EU looks to boost oil security amidst soaring prices

Apr 22, 2008, 13:38 GMT

Brussels - European Union states should improve their strategic oil reserves policy amid concerns over soaring energy prices, the European Commission said Tuesday.

'The risk of supply disruptions is increasing. Supply is more and more concentrated in a handful of countries, many of which are exposed to high geopolitical risks,' the European Commission wrote in a paper asking EU member states, non-governmental organizations and industry representatives to suggest how the bloc should deal with energy reserves in the future.

The launching of the public consultation follows a call from EU members in March 2007 to review the union's oil-stocks strategy. The process is set to last eight weeks, a commission spokesman said.

Current EU rules dictate that member states should maintain a strategic oil reserve equivalent to 90 days' use, a rule which was introduced in 1968 and reinforced in 1973.

But with oil prices more than doubling in the past four years, continued instability in key areas including Nigeria, Iraq and the southern Red Sea shipping lane, and changing demand in Europe, officials now ask whether the current rules are still sufficient.

As one example, the commission's paper points out that in 1973, the single most important oil product used in Europe was heating oil, while the use of jet fuel was 'marginal.' The EU now consumes more jet fuel than fuel oil in absolute terms.

Amendments proposed by the commission include changing the method by which oil consumption is calculated, strengthening government control over some stocks and coordinating EU-wide procedures to follow in case of an emergency shut-off.

The 90-day limit itself 'has proved sufficient for the past 40 years. Therefore, this basic rule seems not to be in need of changing,' the commission paper said.

Once all stakeholders have submitted their comments, the commission 'may come forward with a proposal' to amend the existing rules late this year, a press release said.