock levels at the end of the 
previous month. 

It has to be kept in mind that, contrary to the United States, emergency stocks and commercial 
stocks are not strictly separated in all EU Member States. This might make it more difficult to 
report and to distinguish commercial and emergency stock data. 

In July 2008, in view of improving the transparency of the oil market, the ECOFIN Council 
reached  a  political  agreement  on  publishing  information  on  commercial  oil  stocks  on  a 
weekly basis. However, during the public consultation many Member States and stakeholders 
expressed  their  concerns  over  the  supplementary  costs,  administrative  burden,  the  potential 
inaccuracy of data and the volatility this might provoke. In order to address these concerns, to 
assess the potential impacts and to identify the desirable modalities of weekly reporting, the 
Commission will launch a feasibility study in late 2008. 

2.2.5. 

Justification of action at EU level 

2.2.5.1.  "Subsidiarity Test" 

Energy  security  is  a  public  good  and  –  due  to  the  existence  of  the  internal  market  –  the 
benefits of the stocks released in a crisis cannot be limited to a single country. The internal 
market  ensures  that  any  stock  released  can  flow  freely  to  any  buyer  EU-wide.  The  benefits 
from releasing stocks will not be captured by a single country but by the EU as a whole29. As 

28 

29 

Originally, coordination of Euroilstock was in the hands of the Commission. As of July 1986, this task was taken over by the oil 
industry and for this purpose "Stichting Euroilstock" was established in the Netherlands. 
In so far as the stock release helps to mitigate the oil price rise, the benefits "spill over" to other oil-consuming countries as well. 

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a result, if the emergency systems adopted by individual Member States are too diverse and 
provide  different  levels  of  preparedness  and  reliability  (e.g.  different  quantity  and 
quality/availability  of  emergency  stocks),  this  may  lead  to  decreased  efficiency  and  a  free 
rider  problem.  The  countries  having  sounder  systems  dedicate  more  efforts  to  the 
their  systems,  and  would  probably  contribute 
establishment  and  maintenance  of 
disproportionately more in case of real trouble. 

Since oil markets are global, any disruptions to oil supply – whether occurring in one or more 
Member  States  or  outside  the  EU  –  will  have  repercussions  on  all  Member  States. 
Furthermore, in integrated economies such as the EU internal market, the level of emergency 
preparedness  of  any  single  Member  State  will  influence  the  level  of  preparedness  of  the 
Union as a whole. If minimum requirements are imposed throughout the EU, it may be easier 
to avoid the emergence of a problem or to cope with a disruption. 

It must also be kept in mind that several Member States are not members of the IEA, which is 
responsible for emergency response in case of global disruptions. The European Commission 
takes part in the work of the agency but full EU participation in an IEA action can only be 
guaranteed through an EU mechanism involving EU Member States that are IEA non-member 
countries. 

The above arguments all imply that the objective of maintaining a high level of security in the 
supply of oil and oil products within the EU can be best achieved in a coordinated way. Clear 
rules at the Community level are therefore needed. 

2.2.5.2.  Political mandate 

The  2007  Spring  European  Council  acknowledged  that  global  warming,  together  with  the 
need to ensure security of supply and to enhance competitiveness, make it ever more vital and 
pressing for the EU to put in place an integrated climate and energy policy combining action 
at the European and the Member States' level. To back up such a policy, the Council adopted 
a comprehensive energy Action Plan for the period 2007-2009 which – inter alia – underlines 
the  need  to  enhance  security  of  supply  for  the  EU  as  a  whole  as  well  as  for  each  Member 
State through a number of measures. One of these actions addresses emergency oil stocks: the 
European Council gave a clear mandate for the revision of the current system by calling for 
"improving  oil  data  transparency  and  reviewing  EU  oil  supply  infrastructures  and  oil  stock 
mechanisms,  complementary  to  the  IEA  crisis  mechanism,  especially  with  respect  to 
availability in the event of a crisis". 

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3. 

WHAT ARE THE OBJECTIVES? 

3.1. 

General objectives 

3.1.1.  To  strengthen  security  of  supply  by  an  effective  instrument  based  on  solidarity, 

transparency and practicality 

The EU, like all advanced economies, depends heavily on continuous, reliable and affordable 
supply of oil and oil products. Any difficulty, even temporary, having the effect of reducing 
these supplies, could cause serious disturbances in the economic activity of the Community. 
The EU must therefore be in a position to offset or at least to diminish any harmful effects in 
such a case. 

Provided that emergency stocks exist, their release constitutes the easiest and fastest way of 
making  large  volumes  of  additional  oil  and/or  oil  product  available  to  an  undersupplied 
market,  thereby  alleviating  market  shortage.  In  order  to  allow  an  effective  response  to  oil 
supply  disruptions,  the  emergency  oil  stock  system  has  to  ensure  the  solidarity  of  Member 
States  in  case  of  activation.  It  has  to  allow  for  correct  monitoring  through  transparency  of 
calculations and reporting. Overall, it has to be characterized by practicality in order to ensure 
the effectiveness of its use. The general objective of the proposal is therefore to strengthen the 
capacity of the system to react to an emergency, by improving its efficiency and effectiveness. 

3.1.2.  To minimise negative impacts of a disruption on EU economy 

The economy's reliance on oil is especially true for transport, the main user of oil, which at 
present has no real alternatives to the use of oil at its disposal. Considering the important role 
of transport in the economy, a physical shortage of fuel would have serious repercussions in 
other sectors, as well as on the mobility of citizens. 

Emergency oil stocks are not meant for market intervention or price manipulation. A release 
of stocks should be realized only in case of a severe disruption that significantly reduces oil 
supplies.  It  will  then  be  important  to  compensate  for  missing  volumes  and  to  ensure  the 
integrity of supplies to consumers and thereby to mitigate negative economic impacts. 

However,  a  disruption  of  oil  supply  (e.g.  outages  in  a  major  producing  country)  may  not 
necessarily  entail  a  physical  shortage  of  oil  in  Europe  and  yet  may  –  due  to  the  low  price 
elasticity of oil demand – bring about skyrocketing prices which could also impact negatively 
the  economy.  A  well-grounded  and  credible  system  of  emergency  stocks,  by  its  pure 
existence,  can  have  a  moderating  impact  on  markets  in  case  of  a  disruption.  The  release  of 
stocks  can  replace  disrupted  volumes  and  thereby  it  might  be  possible  to  avoid  physical 
shortage  and/or  large  price  hikes.  As  a  result,  negative  impacts  on  the  economy  could  be 
mitigated. 

Oil stocks thus have a crucial role in minimizing the negative impact of a temporary supply 
disruption on the EU economy. This holds as long as they are available in required quantities, 
qualities and degrees of accessibility. 

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3.2. 

Specific objectives 

3.2.1.  To assure that the stocks have the potential to address shortage 

In  a  supply  disruption,  it  is  essential  to  replace  disrupted  oil  swiftly  and  effectively. 
Therefore,  emergency  stocks  have  to  be  fully  available  in  the  required  quality  and  in  the 
required  quantity.  At  least  a  part  of  the  stocks  have  to  be  in  the  form  of  finished  products, 
serving as an instant remedy even if refineries came to a halt. Moreover, unless the reporting 
of  stocks  is  appropriate,  in  terms  of  frequency,  timeliness  and  report  quality,  the  available 
quantity and quality of stocks cannot be assessed. 

3.2.2.  To be able to release stocks effectively 

Although  the  directive  stipulates  a  consultation  between  Member  States  in  case  of  a 
disruption, up to now the EU has not created a clearly defined framework for oil emergency 
policies and for adequate procedures and measures to use in an oil supply disruption. Crisis 
management  has  to  be  swift  and  effective.  Therefore  the  EU's  relationship  with  the  IEA, 
which  has  an  internationally  accepted  mandate  to  deal  with  global  oil  supply  disruptions, 
needs  to  be  clearly  defined.  At  the  same  time,  the  relationships  between  the  European 
Commission  and  Member  State  administrations,  which  are  in  charge  of  emergency 
stockholding, have to be better defined, and, thus, needs to be revised. 

Decision making procedures have to be better defined and there is explicitly a need to define 
complementary  procedures  to  the  IEA  crisis  management.  This  is  particularly  important  for 
Member  States  which  are  not  members  of  the  IEA,  since  they  are  not  enabled  to  receive 
regular information on emergency issues through the relevant IEA committees. 

3.2.3.  To increase the credibility of the system and show readiness 

When the system of emergency stocks is credible, market players are convinced that reported 
stocks are available and, if necessary, can be offered to the market in a swift way. This can 
prevent  extreme  market  reactions  when  supplies  are  potentially  or  actually  disrupted. 
Therefore, price hikes and speculation may be avoided or at least mitigated. If, however, not 
all  90  days  of  emergency  stocks  can  be  available  to  the  market,  in  a  very  severe  supply 
disruption this may hamper the trust that the system is working effectively. 

3.2.4.  To simplify compliance burden for Member States 

In addition to the costs of buying and holding stocks, emergency stockholding entails for the 
Member States also administrative burden related to calculation, control and reporting on the 
stock levels. Member States have to ensure that the stocks are at their disposal. This requires a 
reporting and control system. If stocks are held abroad and/or by way of "ticketing" or other 
similar instruments, controls are especially important. If a Member State wants to hold stocks 
abroad,  it  has  to  negotiate  a  bilateral  agreement  with  the  Member  State  concerned.  This  is 
time consuming and checking these stocks involves extra efforts. 

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Member  States  which  are  also  members  of  the  IEA30  have  to  comply  with  two  different 
stockholding obligations, with different calculation methods and separate reporting. The IEA 
calculation and reporting methodology is internationally employed and accepted. In addition, 
some  EU  Member  States  intend  to  join  the  IEA.31  Aligning  the  calculation  and  reporting 
method within the EU to that of the IEA would reduce the administrative burden which arises 
through the duplication of administrative work. 

Notwithstanding  the  importance  of  reporting  and  control,  the  Commission  has  to  make  an 
effort  to  ease  the  administrative  burden  on  Member  States  and  the  industry.  This  is  in  line 
with  the  Commission's  Better  Regulation  strategy  and  the  simplification  programme.  In 
particular, the Commission may approximate the EU and IEA system (e.g. common reporting 
and  the  uniform  calculation  of  the  stockholding  obligation  and  compliance).  Further 
simplification  can  be  achieved  by  replacing  bilateral  agreements  with  a  multilateral 
framework, coupled with an enhanced control system. In addition to reducing administrative 
burden, this would be also more in line with the internal market. 

3.3. 

Operational objectives 

3.3.1.  To select best practises/arrangements 

Oil security and energy security is not for free. Sometimes Member States may have chosen 
low-cost policies which are in a crisis less efficient as they do not provide 90 days of stocks. 
These practises may have negative impacts on Member States' ability to act adequately in an 
emergency and may explain to some extent why emergency preparedness is divergent across 
the  EU.  The  Commission's  role  in  this  context  is  to  moderate  excessive  divergences  and  to 
avoid a serious lack of solidarity from some countries in an emergency response to a crisis. 

In the spirit of subsidiarity, the Commission should not prescribe in detail to Member States 
ways and means of fulfilling emergency or stockholding obligations. However, in reviewing 
Member  States'  emergency  policies,  there  might  be  a  need  for  the  Commission  to  indicate 
specific  deficiencies  of  existing  systems  and  to  highlight  existing  best  practices  in  Member 
States, particularly concerning stockholding arrangements. 

In addition to choosing an appropriate stockholding arrangement, it is also important to have 
the right emergency policies and measures to address an actual disruption. It may be useful to 
establish what policy tools and procedures are most suitable in an emergency. In the context 
of stocks, the procedures should facilitate swift and visible stock release. 

Stock  release  is  not  the  only  policy  tool  at  the  disposal  of  Member  States.  They  can  also 
implement demand restraint measures (e.g. restriction of passenger car use), in some sectors it 
is possible to replace oil by other fuels (fuel switching), while oil-producing countries might 
also  resort  to  the  increase  of  indigenous  production  (production  surge).  In  a  severe  supply 
disruption, the combination of the above measures might be desirable. 

30 

31 

EU  Member  States  who  are  also  members  of  the  IEA  are:  Austria,  Belgium,  Czech  Republic,  Denmark,  Finland,  France, 
Germany, Greece, Hungary, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Slovakia, Spain, Sweden, United Kingdom.  
Poland is likely to become an IEA member country in 2008. 

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3.3.2.  To  optimize  the  stockholding  system  in  terms  of  quantities  of  stocks  held  (90-day 

stockholding obligation vs. 120 days etc.) 

