As a member state of the EU and the International Energy Agency (IEA), the UK is required to hold emergency oil stocks for use in an oil supply disruption. The same stocks can be used to meet both obligations.
Currently the EU and IEA obligations are calculated on different bases. The EU obligation is set as 90 days’ average daily national consumption, although as a crude oil producer the UK has a derogation that reduces its obligation by 25% to 67.5 days’ consumption. The IEA obligation is calculated as 90 days of net-imports (plus a 10 per cent exclusion for tank bottoms) and the UK’s current IEA obligation is much smaller than its EU obligation. The latest EU directive will eventually align the EU and IEA obligations on the same net-imports basis.
As UK crude oil production declines, the EU derogation will be phased out, and as net-imports increase, the overall UK obligation is expected to increase from about 2016.
The UK meets these international obligations by directing companies to hold minimum levels of stocks as part of their commercial stocks. Businesses that supply obligated petroleum products to the UK market are liable to receive an obligation. Current obligations are 67.5 days’ supplies for refiners and 58 days’ for non-refiners.
DECC has the UK policy lead for energy emergency preparedness and response covering the operation of oil stocking policy. Our aims for compulsory oil stocking obligations policy are to:
- set UK and individual company-level compulsory stocking obligations
- monitor and enforce company-level compliance
- facilitate a stock release during a supply crisis through agreed temporary reductions in individual obligations, and enforcing these where appropriate
- improve industry regulatory compliance
- regulate without taxpayer liability or undue burden on the industry
Firm but fair regulatory administration and enforcement of the relevant legislation by DECC officials is an important aspect of achieving these aims.
Guidelines on how this system operates are available: