The European Union has launched a public consultation over the oil reserves member states hold to cushion themselves against unexpected oil crises, as crude prices rise to a record high.
The consultation was launched on Tuesday with oil at more than $118 a barrel, after attacks on pipelines in Nigeria stoked supply fears at a time of strong demand from China. The EU’s executive Commission is seeking views on how to revise a 40-year-old directive that instructs member states each to hold 90 days of oil supplies for emergencies. But it did not revisit previous suggestions that reserves be bolstered to 120-days supply or that mechanisms be introduced that could dampen price surges. “The important thing is to reduce red tape and to give more powers to the oil supply group, which advises on measures to take in the event of a crisis,” said a Commission spokesman.
Europe has been closely watching its reserves since January 2007, when Russia halted oil flows through Belarus for three days during a pricing dispute, choking supplies to Europe during peak winter demand. The directive was made in 1968, and was strengthened at the time of the first major oil shock in 1973. But since then, the European Union has moved from six to 27 member states and its oil needs have changed, with demand soaring for jet fuel and waning for heating oil. “The 2005 supply disruptions after hurricanes Katrina and Rita clearly showed how important product stocks can be when refineries are disrupted,” said a Commission statement. “The EU rules should, therefore, maintain an obligation to hold part of the obligatory stocks in the form of products,” it added. The consultation will take place over eight weeks with the goal of presenting draft legislation in the second half of this year. (Reuters)