The Commission has started to analyse the availability of emergency stocks and at the same 
time is aware of the fact that the extent of the 90 day obligation has been questioned by some 
stakeholders.  The  optimal  size  of  emergency  stocks  is  inevitably  a  compromise  between 
security and costs. It has to ensure the replacement of disrupted oil volumes for a sufficiently 
long period of time, without inducing excessive financial burden. 

In strengthening the system, there may be no need to increase the 90 day obligation but the 
availability and reliability of stocks should be improved. However, 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. 

It is worth noting that the harmonization of the EU stockholding obligation with that of the 
IEA may slightly increase EU stock levels in comparison to the existing levels. 

3.3.3.  To  optimize the stockholding system  in  terms of frequency of data reporting for oil 

stocks and the nature of such reports 

Considering  the  low  volatility  of  the  level  of  emergency  stocks,  increasing  the  reporting 
frequency  on  such  stocks  is  probably  unnecessary.  Conversely,  the  long  reporting  lag 
specified in the current legislation can and should be reduced. 

On the other hand, the request of some stakeholders to introduce more frequent reporting on 
commercial  oil  stocks  seems  more  reasonable.  Higher  transparency  of  oil  market 
developments  may  give  higher  benefits  to  the end  consumer  of  oil  products.  These  benefits 
might outweigh the potential, often disputed disadvantages (e.g. increased market volatility). 
Europe might have a need to follow important consumer regions like North America or Asia 
(Japan, China, Korea) where more frequent reporting of commercial stocks is already in place 
or will be soon. 

3.3.4.  Establishing the rules for EU interaction with IEA 

It  is  necessary  to  define  the  role  of  the  Commission  vis-à-vis  the  IEA.  In  addition  to  the 
majority  of  EU  Member  States,  the  European  Commission  participates  in  the  work  of  the 
IEA32. However, this is not the case for the EU Member States which are not members of the 
IEA.  It  is  to  be  decided  if  the  latter  should  be  involved  in  common  actions.  If  so,  this 
obviously necessitates some action/co-ordination from the Commission. 

A smaller, regional disruption may not trigger an IEA action. Nevertheless, such a disruption 
might have serious implications on the supply on one or more Member States which requires 
an action at the EU level. The EU needs therefore to have at its disposal its own instruments, 
independent from the IEA, to solve energy supply problems which do not require solidarity 
actions  from  countries  outside  Europe  such  as  Japan  or  the  United  States.  Nevertheless, 

32 

The Commission is not a full member of the IEA but practically has an "active" observer status: it has the right to have access to 
meetings of IEA bodies, to receive documents, and to speak and make proposals, but has no right to vote in those bodies. 

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considering the expertise and the market knowledge of the IEA Secretariat, co-operation with 
the IEA might be useful even in such a case (e.g. exchange of information). 

In  summary,  the  Commission  and  the  IEA  mechanism  should  function  in  a  complementary 
way, without undermining the efforts of each other. 

3.3.5. 

Simplification of the regulatory environment 

their 
in  which  businesses  operate 
The  regulatory  framework 
competitiveness,  growth  and  employment  performance.  Therefore,  a  key  objective  of  the 
European Union's enterprise policy is to ensure that the regulatory environment is simple and 
of  high  quality.  To  make  sure  that  regulation  is  used  only  when  necessary  and  that  the 
burdens it imposes are proportionate to their aim, the Commission has a number of processes 
and tools in place, including measures to simplify existing legislation. 

is  a  key  factor  of 

There  is  possibly  scope  for  simplification  with  respect  to  the  EU  legislation  on  emergency 
stocks, which could help not only businesses but also Member State administrations which are 
involved in the management and/or control of stocks. An approximation of EU and IEA rules 
would definitely be beneficial to those countries which have to comply with the stockholding 
obligation  of  both  institutions.  It  could  simplify  the  calculation  of  the  obligation  and  also 
reporting (see also section 3.2.4.). 

A  further  possibility  for  simplifying  legislation  is  to  replace  the  bilateral  intergovernmental 
agreements,  which  are  at  present  necessary  for  holding  stocks  abroad,  with  an  EU-wide 
framework. This measure has also been suggested by several Member States. 

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4. 

WHAT ARE THE POLICY OPTIONS? 

The  proposed  policy  options  aim  to  address  the  issues  of  ownership  and  management  of 
stocks,  quality  and  quantity  of  stocks,  the  calculation  and  reporting  methodology,  crises 
management and monitoring of compliance. 

The  following  generic  policy  options  were  analysed  in  order  to  address  the  problems  and 
challenges presented in chapter 2: 

•  No policy change 

•  Reinforcing control means and coordination mechanisms within the existing system 

•  Establishing centralized EU system with mandatory state/public ownership of emergency 

stocks 

•  Creating "dedicated" EU emergency stocks within a revised version of the existing system  

However,  there  are  a  number  of  issues  which  are  independent  from  the  above  options  but 
should be tackled in order to overcome some of the shortcomings of the current system. These 
issues, primarily relating to the calculation of the obligation and of compliance, to reporting 
and to the role of the Commission in case a disruption, are addressed in 4.5, separately from 
the above-mentioned generic policy options.  

4.1. 

Option 0: No policy change 

This option supposes that the existing legal and regulatory framework remains unchanged and 
that the current policy instruments and measures continue. It can be considered a "business as 
usual" scenario. 

The most important elements of this option: 

•  A  90-day  stockholding  obligation  based  on  the  consumption  of  three  product  categories 

(gasoline, middle distillates and fuel oil); 

•  Product stocks can be replaced by crude oil or intermediate products;  

•  Member  States  are  free  to  choose  their  stockholding  arrangements,  including  the 

ownership, the management and the location of stocks; 

•  Stocks may be held in another Member State if there is an intergovernmental agreement in 

place; 

•  Stock levels are to be reported every month by completing a special questionnaire with a 

time lag of 1 month and 25 days; 

•  In case of a supply disruption, the Commission's role is confined to consultation. 

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4.2. 

Option  1:  Reinforcing  control  means  and  coordination  mechanisms  within  the 
existing system 

There  can  be  some  doubts  about  the  full  availability  of  mandatory  industry  stocks  in  the 
meaning  of  Article  3  of  the  present  stocks  directive  in  some  Member  States.  Parts  of  the 
industry and some Member States have on several occasions proposed to overcome these by a 
reinforcement  of  public  control  on  the  availability  of  emergency  stocks,  including  a 
reinforcement of verification means at the disposal of national and/or EU authorities. 

According to the provisions of the directive in force, it is the Member States' responsibility to 
ensure control and supervision of stocks. However, administrations' ability and willingness to 
ensure  effective  control  on  mandatory  industry  stocks  is  varied  (some  do  not  carry  out 
physical checks at all) and occasionally uncertain.  

As regards release procedures, the need for increased coordination within the EU and between 
the  EU  and  the  IEA  is  sometimes  raised  in  view  of  the  fact  that  the  current  provisions  for 
mere consultations of national releases via the Oil Supply Group may not be sufficient in an 
integrated internal market achieved by now in the EU.  

In view of the above, this policy option would mainly entail: 

•  Audits performed by or on behalf of the Commission.33 The auditors would be entitled to 
carry out on-site inspections of companies and other entities holding emergency stocks;  

•  Improvement of the EU's emergency management (including coordination through the Oil 

Supply Group). 

•  Regular  reviews  of  Member  States'  emergency  systems  as  well  as  identification  of  best 

practices related to crisis management and stock release. 

4.3. 

Option  2:  Establishing  centralized  EU  system  with  mandatory  state/public 
ownership of emergency stock 

This  option  endeavours  to  address  the  problems  identified  in  chapter  2  through  a 
comprehensive reshaping of the existing legislation. The proposed option would decrease the 
current  diversity  of  stockholding  systems  adopted  by  individual  Member  States  through  the 
introduction of an optimized common system. This option would largely follow the changes 
proposed  in  the  earlier  attempt  to  revise  the  stockholding  legislation  in  2002  (mentioned  in 
section 2.1.1.), with the omission of its most controversial elements (increasing the obligation 
to 120 days and providing a possibility for market management using emergency stocks). 

The most important elements of this option: 

•  The  level  of  the  stocks  would  continue  to  be  90  days  but  stocks  should  be  owned  in  the 
form  of  physical  oil  or  oil  product  by  the  government  and  managed  as  necessary  by  the 
government  or  a  stockholding  agency  which  is  directly  controlled  by  a  national 
administration; 

33 

The Commission already has such powers in other sectors: the inspectors employed by Directorate I of DG Energy and Transport 
check nuclear facilities while DG Competition can carry out surprise inspections in the offices of companies.  

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•  Member  States  would  be  free  to  establish  joint  stockholding  entities  together  with  other 

Member States in order to comply with the above obligation; 

•  At least part of the stocks should be in the form of products (as opposed to crude oil and 
other  feedstock),  ensuring  supply  even  if  refineries  are  disrupted;  the  composition  of 
product stocks should reflect consumption patterns, with a focus on products the shortage 
of which may cause serious disturbances in the economic activity of the EU; 

•  Emergency  stocks  are  to  be  stored  separately  from  commercial  stocks  and  are  therefore 
clearly  visible  and  fully  available  as  supplementary  oil  in  a  crisis;  moreover,  it  also 
facilitates effective control and swift reporting of stock levels; 

•  None of the concerned crude oil and products should be transferred, mortgaged, assigned, 
conveyed, charged, leased, pledged or otherwise encumbered, ensuring that they are fully 
at the disposal of Member States; 

•  Subject  to  the  above  conditions,  stocks  may  be  held  in  the  territory  of  another  Member 

State, without compromising prompt availability in a crisis;  

•  The  use  of  "tickets"  written  by  the  oil  industry  is  limited  to  the  turnover  of  products  for 
quality reasons (to prevent degradation or to comply with changing product specifications); 

•  Running costs could be financed by a levy included in the final consumer price of the oil 

products. 

4.4. 

Option 3: Creating "dedicated" EU emergency stocks within a revised version 
of the existing system 

This  option  would  entail  a  revision  of  the  current  system  in  order  to  remove  its  main 
weaknesses other than possible constraints on the availability of stocks in time of crises. On 
top, the system would  be amended to require Member  States  to maintain some part of their 
stockholding  as  compulsory  government  or  agency  stocks.  The  rest  of  the  full  stockholding 
obligation  could  be  undertaken  in  any  manner  suitable  to  each  Member  State,  including  by 
leaving  it  to  the  industry,  which  could  be  partly  covered  by  the  minimum  operational 
requirements (MOR).  

Additional characteristics of this system would include: 

•  prohibiting  that  the  emergency  stocks  be  transferred,  mortgaged,  assigned,  conveyed, 

charged, leased, pledged or otherwise encumbered; 

•  if  an  industry  obligation  is  retained,  giving  the  right  to  companies  to  delegate  their 
obligation to the government or the agency, thereby not discriminating small and medium 
sized importers with no access to storage facilities; 

•  requesting to hold at least some product stocks; 

•  limiting the agencies' possibility to use tickets to those drawn against stocks satisfying the 

same requirements of government control in another Member State 

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•  Member States would be free to resort to existing stockholding entities across the EU or to 
establish joint stockholding entities together with other Member States in order to comply 
with the obligation. 

When  defining  this  policy  option,  the  Commission  examined  the  practice  of  large  IEA 
member  countries,  like  the  United  States  and  Japan.  In  these  countries  part  of  the  IEA 
obligation is covered by stocks held by the government and destined for use in more serious 
disruptions  while  the  other  part  of  the  obligation  is  covered  by  the  oil  industry.34  This 
provides  a  reasonable  mix  of  dedicated  emergency  stocks  with  unquestionable  availability 
and  the  more  flexible  stockholding  arrangements  of  the  industry.  The  Commission  also 
looked into the lessons learned from recent disruptions which confirmed that industry stocks 
can be put on the market faster but government/agency stocks have better accountability. 

The extent of the obligation to be held by the government or an agency was determined after 
investigating past disruptions and current stockholding practices. It was found that the largest 
disruption since the 1970s required 16 days of stocks to replace the disrupted oil. Therefore, a 
requirement to hold 90 days of "waterproof" government/agency stocks would be difficult to 
justify. At the same time, the survey of national stockholding systems in the EU showed that, 
on  the  average,  38%  of  emergency  stocks  are  held  by  government  or  agency,  which  is 
equivalent to well over 40 days of consumption. Considering these findings, the proposed 30-
day government/agency obligation seems to be a reasonable compromise. 

Furthermore, a  survey of storage costs in  Member States refuted the common assertion that 
industry stockholding is cheaper (see Table 3 in section 5.3.1.). 

4.5. 

Addressing  the  problems  related  to  crisis  management,  calculation  and 
reporting 

Since  the  issues  of  crisis  management,  calculation  (of  stockholding  obligation  and 
compliance)  and  reporting  are  independent  of  the  choice  from  the  above  options,  it  is 
proposed to tackle them in case of each option except the no policy change case (i.e. under 
each of Option 1, Option 2 and Option 3). 

Calculation 

In order to decrease administrative burden of Member States with membership in both the EU 
and  the  IEA,  it  is  proposed  to  switch  to  the  IEA  methodology  which  is  internationally 
accepted.  Accordingly,  the  stockholding  obligation  will  be  based  on  the  net  import  of  oil, 
including  both  crude  oil  and  oil  products.  It  is  however  necessary  to  retain  some  of  the 
obligation for oil producing countries as their production is also exposed to disruption, e.g. as 
a result of natural disasters, accidents or strikes. An abolition or significant reduction of their 
obligation would also weaken the emergency system as a whole and undermine the solidarity 
amongst Member  States. (As  a net oil exporter, Denmark has no stockholding obligation in 
the IEA regime, while the UK, as a marginal oil importer has a very low obligation. Romania 
is not a member of the IEA but would also face a lower obligation under the IEA regime.) 

34 

In the United States, the government-owned Strategic Petroleum Reserves hold stocks equivalent to nearly 60 days of net imports; the rest of the 90-day IEA 

obligation is covered by industry stocks. In Japan, government stocks amount to about 80 days of net imports and are complemented by 70 days of mandatory 
industry stocks. 

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It  is  also  imperative  to  retain  the  obligation  to  hold  a  part  of  the  stocks  in  the  form  of 
products. Product stocks serve as an instant remedy even if refineries would come to a halt. 
However,  the  extent  of  this  obligation  should  not  induce  a  significant  change  to  current 
stockholding practices.  

Regarding  the  date  of  compliance  to  the  previous  year's  consumption/net  imports,  a 
reasonable compromise is to be sought between IEA rules (1 January) and EU rules (31 July) 
which  would  provide  sufficient  time  for  Member  States  to  adjust  stock  levels  to  changing 
consumption/net imports.35 

Reporting 

Due to the low variation of emergency stock levels, there is no advantage in normal times in 
increasing the frequency of their reporting.36 However, there is certainly scope for decreasing 
the long reporting lag. In case of a supply disruption it is particularly important to have up-to-
date stock data. 

Once the EU obligation is approximated to that of the IEA, the Monthly Oil and Natural Gas 
Statistics  (MOS)  or  the  JODI  questionnaire  would  logically  replace  the  current  special 
questionnaire of the Commission used for the monthly reporting of emergency stock levels. 
The  MOS  questionnaire  might  need  some  fine-tuning  so  that  it  is  fully  in  line  with  the 
updated  EU  rules  (in  particular,  if  additional  rules  are  introduced  compared  to  those  of  the 
IEA). Also, the definitions used in MOS have to be clarified in order for the data to be used in 
infringement procedures. These modifications can be carried out with comitology procedure. 

In addition to the MOS questionnaire, it is also justifiable to demand additional information 
from Member States on the location and ownership of stocks, and on the measures taken to 
ensure their availability. Such reporting would help to verify that emergency stocks are at the 
full disposal  of  Member  States. This is particularly important for emergency stocks held by 
the  industry,  often  commingled  with  stocks  held  for  commercial  purposes.  An  annual 
periodicity of this reporting is probably sufficient.  

Certain  stakeholders  argue  that  European  commercial  oil  stock  data  should  be  reported  and 
published  more  frequently  than  on  a  monthly  basis  and  the  ECOFIN  Council  reached  a 
political  agreement  on  the  necessity  of  such  reporting.  Data  on  oil  stocks  is  relevant  as  it 
provides  an  indication  of  the  tightness  of  the  market  and  could  therefore  have  a  significant 
influence  on  oil  prices.  Its  relevance  is  suggested  by  the  example  and  practice  of  large  oil 
consuming  countries  (United  States,  Japan  and  possibly  China  and  Korea)  which  report  oil 
stocks  on  a  weekly  basis.  Improved  and  more  complete  data  on  global  oil  stocks  could 
contribute to improve oil market transparency. In order to better address the concerns of other 
stakeholders, further analysis of the issue and the US and Japanese example is necessary. The 
Commission  will  launch  a  feasibility  study  in  order  to  review  the  costs,  the  benefits,  the 
impacts  on  industry  and  possible  modalities  of  weekly  reporting,  as  well  as  the  issue  of 
confidentiality.  

35 
36 

The IEA Secretariat expressed its readiness to find such a compromise. 
Current monthly reporting is in line with the intentions of the IEA which plans to increase the frequency of examining compliance 
from quarterly to monthly. 

EN 

29 

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Crisis management 

For  an  effective  crisis  management  within  the  EU,  procedures  are  required  for  actions 
triggered by the IEA, as well as in case of regional/European crises not addressed by the IEA 
mechanism.  

The  IEA  remains  the  main  entity  to  deal  with  disruptions  on  the  global  scale.  In  an  IEA 
action,  EU  Member  States  which  are  also  members  of  the  IEA  should  be  able  to  release 
stocks  without  the  Commission's  explicit  approval  but  should  nevertheless  consult  the 
Commission.  The  Commission  in  turn,  has  to  keep  those  Member  States  which  are  not 
members of the IEA informed, provide them with guidance and coordinate their participation 
in  the  action.  For  these  countries  trainings  might  be  also  necessary  on  how  to  respond  to  a 
specific  supply  disruption.  The  IEA  could  provide  help  in  this  respect.  The  role  of  the 
Commission should also include a responsibility for coordinating actions of all EU Member 
States,  regardless  of  their  status  vis-à-vis  the  IEA,  and  this  in  the  interest  of  providing  a 
coherent  reply  and  enhancing  the  effectiveness  of  any  IEA  action.  At  the  same  time,  the 
Commission  has  to  ensure  that  steps  taken  by  the  EU  collectively  or  by  way  of  individual 
Member State actions respect existing EU legislation.  

If a (regional) disruption does not trigger an IEA action, a decision on an EU action is to be 
made in consultation with the Oil Supply Group. Nevertheless, information exchange with the 
IEA would be desirable even in such cases. 

In order to enable swift action, decision making within the Commission should be streamlined 
in  case  of  a  crisis.  It  should  be  useful  to  nominate  a  "crisis  manager",  mandated  to  take 
appropriate  action  in  case  of  a  supply  related  crisis  (e.g.  convening  the  Oil  Supply  Group), 
interact  with  the  IEA  and  enter  into  communications  with  other  stakeholders  (including 
press), without such decisions being delayed by the regular hierarchical approval procedure. 
The  draft  rules  for  an  "Oil  Crisis  Management  Task  Force"  to  be  set  up  within  DG  TREN 
have  been  prepared.  This  small  and  operational  task  force  would  execute  the  Commission's 
role in case of oil supply disruptions requiring action at EU level. 

EN 

30 

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Option 0: No policy 
change 

Option 1: 
Reinforcing 
control 

Option 2: 
Centralized 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 

Minimum product 
share 

Regular audits and 
reviews 

no 

no 

no 

yes 

yes 

no 

yes 

no 

Reporting 

monthly, based on 
special questionnaire 

monthly, based on MOS/JODI 

 "intermediated" 
(through agency) 

no 

no 

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

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31 

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5. 

WHAT  ARE  THE  LIKELY  ECONOMIC,  SOCIAL  AND  ENVIRONMENTAL  IMPACTS? 
HOW DO THE OPTIONS COMPARE? 

The four options have been assessed on the basis of their most important likely impacts:  

•  impact 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,  

•  environmental, social and economic impacts.  

The impact analysis of the individual options is complicated by the fact that the transposition 
of  the  existing  legislation  has  created  important  differences  between  the  Member  States' 
stockholding  systems.  Member  States  have  opted  for  different  regimes  and  have  dedicated 
unequal costs and efforts to the compliance with their obligations. As a result, the impacts of 
the individual options 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  (e.g.  how  government  or 
agency  stockholding  would  be  financed)  is  also  likely  to  affect  the  impacts,  especially  with 
respect to the size and focus of the financial burden37.  

The above factors make it very difficult to quantify the impacts. As the policy options refer 
mainly to changes in the organisation and national management of the stockholding systems, 
a  correct  quantification  of  impacts  across  the  EU  proves  hardly  possible.  Therefore,  a  more 
detailed,  qualitative  analysis  was  preferred.  Nevertheless,  approximate  numerical  data  are 
provided where possible. 

Not  only  it  is  difficult  to  quantify  the  costs,  the  quantification  of  benefits  is  probably  even 
more challenging. The current system was never put to a real test by a large-scale disruption 
(even the IEA collective action after hurricane Katrina in 2005 used only 2.5 days of stocks 
out  of  90)  so  we  have  limited  knowledge  on  the  potential  consequences  of  a  major  supply 
disruption  on  the  economy  and  the  society,  and  to  what  extent  these  can  be  avoided  or 
mitigated  by  using  emergency  stocks.  Nevertheless,  in  section  5.1.  an  attempt  is  made  to 
specify the potential impacts of a disruption. 

5.1. 

Potential impacts of a supply disruption 

Emergency oil stocks provide benefits to the economy. The principal benefit is the avoidance 
of  economic  losses  in  case  of  a  supply  disruption,  due  to  the  ability  of  stocks  to  replace 
missing supplies and thereby to dampen or eliminate potential price hikes. 

An oil supply disruption is likely to have serious negative impacts on the economy, depending 
on the relative size and the duration of the disruption. Some sectors are particularly dependent 
on the regular supply of oil and/or petroleum products. Transport is by far the biggest user of 
oil in the EU (see Figure 3) and oil accounts for 97% of energy consumption in this sector. 
Households spend 13.6% of their total final consumption on transport, mostly by road and air, 

37 

If stockholding is financed by a levy imposed on the final consumer, impact on the government budget can be largely avoided. In 
contrast, financing through public expenditure would either reduce other public expenditure or result in increased taxes. 

EN 

32 

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i.e.  transport  modes  most  dependent  on  oil-based  fuels.  Part  of  this  expenditure  is 
discretionary  (holidays,  leisure  travel)  but  an  important  part  is  underpinning  more  than  just 
contemporary  lifestyle,  ensuring  social  organization  and  adequate  labour  force  mobility  on 
which modern EU economy depends. 

Figure 3: Petroleum products use by sector, 2004 

Source: Eurostat 

In the chemical industry, oil is the main feedstock and energy source at the same time. In the 
fisheries sector, at current price levels, fuel costs constitute more than 30% of the value of EU 
fish  landings.  Oil-based  fuels  (mainly  heavy  fuel  oil)  play  a  limited  role  in  the  electricity 
sector  –  in  2005  they  accounted  for  4.2%  of  power  production  in  the  EU.  Nevertheless,  in 
countries such as Greece, Ireland, Italy and Portugal, power supply depends 13-19% on oil-
fired power plants while the sector in Cyprus and Malta is practically completely dependent 
on oil. 

This underlines the importance of regular and integral supplies of oil and petroleum products 
to the economy. The principal role of emergency stocks is to ensure such integral supplies at 
times  of  crises  and/or  disruptions,  particularly  in  cases  where  the  severity  of  situation  may 
lead to a temporary suspension of trading on the local or even global oil markets either due to 
technical reasons or because of physical unavailability of needed oil volumes.  

The damage to the economy that could be caused in such situations without the possibility of 
drawing on emergency stocks is intuitively understood but hard to quantify  precisely. If we 
had  no  emergency  stocks  to  replace  disrupted  volumes,  this  would  first  and  foremost  bring 
most  of  the  transport  to  a  standstill  which  is  in  itself  an  important  economic  sector38.  In 
addition, the lack of oil would also paralyse the activities of other sectors like the chemical 
industry.  Considering  the  important  role  of  transport  in  modern  society  and  economy,  other 

38 

Enterprises with transport services as their main activity employed 8.2 million persons and generated EUR 363 billion value added in 2004, accounting for an 
estimated 6.9 % and 7.3 % respectively of the EU's total non-financial business economy (Panorama of Transport, Eurostat, 2007) 

EN 

33 

   EN 

 
 
                                                 
sectors  would  be  also  seriously  affected.  The  impact  on  households,  especially  those  using 
heating oil, would be immense as well. 

However,  there  is  hardly  any  quantitative  analysis  on  the  potential  impact  of  a  large-scale 
supply disruption which, in addition to skyrocketing prices, would result in a lack or scarcity 
of oil. In fact, there is hardly any experience of such disruptions to date. Even during the first 
oil crisis in 1973, when the Arab oil producers enforced an embargo against the Netherlands 
and  the  United  States,  and  other  countries  also  faced  partial  cutbacks,  there  was  no  real 
shortage of supply and it is more correct to refer to it as an oil price shock (the price of oil 
quadrupled by 1974). 

The potential damage to the economy and society from an oil supply disruption therefore has 
in practice to be gauged by analysing a case of a sudden price increase of the kind that could 
be  associated  with  any  unmitigated  supply  disruption.  This  impact  could  be  considered  an 
assessment of a minimum damage level. Effective damage from a physical disruption would 
be  somewhere  above  that  level,  taking  into  account  that  the  sudden  price  hike  would  be 
coupled  with  further  economic  losses  stemming  from  actual  physical  unavailability  of  oil 
supplies.  

There is indeed a wealth of analysis on the impact of increasing oil prices on the economy. 
Already after the second oil shock in 1980s, James Hamilton published an influential article 
demonstrating that an oil price increase had preceded all but one recession (that in 1960) in 
the  United  States  since  the  end  of  World  War  II.39  More  recently,  the  IEA's  World  Energy 
Outlook 2005 claimed that a $10 rise in the oil price, if sustained for a year, would cut GDP in 
OECD countries by 0.4%. 

In  2008,  the  Commission  also  investigated  the  issue  of  the  macroeconomic  impact  of  oil 
prices,  based  on  the  simulations  of  ECFIN's  QUEST  model.40  The  results  show  that  the 
impact of an increase in oil prices of 100% over a period of three years would decrease GDP 
by  0.9%  below  baseline  after  three  years  and  slightly  more  than  1%  after  10  years. 
Considering the current size of the EU GDP, this is equivalent to a GDP loss of about €120 
billion.  This  loss  would  be  unevenly  spread;  in  some  sectors  (e.g.  some  segments  of  the 
transport  sector),  fuel  costs  can  represent  up  to  50%  of  income  and  these  sectors  would 
obviously suffer the most. 

The  impact  on  consumption  according  to  the  model  is  much  stronger,  2%  lower  after  three 
years and 3% lower after 10 years. Consumer prices are 2% higher after three years than in 
the  baseline  scenario.  The  increase  in  energy  prices  does  not  have  a  significant  impact  on 
energy consumption in the short run due to the small short-run elasticities of substitution, but 
energy consumption by households is 6% lower after ten years.  

A second scenario takes the previous simulation as a new baseline and shows the effects of a 
further oil price increase of 25%. In this case the negative impact on real GDP is around 0.2% 
in the first year, rising to 0.7% after 10 years. This implies that, proportionally, the effect of 
oil  price  shocks  is  non-linear,  i.e.  larger  when  the  starting  price  level  is  higher.  This  is  an 
important conclusion considering that a supply disruption resulting in physical shortage of oil 

39 
40 

Hamilton, J. D. (1983) “Oil and the Macroeconomy since World War II,” Journal of Political Economy 91: 228-248. 
Results were published in the Quarterly Report on the Euro Area, Volume 7 N° 1 (2008) 
(http://ec.europa.eu/economy_finance/publications/publication_summary12329_en.htm). 

EN 

34 

   EN 

 
                                                 
or petroleum products (if not countervailed by emergency stocks releases) would be likely to 
lead  to  a  temporary  price  hike  with  unavoidable  price  overshooting.  Indeed,  the  price  rises 
caused by the 1973 oil shock had a much greater impact on the economy than the temporary 
fuel  shortage  caused  by  the  embargo:  oil  importing  countries  saw  sudden  inflation  and 
economic recession.  

5.2. 

Impact on the EU's capacity to effectively react to an emergency 

The  first  criterion  to  be  used  when  comparing  the  various  policy  options  should  be  their 
impact on the EU's ability to cope with an oil supply disruption, i.e. the extent to which the 
option  can  improve  the  security  of  supply.  In  this  respect  it  is  important  to  emphasize  that 
emergency stocks should only be used in a severe supply disruption and should provide the 
system  with  "fresh",  additional  oil  by  replacing  the  disrupted  volume.  At  least  this  should 
provide a buffer to avoid or to mitigate negative impacts to the economy.  

5.2.1.  Option 0: No policy change 

Option  0  would  mean  that  the  weaknesses  of  the  current  system  would  remain  in  place, 
putting  at  risk  the  EU's  ability  to  react  to,  and  ultimately  withstand,  possible  adverse 
developments. This could have more serious consequences in the future given that the risk of 
supply  disruptions  might  be  higher  in  the  future  than  in  the  past  (as  described  in  section 
2.2.1.). Oil production in the future may not keep pace with higher oil demand from countries 
outside the OECD like China, India or Middle East countries41. As a result, even if a global 
shortage  of  oil  is  not  imminent,  spare  capacities  are  likely  to  decline  and  even  smaller  oil 
supply disruptions may have a stronger impact in the future than they had in the past. 

Shortcomings  of  the  current  system  have  been  outlined  in  chapter  2  and  can  be  further 
analyzed. In this context, the main point determining the impact of oil stocks on security of 
supply is not the amount of emergency stocks held but the volume of stocks which can really 
be available in a crisis and the certainty of their availability. 

A stockholding system which relies on government or agency stocks and in which public/state 
ownership of stocks is compulsory may have the full amount of 90 days at its disposal. This 
oil is usually very visible because of dedicated storage tanks or underground facilities. This 
oil  is  in  a  crisis  available  as  "fresh",  additional  oil  which  has  not  yet  been  linked  to  the 
existing commercial system. 

A  stockholding  system  which  relies  on  mandatory  industry  stockholding  may  have  less  oil 
available in final analysis, as emergency stocks are typically commingled in such system with 
businesses' Minimum Operational Requirements (MOR). In a disruption, businesses will use 
MOR  to  maintain  their  operations,  reducing  the  amount  of  stocks  that  can  be  considered  as 
additional emergency stocks available for the state administration's use.  

A  survey  undertaken  by  the  Commission  in  early  2007  in  the  context  of  this  impact 
assessment yielded data on the breakdown of emergency stock held in the EU by the character 
of stockholding entity as shown in Figure 5. In three EU Member States, all stocks were held 

41 

The  latest  (July  2008)  Medium-Term  Oil  Market  Report  of  the  IEA  warns  of  increasing  market  tightness  beyond  2010,  with 
OPEC spare capacity declining to minimal levels by 2013 

EN 

35 

   EN 

 
                                                 
by the government or an agency. In eight, all stocks were held by the oil companies42, while 
the  majority  of  Member  States  had  a  mixed  system.  The  survey  has  also  showed  a  huge 
variety in MOR ranging from 2 to 94 days of domestic consumption (see Figure 6)43. 

Government
3%

Agency
35%

Industry
62%

Figure 5: Share of Emergency Stock Volumes Held by Governments, Agencies and the 
Industry 

Source: European Commission DG TREN 

42 

43 

In the meantime, Belgium has established a stockholding agency. In Austria and Denmark, most of the emergency stocks are held 
by a privately owned stockholding entity which can be regarded as an agency. 
This  was  an  informative  questionnaire  which  did  not  provide  a  precise  definition  of  MOR  and  thus  allowed  for  flexible 
interpretation of what counts for MOR. 

EN 

36 

   EN 

 
 
                                                 
100

94

s
y
a
d

90

80

70

60

50

40

30

20

10

0

46

41

38

36

34

27

27

24

24

11

8

8

6

3

2

NL

LT

FI

RO

IT

SE

FR

BG

IE

PL

CY

AT

UK

LU

BE

EL

Figure 6: MOR Expressed in Days of Consumption44 

Source: European Commission DG TREN 

Furthermore, and as already touched upon in chapter 2, current rules and practices regarding 
the use of "tickets" may lead to further limitations on the capacity of the current system to act 
adequately in a supply disruption. Yet, Member States hold according to data collected in the 
aforementioned survey about 18 million tons of oil and oil products in the form of "tickets", 
which represents an 11% share of the overall emergency stocks. Ten Member States do not 
hold or do not permit "tickets" to be held while eight Member States hold more than 20% of 
their stocks in "tickets" (see Figure 7). Almost half of such stocks are located abroad. 70% of 
"tickets" are held by the industry, 30% by agencies. 

44 

Only Member States where part of the stocks are held by the industry were requested to answer this question; still, some of these 
countries did not provide data. 

EN 

37 

   EN 

 
 
                                                 
74%

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

43%

36%

31%

27%

25% 25% 24%

18%

12% 10%

4% 4%

2% 1% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%

LU CY UK BE

IE

EE NL

SI

FR

IT

SE PT DK PL DE ES AT BG CZ

FI

EL HU LV

LT RO SK

Figure 7: Share of "Ticket" Stocks in EU Member States 

Source: European Commission DG TREN 

All the above is likely to lead to a situation whereby in a severe supply disruption some of the 
EU Member States' emergency stocks may not be as fully available as Article 3 of Directive 
2006/67/EC stipulates. In a first step this would impact the solidarity of Member States to act 
on  an  equal  basis  in  a  supply  disruption.  It  would  require  those  Member  States  complying 
with  Article  3  to  take  a  larger  burden  and  to  allow  room  for  "free-riding"  of  other  Member 
States.  In  a  severe  and  long  lasting  supply  disruption  this  could  negatively  impact  the 
effectiveness of the whole emergency and stock draw system. 

Other  issues  which  can  impact  negatively  on  the  effectiveness  of  the  EU's  capability  to  act 
adequately  in  a  supply  disruption  are  linked  to  crisis  management  issues,  to  insufficient 
linkages to the IEA and to the fact that most of the new Member States are not members of 
the  IEA  and  are  therefore  not  included  in  the  globally  working  oil  emergency  response 
system. 

5.2.2.  Option  1:  Reinforcing  control  means  and  coordination  mechanisms  within  the 

existing system 

Option  1,  i.e.  the  option  to  reinforce  public  control  by  giving  the  Commission  a  role  for 
special inspections/audits may definitely increase the credibility of the system, at least in the 
long  run.  Country  reviews,  carried  out  in  conjunction  with  the  IEA,  would  help  to  identify 
shortcomings of national stockholding systems and to disseminate best practices. Inspections 

EN 

38 

   EN 

 
 
could  identify  countries  which  may  formally  comply  with  the  90  day  obligation  but  whose 
effective stock levels may be lower or not fully available to the administration45. 

If  several  countries  would  prove  to  be  non-compliant,  this  would  lead  to  a  number  of 
infringement procedures, possibly undermining the credibility of European emergency stocks. 
It  could  take  several  years  to  achieve  compliance  and  restore  credibility.  Increased  control 
could also help to avoid illegal practices with "tickets" and/or stocks held abroad (e.g. double 
reporting of the same molecules). 

However,  even  a  fully  ensured  and  strict  compliance  with  the  provisions  of  the  existing 
legislation  coupled  with  improved  release  mechanisms  guaranteeing  proper  and  effective 
coordination would not remove the structural mismatches of the current system.  

One  of  such  mismatches  concerns  the  composition of emergency stocks. Analysis of inland 
deliveries and emergency stocks of petroleum products in the EU shows that current product 
categories cover only 81% of consumption (see Figure 8). It was also found that the coverage 
of jet fuel is relatively low (7% of product stocks as opposed to 10% of consumption) while 
fuel  oil  stocks  are  disproportionately  high  (19%  of  product  stocks  while  only  7%  of 
consumption). 

Inland deliveries (2007)

Other
19%

Gasoline
17%

Product stocks (30 June 2007)

Residual fuel 
oil
19%

Other
0%

Gasoline
19%

Residual fuel 
oil
7%

Kerosene and 
jet fuel
10%

Kerosene and 
jet fuel
7%

Gas/Diesel Oil
47%

Gas/Diesel Oil
55%

Figure 8: Composition of oil product consumption and of product stocks in the EU-27 

Source: Eurostat, DG TREN 

Moreover, even full enforcement of current rules would not insulate the existing system from 
risks  associated  with  current  practices  on  "tickets".  Even  with  full  transparency  and 
accountability  of  tickets,  logistic  problems  may  intervene  and  undermine  the  possibility  of 
using stocks held under "ticket" arrangements in a prompt manner in times of supply crises. 
For the most extreme example, a local supply disruption in Cyprus could be addressed only 
with difficulty by using stocks located in Finland, unless a swap46 can be arranged. Moreover, 
if the coverage for "tickets" is in the form of crude oil or blending components (e.g. naphtha 
to  be  used  for  gasoline  production),  this  also  calls  the  prompt  availability  of  products  into 
question. 

45 

46 

Such cases could indeed be revealed by in-depth inspections. For example, the case of Belgium showed that, after switching from 

mandatory  industry  stockholding  to  an  agency  system,  the  newly  created  agency  failed  to  collect  the  stocks  (e.g.  by  way  of 
"tickets") previously reported by the country, resulting in a non-compliance in Category II.  
In a geographical swap stocks in different locations are exchanged. 

EN 

39 

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5.2.3.  Option 2: Establishing centralized EU system with mandatory state/public ownership 

of emergency stocks 

Stocks owned directly by Member States are easy to monitor since they are held by a single 
entity and commingling with commercial stocks is avoided. Furthermore, stocks held by the 
industry  as  part  of  their  assets  are  established  in  line  with  their  commercial  strategies  and 
contractual obligations and are primarily meant to be used for generating profit – in a supply 
disruption,  public  and  commercial  interests  may  not  coincide  and  may  even  become 
contradictory.47  The  quality  (availability)  of  stocks  would  thus  definitely  increase  as  they 
would  be  separated  from  any  commercial  stocks  and  be  fully  dedicated  to  emergency 
purposes. Each Member State would have 90 days of "fresh oil" for use in an emergency. This 
option would thus delete possible "free rider" positions and avoid current distortions between 
Member States deriving from the fact that the costs and the level of oil security vary too much 
from one country to another. 

It is also easy to monitor the volume of stocks released (usually by means of tenders), which 
is not the case if emergency stocks are held by the industry (usually "released" by decreasing 
the stockholding obligation). 

This option thus can be seen as considerably improving the capability and effectiveness of the 
whole  EU  emergency  response  system.  For  the  purposes  of  comparison  of  this  option  with 
others, particularly the next/last one, it may be useful to consider the effective coverage this 
option would provide. 

The  calculations  of  the  IEA  show  that  public  stocks  alone  (the  availability  of  which  is  not 
questioned)  held  by  IEA  member  countries  would  last  for  about  2  years  in  case  of  a 
continuous  stockdraw  of  2  million  barrels  per  day  (see  Figure  9).  This  is  equivalent  to  the 
stock release rate of the 2005 IEA action, although the latter lasted for less then four months. 
The sufficiency of the 90-day obligation might depend, on the one hand, on the availability of 
the  emergency  stocks  and,  on  the  other  hand,  on  the  risks  of  an  oil  supply  disruption  and 
particularly its possible extent and duration. 

47 

For companies it might make economic sense to make use of the emergency stocks for commercial operations and neglect their 

stockholding obligation, even if this entails penalties. In anticipation of increasing prices, companies might be also inclined to opt 
for holding on to stocks instead of alleviating the shortage by releasing them. 

EN 

40 

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Figure 9: The Ability of IEA Public Stocks to Replace 2 or 4 mbpd of Disrupted Oil 

Source: IEA 

5.2.4.  Option 3: Creating "dedicated" EU emergency stocks within a revised version of the 

existing system  

Judging  on  past  experience,  even  the  biggest  disruptions  experienced  to  date  required  the 
deployment  of  much  less  emergency  stocks  than  the  90-day  obligation  (see  Table  2).  This 
option  would  thus  seek  to  improve  the  availability  of  emergency  stocks  by  establishing  a 
minimum  level  of  dedicated  emergency  stocks  which  is  sufficient  to  cover,  with  sufficient 
margin, even the most serious disruptions experienced in previous decades.  

EN 

41 

   EN 

 
 
Date 

5/70-1/71 

4/71-8/71 

No. 
of 
days 

270 

150 

3/73-5/73 

90 

10/73-3/74 

180 

5/77 
11/78-4/79 
10/80-1/81 
4/89-6/89 
8/90-1/91 
4/99-3/00 

11-12/99 

12/00 

6-7/01 

4-5/02 

30 
180 
120 
90 
180 
360 

60 

30 

60 

60 

12/02-3/03 
3/03-12/03 

9-12/05 

120 
300 

120 

Gross 
supply 
loss 
(mbpd) 
1.3 

% of 
world 
oil 
demand 
2.5 

0.6 

0.5 

4.3 

0.7 
5.6 
4.1 
0.5 
4.3 
3.3 

1.1 

1.6 

2.1 

1.8 

2.6 
2.3 

1.5 

1.1 

0.8 

7.1 

1.1 
8.5 
6.2 
0.8 
6.5 
4.5 

1.5 

2.1 

2.7 

2.3 

3.4 
2.9 

1.9 

Days of 
stocks 
needed48

Reason 

7 

2 

1 

13 

0 
15 
7 
1 
12 
16 

1 

1 

2 

1 

4 
9 

2 

nationalisation 

Libyan price controversy 
Algeria-France 
dispute 
Lebanon civil unrest 
Arab-Israeli  War  &  Arab  oil 
embargo 
Accident at Saudi oilfield 
Iranian Revolution 
Outbreak of Iran-Iraq War 
UK Cormorant platform accident 
Iraqi invasion of Kuwait 
OPEC production cutbacks 
Iraqi oil export suspension 
(rejection of phase V1 extension) 
Iraqi oil export suspension 
(price disagreement with UN) 
Iraqi oil export suspension 
(rejection of UN resolution 1352) 
Iraqi oil export suspension 
(rejection of UN resolution 1352) 
Venezuelan strike 
Iraqi conflict 
Katrina  Hurricane  damage  to  US 
crude oil production facilities 

Table 2: Major Oil Supply Disruptions since 1970 

Source: IEA World Energy Outlook 2005 

These  stocks  would  be  separated  from  commercial stocks  and, as a result,  would be clearly 
visible and fully and surely available as supplementary oil in a crisis. Obliging Member States 
to  hold  a  minimum  of  30  days  under  a  system  managed  through  a  state-controlled  agency 
would improve the preparedness of the EU in practical terms equally as option 2.  

This option is also in line with the practice of the United States where the government-owned 
Strategic  Petroleum  Reserves  (SPR)  hold  stocks  equivalent  to  nearly  60  days  of  net  oil 
imports while the rest of the 90-day IEA obligation is held by the industry. 

48 

Number of days of stocks needed to replace the disrupted oil [This calculation assumes that all consuming countries dispose of 

emergency stocks which is obviously not the case; basically the OECD countries have to replace all the missing oil whilst in 2004 
they consumed 58% of oil.]  

EN 

42 

   EN 

 
 
                                                 
5.3. 

Financial and administrative impacts 

In  addition  to  the  impact  on  emergency  preparedness,  the  impact  on  financial  and 
administrative  burden  has  to  be  taken  into  account  as  well.  Member  States,  the  oil  industry 
and  the  Commission  may  all  face  additional  (or  possibly  lower)  financial  or  administrative 
burden depending on the policy option chosen.  

Any  additional  burden  imposed  by  the  amendment  of  the  current  legislation  should  be 
proportional to the additional benefit provided in terms of better emergency preparedness. In 
addition,  the  amendment  should  not  contradict  the  endeavour  of  the  Commission  and  a 
number  of  Member  States  to  simplify  existing  legislation.  Also,  disproportionate  financial 
burden should be avoided. 

5.3.1.  Option 0: No policy change 

Option  0  implies  no  change  to  the  current  financial  and  administrative  burden.  A  survey 
undertaken by DG TREN in the context of this impact assessment revealed that, on average, it 
costs Member States 31 €/ton/y ear to maintain their emergency stocks (see Table 3).  

Country 

AT 
BE 
BG 
CY 
CZ 
DE 
EE 
ES 
FI 
FR 
HU 
IE 
IT 
LT 
LU 
NL 
PT 
SE 
SI 
SK 
Total 

Government/agency stocks 
Costs (€/t)  Stock level (kt)  Costs (€/t)  Stock level (kt)  Costs (€/t)  Stock level (kt) 

Industry stocks 

Total 

31 
20 
625 
50 
24 
18 
323 
27 
2 
29 
49 
40 

77 

19 
34 

43 
19 
25 

3 400  
1 880  
161
280  
2 000  
22 300  
95  
6 094  
3 600  
13 076  
1 240  
927  

200

4 260  
1 082  

549  
512  

1 124

170

39
146
25

17 389
136
750

35-50

4 081

61 656

48

22 526

31 
20 
881 
50 
24 
18 
323 
27 
2 
29 
49 
40 
39 
105 
25 
19 
34 
35-50 
43 
19 
31 

3 400
1 880
331
280
2 000
22 300
95
6 094
3 600
13 076
1 240
927
17 389
336
750
4 260
1 082
4 081
549
512
84 182

Table 3: Costs of emergency stockholding in Member States (2007) 

Source: European Commission, DG TREN 

Emergency stockholding entails one-off costs (buying stocks, building storage facilities) and 
running costs (renting storage facilities, ticket fees etc.). The high costs faced by some new 
Member States reflect the fact that these countries are still building up their emergency stocks 
and  therefore  incur  significant  one-off  stocks.  Such  stocks  can  be  minimized  by  using 
“tickets” or by buying stocks on credit and storing them in rented facilities.  

EN 

43 

   EN 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5.3.2.  Option  1:  Reinforcing  control  means  and  coordination  mechanisms  within  the 

existing system 

Option 1 does not envisage changes in the requirements for stock ownership or management, 
so it is not expected to entail supplementary costs for the administration or the industry of the 
Member States. However, additional costs would certainly occur as a result of the audits and 
reviews foreseen under this option (auditors, missions, meetings).  

Audits would not necessarily require additional Commission staff. It might be more beneficial 
and cost-efficient to mandate external auditors as this task requires special expertise in both 
accounting and oil issues, and only a  limited number (3-6) of  reviews can be foreseen each 
year.  The  estimated  cost  of  a  comprehensive  audit  of  a  single  country  is  in  the  order  of  € 
50,000.  This  estimate  was  confirmed  by  a  medium-sized  Member  State  which  mandates 
external auditors to carry out yearly audits of companies with a stockholding obligation and 
the total costs are of this order of magnitude. 

Country reviews, on the other hand, even if carried out together with the IEA, would probably 
necessitate  the  expansion  of  Commission  staff.  Depending  on  the  results  of  the  audits  and 
reviews, the number of infringement procedures might also increase. 

Specific costs to be born by Member States or the oil industry could only be determined if the 
audit  would  detect  serious  faults  on  Member  States'  compliance  with  stockholding 
obligations. 

5.3.3.  Option 2: Establishing centralized EU system with mandatory state/public ownership 

of emergency stocks 

Financial  and  administrative  requirements  of  this  option  would  vary  significantly  across 
Member States. This is a consequence of the current diversity of stockholding systems which 
is described schematically in Table 4.  

EN 

44 

   EN 

 
Member State 

Austria 
Belgium 
Bulgaria 
Cyprus 
Czech Republic 
Denmark 
Estonia 
Finland 
France 
Germany 
Greece 
Hungary 
Ireland 
Italy 
Latvia 
Lithuania 
Luxembourg 
Malta49 
Netherlands 
Poland 
Portugal 
Romania 
Slovakia 
Slovenia 
Spain 
Sweden 
United Kingdom 

EU Membership 
1995 
1957 
2007 
2004 
2004 
1973 
2004 
1995 
1957 
1957 
1981 
2004 
1973 
1957 
2004 
2004 
1957 
2004 
1957 
2004 
1986 
2007 
2004 
2004 
1986 
1995 
1973 

IEA Membership 
1974 
1974 
- 
- 
2001 
1974 
- 
1992 
1992 
1974 
1977 
1997 
1974 
1974 
- 
- 
1974 
- 
1974 
2008 
1981 
- 
2007 
- 
1974 
1974 
1974 

Stockholding system 
Agency/Industry 
Agency/Industry 
Government/Industry 
Agency/Industry 
Government 
Agency/Industry 
Agency/Industry 
Agency/Industry 
Agency/Industry 
Agency 
Industry 
Agency 
Industry/Government 
Industry 
Agency/Industry 
Government/Industry 
Industry 

Agency/Industry 
Industry/Government 
Agency/Industry 
Industry/Government 
Government 
Agency 
Agency/Industry 
Industry 
Industry 

Table 4: Current stockholding systems of EU Member States 

Source: Oil Supply Security (IEA, 2007), Commission survey 

For most Member States this option would entail a major change to the current system and – 
depending  on  the  practical  implementation  –  this  might  have  an  impact  on  the  financial 
burden. In summary: 

–  Six EU Member States (BG, CZ, LT, PL, RO, SK) dispose at present of government-held 

stocks, representing less than 3% of EU emergency oil stocks.  

–  Only two of these countries, the Czech Republic and Slovakia hold all emergency stocks 
under  such  a  regime.  For  these  two  countries,  Option  2  is  not  likely  to  cause  major 
organisational changes or additional financial burden.  

49 

Malta did not answer to the Commission survey. 

EN 

45 

   EN 

 
 
 
                                                 
–  Five Member States (EL, IT, LU, SE, UK) completely rely on mandatory industry stocks 
today. These countries would also need to purchase emergency stocks and might have to 
establish agencies to manage them.50  

–  All  other  Member  States  (AT,  BE,  BG,  CY,  DE,  DK,  EE,  EI,  ES,  FR,  HU,  IE,  LT,  LV, 
NL,  PL,  PT,  RO,  SI)  have  some  government  or  agency  stocks  in  their  present  systems. 
However,  only  a  few  of  them  have  the  full  90  days  of  stocks  at  their  disposal,  under 
conditions  approaching  the  model  envisaged  under  this  option.  Even  in  Member  States 
with agencies, stocks are often not state-owned, so do not comply with the requirements of 
this option. 

The cost of buying oil for reaching the 90 day level required for emergency stocks at EU level 
(about 135 million tons in crude oil equivalent), at current market prices (about $70/barrel in 
the second half of October 2008) could be of the order of €55 bil lion. If part of these stocks 
would be in the form of products, costs would be obviously even higher. These costs could be 
financed either by the taxpayer through the government budget (either through higher taxes or 
by reallocating public expenditure) or directly by the consumer (through a levy). Bank loans 
could be used as well for covering the initial costs. In addition to buying the stocks, building 
new storage facilities to hold the physical crude oil and products might be also necessary. The 
mode of financing such facilities would be similar to that of purchasing oil stocks. 

It should be emphasized that switching to a direct government ownership and agency system 
does not entail automatically a significant increase of running costs. Costs of building storage 
facilities, buying and storing stocks should not be essentially higher if the stocks are owned 
by  the  Member  State  instead  of  the  oil  industry.  This  is  confirmed  by  a  recent  survey,  the 
results of which show that the average costs of government/agency stocks are actually lower 
than those of industry stockholding (see Table 3). Lower costs can be explained by the fact 
that these entities are not profit-oriented and usually have access to credits at favourable terms 
(often helped by state guarantee). Managing an agency certainly involves some administrative 
costs but these are almost negligible compared to the costs related to physical stockholding: 
the  survey  mentioned  above  found  that  it  adds  up  to  1.5%  of  total  stockholding  costs  (see 
Figure 10).  

50 

Italy established a stockholding agency in 1998 which is not operational for the time being. The Swedish Energy Agency has a 
role in supervising emergency stocks but is not responsible for holding the stocks. 

EN 

46 

   EN 

 
                                                 
Management/administration
1.6%

Other costs
5.2%

Financing costs
30.5%

Ticket fees
10.5%

Storage costs
52.2%

Figure 10: Cost structure of government/agency stocks 

Source: European Commission, DG TREN 

If emergency stocks are held by the industry, costs are obviously incorporated into consumer 
prices.  Unless  financed  by  taxpayers,  this  would  not  change  in  case  of  state-owned 
stockholdings  but,  by  establishing  a  special  fee  incorporated  into  price,  the  costs  would  be 
more apparent, thereby increasing transparency.  

The burden on the industry in the countries concerned would substantially ease: they would 
no longer face an obligation to hold stocks and to report the level of such stocks. In fact, they 
could realize a huge one-off (windfall) profit by selling their emergency stocks. Nevertheless, 
it has to be emphasized that even if all emergency stocks are state-owned and managed by the 
government  or  agencies,  Member  States  cannot  cope  with  a  disruption  without  the  industry 
and its logistic system. The industry may also have a role in collecting a fee from consumers 
to finance the stockholding system. 

If  all  stocks  are  managed  by  the  government  or  a  single  agency  (instead  of  a  number  of 
companies), administrative burden in terms of reporting is likely to moderate.  

5.3.4.  Option 3: Creating "dedicated" EU emergency stocks within a revised version of the 

existing system  

Option 3 could entail additional financial burden for a number Member States, but this should 
be much lower than in Option 2 and it would concern fewer countries. In fact, many Member 
States may be reasonably close to complying with the obligations entailed in this option.  

Similarly to Option 2, the financial burden on Member States will depend on how close their 
current  system  is  to  the  proposed  one  and  on  the  decision  of  how  it  will  be  financed.  The 
estimated  impact  on  individual  Member  States'  stockholding  is  presented  in  Table  5.  The 
calculation takes the proposed alignment with the IEA methodology into account. 

EN 

47 

   EN 

 
 
MS 

AT 
BE 
BG 
CY 
CZ 
DK 
EE 
FI 
FR 
DE 
EL 
HU 
IE 
IT 
LV 
LT 
LU 
MT 
NL 
PL 
PT 
RO 
SK 
SI 
ES 
SE 
UK 
Total 

Government+agency 
products 

total 

crude  

98 
0 
916 

0 
300 
2 695 
14 112 

95 
297 
1 024 

50 
1 050 
10 126 
11 243 

192 
297 
1 940 

50 
1 350 
12 822 
25 355 

547 
0 

644 
1 605 

1 192 
1 605 

0 
0 

NA 
2 419 
663 
777 
0 
276 
0 
1 954 

12 
190 

NA 
1 551 
157 
1 068 
476 
223 
442 
3 459 

12 
190 

NA 
3 970 
820 
1 845 
476 
499 
442 
5 413 

24 759 

33 712 

58 471 

Stock levels on 30/11/20061 
Industry 
products 
1 524 
3 005 
122 
101 

crude  
1 655 
1 313 
0 
0 

total 
3 179 
4 318 
122 
101 

544 
0 
1 067 
4 664 
4 909 
2 064 
0 
250 
5 966 
0 
9 
0 

NA 
5 176 
1 618 
798 
366 

2 225 
47 
979 
3 968 
3 833 
3 110 
213 
799 
12 779 
143 
113 
753 

NA 

397 
1 185 
2 419 
241 

2 768 
47 
2 046 
8 632 
8 742 
5 174 
213 
1 049 
18 745 
143 
122 
753 

NA 
5 573 
2 803 
3 218 
606 

4 738 
1 219 
8 225 
44 580 

6 778 
3 081 
6 328 
54 142 

11 516 
4 300 
14 553 
98 723 

crude  
1 655 
1 313 
98 
0 
916 
544 
0 
1 367 
7 359 
19 021 
2 064 
547 
250 
5 966 
0 
9 
0 

NA 
7 595 
2 281 
1 576 
366 
276 
0 
6 692 
1 219 
8 225 
69 339 

Total 
products 
1 524 
3 005 
217 
398 
1 024 
2 225 
97 
2 029 
14 095 
15 076 
3 110 
857 
2 404 
12 779 
154 
303 
753 

NA 
1 948 
1 342 
3 487 
717 
223 
442 
10 237 
3 081 
6 328 
87 854 

total 
3 179 
4 318 
314 
398 
1 940 
2 768 
97 
3 396 
21 454 
34 097 
5 174 
1 404 
2 654 
18 745 
154 
312 
753 

NA 
9 543 
3 623 
5 063 
1 082 
499 
442 
16 930 
4 300 
14 553 
157 193 

2008 
obligation 
in coe2 

3 120 
4 439 
1 235 
688 
2 138 
1 424 
210 
2 415 
20 010 
23 119 
4 051 
1 189 
2 068 
17 818 
414 
523 
756 
270 
4 959 
5 397 
3 042 
1 741 
687 
682 
16 597 
2 908 
11 934 
133 834 

1/3 of 
the 
obligation3 
1 040 
1 480 
412 
229 
713 
475 
70 
805 
6 670 
7 706 
1 350 
396 
689 
5 939 
138 
174 
252 
90 
1 653 
1 799 
1 014 
580 
229 
227 
5 532 
969 
3 978 
44 611 

Government/ 
agency 
stocks in coe4 
0 
0 
190 
321 
1 931 
0 
54 
1 404 
13 362 
24 843 
0 
1 188 
1 733 
0 
13 
205 
0 

NA 

"Missing" 
gov./agency stocks 
in % 
in 1000t 
100% 
100% 
54% 
0% 
0% 
100% 
23% 
0% 
0% 
0% 
100% 
0% 
0% 
100% 
91% 
0% 
100% 
NA 

1 040 
1 480 
222 
0 
0 
475 
16 
0 
0 
0 
1 350 
0 
0 
5 939 
125 
0 
252 

NA 

3 852 
766 
1 853 
514 
489 
477 
5 495 
0 
0 
58 692 

0 
1 033 
0 
66 
0 
0 
38 
969 
3 978 
16 982 

` 

0% 
57% 
0% 
11% 
0% 
0% 
1% 
100% 
100% 

Table 5: Estimated impact of option 4 on Member States' stockholding obligation (in 1000 tons) 

1composition of emergency stocks as reported by Member States in an ad hoc questionnaire (Malta did not answer) 2estimated obligation in crude oil equivalent after the proposed 
alignment with IEA rules (in case of Denmark, Romania, and the United Kingdom this corresponds to 67.5 days of domestic consumption, in case of other IEA member countries it 
is the actual IEA obligation, in case of Malta it is an estimation based on average difference between EU and IEA obligations, in case of other countries it is calculated based on 
MOS data) 3this corresponds to the proposed 30-day obligation 4Stocks held by government or agency on 30/11/2006 recalculated into crude oil equivalents, with a 10% deduction 

EN 

48 

EN 

 
  
 
 
  
 
 
  
 
 
 
 
 
  
 
 
  
 
 
  
 
 
  
 
 
 
 
 
 
 
 
  
 
 
  
According to the calculations, about half of the Member States (CY, CZ, FI, FR, DE, HU, IE, 
LT, NL, PT, SK, SI) would practically be compliant with such a modified obligation as they 
have dedicated emergency stocks (held by government, agency or other entity) covering more 
than 30 days. In addition, all these countries have at least 30 days of dedicated stocks in the 
form  of  products.  Meanwhile  Belgium  has  established  agency  stocks  so  most  probably  it 
would be also compliant. In case of Austria and Denmark, most stocks are held by a privately 
owned  stockholding  entity;  these  arrangements  might  need  some  improvement  but  by  and 
large appear to be compliant as well. 

Based  on  the  November  2006  stock  levels,  six  Member  States  (BG,  EE,  ES,  LV,  PL,  RO) 
would  be  partly  compliant,  with  dedicated  emergency  stocks  covering  less  than  30  days.  In 
case  of  Spain  the  missing  volume  was  insignificant  and  according  to  more  recent  data  the 
country  would  be  compliant.  The  other  five  Member  States  have  part  of  their  emergency 
stocks held by the government or an agency and could be expected to be compliant after the 
end of current transition period related to accession. 

The five remaining Member States where all stocks are currently held by the industry (EL, IT, 
LU, SE, UK) would  need to  establish  12.5 million tons of government/agency  stocks. They 
would need to establish a stockholding entity with the appropriate management structures or 
entrust the like entity of another Member State. Even some of the latter countries have public 
or  semi-public  bodies/agencies  in  place  (sometimes  dormant)  whose  missions  could  be 
enlarged towards a control over the dedicated stocks.51  

If  the  above  volume  was  to  be  purchased  in  the  form  of  crude  oil  at  current  market  prices 
(about  $70/barrel  in  the  second  half  of  October  2008),  the  total  cost  shared  amongst  the  5 
Member States concerned would be about €5 billion. However, it  should be emphasized that 
the required volumes are already present in the EU and the Member States concerned do not 
necessarily have to buy the stocks to satisfy the new requirements. If they opt for an agency-
based  solution,  each  Member  State  concerned  can  create  an  agency/entity  in  which  oil 
companies  would  have  an  interest/obligatory  membership  (as  is  already  the  case  e.g.  in 
Germany) and to which stocks could be transferred/delegated without requiring purchase by 
the  Member  State.52  Another  option  is  to  resort  to  other  Member  States  which  have 
substantial "surpluses" compared to the proposed 30-day government/agency obligation and, 
under some agreement, can make those stocks available to those in need. 

If government/agency stocks are to be stored separately from commercial stocks, this is likely 
to  require  the  building  of  additional  tanks.  However,  subject  to  adequate  recording  and 
control,  these  stocks  could  continue  to  be  held  in  the  companies'  storage  facilities,  even  if 
commingled  with  operational  stocks  (this  is  a  standard  practice  in  several  Member  States, 
including  France).  This  would  also  remove  or  lessen  the  possible  necessity  of  building 
additional storage facilities in the MS concerned. 

As  it  was  spelled  out  in  section  5.3.3.,  costs  would  not  necessarily  be  higher  than  for 
mandatory industry stocks. Costs of physical stockholding should be similar while the scale of 
administrative  costs  for  existing  stockholding  entities  is  marginal.  This  conjecture  is 

51 

52 

Italy established a stockholding agency in 1998 which is not operational for the time being. The Swedish Energy Agency has a 
role in supervising emergency stocks but is not responsible for holding the stocks. 

The  archetype  of  the  stockholding  agencies,  the  German  EBV  receives  no  government  funds;  its  operating  costs  are  covered  by  a  fee  paid  by  member 
companies on every tonne of eligible product delivered for domestic consumption. Membership in the EBV is compulsory for refiners and importers. 

EN 

49 

   EN 

 
                                                 
confirmed by the cost data received from Member States: industry-held stocks do not appear 
to be consistently cheaper than government or agency held ones (see Figure 11). 

60

50

40

n
o
t
/

R
U
E

30

20

10

0

50

49

43

43

40

39

34

31

31

29

27

25

24

20

19

19

18

2

CY

HU

SI

SE

IE

IT

PT

AT

EU

FR

ES

LU

CZ

BE

NL

SK

DE

FI

Figure 11: Cost of emergency stockholding in Member States* (2007) 

Source: European Commission, DG TREN 

Blue columns indicate government/agency stocks while purple columns indicate industry-held stocks.  
*Some Member States which are still building up their stocks face significantly higher costs 

In  the  countries  which  may  decide  to  establish  a  new  stockholding  entity,  a  step  by  step 
procedure for the switch should be envisaged.  

Companies would continue to face a stockholding obligation in the countries concerned, but 
its  extent  would  decrease  in  a  number  of  these  countries.  Administrative  burden  related  to 
compliance  would  not  decrease  (in  countries  setting  up  a  new  agency  it  would  probably 
increase),  but  this  could  be  compensated  by  the  approximation  of  the  EU  and  IEA  systems 
(setting the obligation and reporting) which would reduce such burden. 

5.4. 

Economic, social, environmental and external impacts 

The impacts of the various policy options are not restricted to particular economic sectors or 
social groups. Considering the important role oil plays in the European energy mix, a supply 
disruption would inevitably affect the economy and the society as a whole. Therefore, it is in 
the  interest  of  all  sectors  and  social  groups  to  have  a  reliable  system  in  place  to  cope  with 
such  a  disruption.  This  does  not  preclude  the  possibility  that  some  economic  sectors  or 
particular social groups would be affected more than others by a disruption and by Europe's 
ability  or  inability  to  cope  with  it.  The  choice  from  among  the  options  could,  for  example, 
definitely  have  an  important  effect  on  the  oil  industry,  in  particular  the  companies  which 
currently have an obligation to maintain emergency stocks.  

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5.4.1.  Economic impacts with respect to competitiveness 

Economic impacts – in addition to those already touched upon above – may include those on 
the competition between different players in the oil industry.  

As  the  stockholding  arrangements  vary  widely  between  Member  States,  the  effects  on  the 
competition are also different for each country. For example, in countries where the obligation 
to hold stocks relies on the industry, the burden on the companies is higher in comparison to 
countries where the emergency stocks are state-owned. Furthermore, impacts are different for 
enterprises  with  or  without  storage  capacities,  as  well  as  for  refining  and  importing 
companies. Such distortions were presented in section 2.2.3.2. 

Option 0: No policy change 

This alternative means that existing competitive distortions remain unchanged, and the costs 
will also remain the same both in terms of level and distribution. 

Option 1: Reinforcing control means and coordination mechanisms within the existing system 

As  the  decisions  regarding  ownership  and  management  of  stocks  would  remain  at  the 
discretion  of  the  Member  States,  the  proposed  option  will  not  have  a  significant  mitigating 
effect  on  the  existing  competitive  distortions.  This  option  would  not  help  to  create  equal 
burden for the market participants. 

Option  2:  Establishing  centralized  EU  system  with  mandatory  state/public  ownership  of 
emergency stocks 

An  agency  system,  as  envisaged  under  Option  2,  can  easily  cease  discrimination  between 
refiners  and  non-refiners  or  between  companies  with  and  without  storage  facilities  and 
thereby can avoid any resulting distortions to competition. It would thus help to create "fair 
and non-discriminatory conditions" specified in the current legislation. 

Option 3: Creating "dedicated" EU emergency stocks within a revised version of the existing 
system 

This option would entail a possibility of companies to delegate their remaining obligation to 
the entity which holds the "dedicated" emergency stocks. In return, they would have to pay a 
fee  not  exceeding  the  costs  born  by  the  stockholding  entity.  As  a  result,  the  potential 
discrimination between different types of 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. This option would also allow for eradication 
of the problematic use of "ticket" contracts, thereby contributing to the improvement of stock 
availability. 

5.4.2. 

Social impacts 

The  social  impacts  related  to  the  emergency  oil  supply  legislation  mainly  derive  from  the 
economic impacts of the stockholding arrangements and their functioning or non-functioning 
in case of an emergency. Disruptions often lead to high energy prices which, either coupled 
with physical shortage of oil products or not, would particularly hit the most vulnerable parts 
of the society which would have to face increased heating and transport costs. In the event of 
sustained  disruptions,  expected  economic  losses  could  lead  to  increased  unemployment, 

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which would have adverse effects on the society. The release of stocks in severe and sustained 
disruptions would mitigate such economic harm. Already the existence of a buffer of 90 days 
emergency  stocks  may  calm  markets  and  help  to  avoid  exaggerated  price  movements  and 
extreme market reactions. 

Since emergency stocks contribute to the integrity of supplies in case of a supply disruption 
and can therefore help to avoid surging oil prices, they are beneficial to economic and social 
welfare.  Should  the  system  of  emergency  stocks,  for  whatever  reason,  fail  to  replace  the 
disrupted  oil  supplies,  this  would  have  serious  negative  consequences  on  the  society.  Any 
policy option which strengthens the ability of the EU to cope with a disruption will reduce the 
risk of such a failure. 

Assuming that the existing legislation will not effectively work in some Member States, we 
cannot mitigate as necessary the impact of severe supply disruptions under Option 0. Reduced 
effectiveness  and  efficiency  of  stock  release  can  lead  to  price  rises,  escalation  of  market 
uncertainty, and indirectly trigger unemployment. The most vulnerable groups in society will 
face difficulties with respect to paying for transport and heating.  

As  it  proposes  a  consistent  system  across  the  EU  with  high  effectiveness  and  efficiency  in 
case of stock release, Option 2 is likely to best prevent negative economic and social effects 
from occurring. Option 1 and 3 are also expected to mitigate adverse social impacts. 

5.4.3.  Environmental impacts 

The  presented  policy  options  are  not  expected  to  have  any  particular  impacts  on  the 
environment.  The  impact  on  the  environment  would  be  relevant  only  in  the  case  of  the 
construction  of  new  storage  facilities.  New  facilities  and  tanks  would  be  subject  to 
authorisation  procedures  and  would  have  to  meet  prevailing  safety  and  environmental 
specifications.  Acquiring  the necessary  permits can be a lengthy process and could  in  some 
cases  face  opposition  from  local  citizens  ("not  in  my  backyard"  syndrome)  countering  the 
projects  for  building  new  storage  facilities.  However,  if  the  specific  requirements  are  met, 
environmental risks to soil, water and air are contained to the minimum. 

No  new  storage  facilities  would  be  required  under  Option  1,  unless  it  turns  out  during  the 
audits that a country does not actually have 90 days stocks at its disposal. In this case it may 
be necessary to build new storage facilities. 

Under  Option  2,  with  no  further  commingling  of  emergency  stocks  and  commercial  stocks, 
the overall physical oil and oil product stocks within the EU would probably increase. This 
may require the construction of new facilities in some Member States.  

Under  option  3,  the  establishment  of  the  30-day  dedicated  emergency  stocks,  if  held 
separately  from  commercial  stocks,  might  require  additional  storage  capacities  in  some 
Member  States,  especially  in  those  where  at  present  all  stocks  are  held  by  industry.  If 
commingling  is  allowed,  this  would  remove  or  lessen  the  possible  necessity  of  building 
additional storage facilities. 

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5.4.4. 

Impacts outside the EU 

With  the  exception  of  candidate  countries  which  will  have  to  take  into  account  any 
amendments to the current legislation, no significant external impacts are foreseen from any 
of the options. 

Oil supply disruptions to which the oil stock system is to react often happen in third (producer 
or  transit)  countries.  However,  the  location  of  the  disruption  has  no  specific  practical 
implications on emergency stocks procedures. 

On the other hand, in case of a serious disruption with a global impact, the release of stocks in 
Europe can bring relief to the global market irrespective of the location of the disruption. This 
impact is likely to be realized under all policy options (1, 2 and 3). 

Provided that the revised rules require an increase of stock levels in some Member States (and 
thereby increase oil demand), a short-term speculative effect on oil prices cannot be excluded. 

The EU’s position within the IEA might strengthen by being able to coordinate and channel 
the actions of non-IEA Member States in case of an IEA emergency response action. 

5.5. 

Impacts of proposed changes in crisis management, calculation and reporting  

Calculation 

To  the  extent  that  options  1,  2  and  3  would  entail  a  switch  to  the  IEA  calculation 
methodology, we have to analyse the potential impacts of this change. 

Since for most countries the IEA obligation is higher than the current EU obligation, a switch 
to  the  IEA  methodology  would  mean  an  increasing  obligation  for  non-IEA  Member  States, 
many of which are still enjoying a transitional period. However, this switch should not be a 
problem for IEA member countries which already have to comply with both systems. 

It is difficult to directly compare the extent of EU and IEA obligations since the former is set 
in product equivalent, while the latter is established in crude oil equivalent. In addition, in the 
IEA  system  a  wider  range  of  products  can  qualify  as  emergency  stocks.  By  comparing  the 
compliance  of  IEA  member  countries  (with  the  exception  of  Denmark  and  the  United 
Kingdom53)  in  the  two  systems,  it  was  found  that  the  average  compliance  is  118  days  (of 
consumption) under the current EU rules while it is 112 days (of net imports) under the IEA 
system (see Table 6). This ratio suggests that a 90-day IEA compliance corresponds to a 95-
day  EU  compliance.  In  other  words,  on  average,  the  IEA  obligation  is  about  5%  higher.  It 
should be noted that these averages hides considerable differences: the ratio of EU and IEA 
compliance  is  largely  dependent  on  the  composition  of  products  consumed  and  stored.  In 
several countries the IEA compliance is actually higher, suggesting that in these countries it is 
easier to comply with the IEA obligation. 

53 

These countries were not taken into account because under IEA rules they have no or minimal obligation. 

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Member State 

AT 
BE 
CZ 
DE 
DK 
EL 
ES 
FI 
FR 
HU 
IE 
IT 
LU 
NL 
PL4 
PT 
SE 
SK 
UK 
Total 
Total except DK,UK 

2007 EU 

latest EU 

Obligation1  Stocks1 
3 623
2 881
1 747
28 897
2 088
4 679
16 074
3 683
20 459
1 362
2 364
17 198
714
7 892
4 830
3 477
4 267
538
12 989
139 762
124 685

2 610 
4 022 
1 570 
22 302 
1 337 
3 783 
12 683 
1 967 
16 299 
1 188 
2 040 
12 591 
711 
3 897 
3 590 
2 378 
2 670 
560 
11 206 
107 405 
94 862 

latest EU 
compliance 
in days3 
125
64
100
117
141
111
114
168
113
103
104
123
90
182
121
132
144
86
104
117
118

2008 IEA 

latest IEA 

Obligation2
3 120
4 439
2 138
23 119
0
4 051
16 597
2 415
20 010
1 189
2 068
17 818
756
4 959
5 397
3 042
2 908
657
1 088
115 770
114 683

Stocks2 
3 721 
4 620 
2 621 
32 125 
2 335 
4 730 
17 142 
3 420 
23 800 
1 959 
2 423 
19 951 
792 
10 306 
7 159 
3 407 
3 592 
965 
12 769 
157 836 
142 732 

latest IEA 
compliance 
in days3 
107
94
110
125

 - 

105
93
127
107
148
105
101
94
187
119
101
111
132
1057
123
112

Table 6: Comparing current EU and IEA obligations and compliance for Member States 
with IEA membership 

1The EU obligation and stock level is in product equivalent, stock levels are from end of March 2008 or April 
2008,  the  obligation  is  based  on  2006  consumption  2The  IEA  obligation  and  stock  level  is  in  crude  oil 
equivalent, stock levels are as of 1 January 2008, the obligation is based on 2007 net imports 3The obligation is 
90 days for both the EU and the IEA 4Poland is likely to become an IEA member country in 2008 

From the 8 EU Member States which are not members of the IEA, Romania is a significant 
producer,  and  according  to  the  proposed  rules  would  not  face  an  increasing  obligation.  The 
other  7  countries  have  an  EU-obligation  of  about  3  million  tons54,  which  (according  to  the 
above rough calculation) should be topped up by about 150 thousand tons.  

This estimation was not confirmed by further, country-by-country analysis. Eurostat and the 
IEA Secretariat prepared a simulation of these countries' compliance with the IEA obligation, 
based  on  their  responses  to  the  MOS  questionnaire  (see  Table  7).  It  was  found  that  five  of 
them  (CY,  EE,  LT,  RO,  SI)  are  already  compliant  with  such  a  hypothetical  obligation. 
Bulgaria  is  not  yet  compliant  but  its  IEA  compliance  is  higher  than  its  EU  compliance, 
suggesting  that  a  switch  to  the  IEA  methodology  would  not  entail  an  increasing  burden  for 
this  Member  State.  Latvia  appears  to  be  the  only  country  which  would  need  to  make 
additional efforts after the proposed changes in calculation. 

54 

This calculation disregards the transition period some of these countries still enjoy. 

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Member 
State 

BG 
CY 
EE 
LT 
LV 
MT 
RO 
SI 
Total 

2007 EU 

latest EU 

latest EU 

Obligation1 
698 
573 
230 
377 
289 
218 
1 226 
554 
4 165 

Stocks1 
315 
647 
150 
388 
203 
270 
1 129 
556 
3 658 

compliance
41
102
59
93
63
112
83
90
79

2008 
Obligation under 
IEA rules2 

1 235
688
210
523
414

1 159
682
4 911

Latest 
Stock level 
under IEA rules2 
619 
740 
335 
1 240 
171 

Calculated 
compliance 
under IEA rules 
45
97
143
213
37

1 252 
712 
5 069 

97
94
93

Table 7: Comparing current EU and estimated IEA obligations and compliance for 
Member States without IEA membership 

1The EU obligation and stock level is in product equivalent, stock levels are from end of March 2008 or April 
2008,  the  obligation  is  based  on  2006  consumption  2The  IEA  obligation  and  stock  level  is  in  crude  oil 
equivalent, calculated from latest MOS submissions 3Malta does not report MOS 

An obligation based on net imports would also mean that the stock levels should reflect the 
development of import dependency, i.e. as import dependency rises, oil stock levels will have 
to increase to provide the same coverage in terms of days. 

The higher IEA obligation currently provides some cushion in case of an IEA stockdraw (i.e. 
EU stock levels are not expected to go under 90 days immediately) – this would change with 
the harmonized obligation. 

A  switch  would  also  clarify  the  handling  of  biofuels  which  is  not  clearly  addressed  in  the 
current EU legislation. In the IEA methodology, pure biofuels are considered as renewables 
and their import does not entail a stockholding obligation. (Furthermore, it is not possible to 
meet the stockholding obligation with pure biofuel stocks, unless they are stored in the same 
facility with fossil fuels, ready for blending.) However, if biofuels are blended into fuels, they 
are incorporated into net imports and therefore entail a stockholding obligation.  

Reporting 

The  current  reporting  lag  for  emergency  stocks,  as  provided  for  under  Council  Directive 
2006/67/EC, is unduly long. With current information technology, reporting with a shorter lag 
is  unlikely  to  induce  significant  additional  administrative  or  financial  burden.  If  Member 
States would report within shorter time limits, the Commission would have a more up-to-date 
picture  on  the  development  of  stocks  and  –  by  publishing  this  data  –  the  industry  and  the 
general public would also benefit from this information. 

A  switch  to  the  Monthly  Oil  and  Natural  Gas  Statistics  (MOS)  questionnaire  as  a  reporting 
tool  would  not  entail  difficulties  to  Member  States  since  Eurostat  is  already  collecting  this 
questionnaire  from  them.  As  a  result,  they  could  get  rid  of  the  current  double  reporting 
obligation.  However,  this  would  not  improve  the  timeliness  of  reporting  as  the  deadline  is 
even longer (3 months after the reference month). The reporting deadline can be modified by 
comitology  procedure.  The  use  of  the  Joint  Oil  Data  Initiative  (JODI)  questionnaire  would 
provide  less  detailed  but  more  up-to-date  data:  it  is  reported  25  days  after  the  reference 

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month.  The  Commission  asked  Member  States  on  the  potential  impact  of  a  switch  to  IEA 
methodology on administrative burden and they reported that no or only marginal reduction 
(some man-hours) is expected. 

The confidentiality of IEA compliance might change after the harmonization (for EU Member 
States) if the Commission continues to publish stock levels. This is not opposed by the IEA 
Secretariat which regards it as a good incentive to comply. 

The proposed annual reporting on the location and ownership of stocks, and on the measures 
taken  to  ensure  their  availability,  would  not  entail  a  significant  additional  administrative 
burden  for  Member  States.  This  information  should  be  already  available  to  Member  State 
administrations,  even  for  stocks  held  by  the  industry.  The  current  legislation  (Article  3) 
specifies that Member States have the emergency stocks at their disposal. This is not possible 
without  knowing  who  is  holding  the  stocks  and  in  which  locations.  This  was  confirmed 
during  formal  and  informal  consultations,  when  several  Member  States  with  mandatory 
industry stocks claimed that such stocks are under full government control.  

As it was mentioned in section 2.2.4.3., the reporting of commercial stocks is also important 
from a security of supply perspective. Nevertheless, views are contradictory as to the benefits 
of more frequent reporting of commercial stocks. Stakeholders tend to acknowledge that the 
consumers are likely to benefit from the better transparency provided by frequent reporting. 
However,  many  are  worried  that  this  could  be  offset  by  some  disadvantages:  the  increased 
costs  and  administrative  burden  would  in  particular  hit  smaller  enterprises,  while  the 
potentially  decreasing  data  accuracy  could  lead  to  increased  volatility  and  the  need  for 
subsequent revisions of data. In addition, weekly reporting makes sense only if the reporting 
gap  is  not  more  than  a  couple  of  days.  Further  investigations  on  how  other  countries 
(particularly  the  United  States)  have  solved  these  difficulties  will  help  to  decide  on  the 
modalities of a European reporting system. 

Since  the  reporting  of  commercial  stocks  is  not  directly  related  to  the  emergency  stocks 
system,  this  impact  assessment  does  not  undertake  to  evaluate  its  potential  impacts  in  a 
comprehensive  way.  In  order  to  better  understand  the  possible  impacts  on  industry  and  the 
benefits  and  drawbacks  from  more  frequent  but  possibly  less  reliable  data  reporting,  the 
Commission will launch a feasibility study on the issue.  

Crisis management 

Past events showed that there is a need for a swift and effective emergency response system. 
In particular, if a disruption is addressed by an IEA action, clear rules are necessary to enable 
a coordinated EU participation in it. The rules outlined in section 4.5. would enable Member 
States  which  are  also  IEA  member  countries  to  join  an  IEA  action  without  a  formal  EU 
authorisation but should  inform the Commission about their actions. On the other hand, the 
Commission  would  be  mandated  to  coordinate  the  actions  of  Member  States  which  are  not 
members  of  the  IEA  and  channel  the  input  of  these  countries  to  the  IEA  Secretariat.  As  a 
result,  the  Commission  would  be  able  to  enhance  and  complement  the  effects  of  an  IEA 
action. 

The  proposed  rules  would  provide  sufficient  flexibility  to  address  smaller  (regional) 
disruption which will not trigger an IEA action. 

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6. 

SUMMARY OF THE OPTIONS 

Option 0: No policy change 

Although  Option  0  would  not  entail  additional  burden  on  Member  States  and  the  industry, 
with no policy change an effective EU-wide emergency preparedness cannot be guaranteed. 
This  gives  cause  for  concern  since  supply  disruptions  might  become  more  frequent  in  the 
future,  calling  for  the  improvement  of  emergency  preparedness  in  order  to  avoid  adverse 
economic and social impacts.  

Option 1: Reinforcing control means and coordination mechanisms within the existing system 

This  option  would  not  necessarily  entail  a  change  to  current  stockholding  arrangements. 
However,  the  realization  of  regular  inspections/audits  may  give  us  unpleasant  surprises:  it 
may  turn  out  that  in  some  Member  States  the  90  days  of  stocks  are  not  fully  available.  In 
these countries it may take a long time to switch to a better system and to comply with the 
current obligation. 

Option  2:  Establishing  centralized  EU  system  with  mandatory  state/public  ownership  of 
emergency stocks 

This option is very ambitious: it would completely transform the current stockholding system 
of many Member States. By providing 90 days of dedicated, state-owned emergency stocks, it 
would  definitely  improve  preparedness,  but  at  the  expense  of  increased  government 
expenditure/debt. This may not be justified by the experience of past disruptions which never 
necessitated so high stockdraws. 

Option  3:  Creating  dedicated  EU  emergency  stocks  within  a  revised  version  of  the  existing 
system  

Requesting  Member  States  to  hold  a  minimum  of  30  days  stocks  under  strict  government 
control, and possibly to establish a state-controlled agency to manage these stocks, may be the 
reasonable compromise between the ideal model (Option 2) and the business as usual option. 
This  option  may  also  be  able  to  overcome  the  problems  of  Option  1.  It  would  result  in  a 
minimum level of dedicated stocks which is fully available as supplementary stock in case of 
a disruption and which is sufficient to cope with disruption experienced in the past. For the 
rest of the obligation it would provide Member States considerable flexibility. Many Member 
States are reasonably close to complying with this option. 

Conclusion 

The  most  important  positive  impact  of  Options  1,  2  and  3  is  the  better  availability  of 
emergency  stocks  and,  as  a  consequence,  the  improved  capacity  of  the  EU  to  face  with  a 
supply disruption and to manage the associated risks. As a negative impact, these options can 
entail additional financial and/or administrative burden, the extent of which largely depends 
on  the  starting  point  (i.e.  the  current  stockholding  structure)  and  the  modalities  of  the 
implementation. 

In a realistic view options 0 and 2 may be the options which are less opportune or the most 
difficult  to  achieve.  Option  1  (better  controlling)  is  probably  only  an  intermediate  solution 

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because it may detect failures in Member States' existing systems and has then to be followed 
by  infringement  procedures  and  at  the  end  a  switch  of  the  existing  procedures  to  a  better 
system. Option 3 seems to provide for a possibly better and more secure system which could 
be achieved without harmful legal procedures. 

Nevertheless,  it  might  be  useful  to  combine  Option  3  with  elements  of  Option  1  (audits, 
reviews). During the public consultation, most stakeholders argued that physical commingling 
of emergency and commercial stocks does not pose a problem provided that such stocks are 
properly  recorded  and  controlled.  Allowing  commingling  would  reduce  the  necessity  of 
building  additional  storage  facilities  in  the  Member  States  concerned  and  thereby  would 
reduce  financial  and  environmental  implications.  However,  commingled  emergency  stocks 
have  to  be  strictly  controlled  in  order  to  ensure  that  such  stocks  are  not  moved  without 
government consent. 

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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 

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

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

Financial burden 

No change 

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

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 (depending on 
implementation) 

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 8: Comparison of the options' impacts 

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7. 

MONITORING AND EVALUATION 

The Commission will monitor the implementation of the proposed changes by: 

•  Regular analysis of Member States’ reporting on the level and composition of emergency 

stock;  

•  Periodic review Member States’ emergency systems; 

•  If doubt arise about reported stock levels, audit of Member States’ stock levels performed 

by or on behalf of the Commission; 

•  If necessary, infringement procedures.  

The above activities would be partly carried out in conjunction with the IEA Secretariat. 

Meetings  of  the  Oil  Supply  Group  will  be  utilized  to  follow  up  and  discuss  the 
implementation and share experiences of Member States. 

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