Time To Tap Strategic Oil Reserves

12.00.00am GMT Mon 3rd Mar 2003

Responding to reports that the threat of Middle East war had pushed crude oil prices up by 48% in the last year, and by more than 30% in the last 3 months alone, Vincent Cable MP, Liberal Democrat Shadow DTI Secretary, has written to the Government calling for a reassessment of the policy of retaining oil stocks.

Dr Cable said: "At the moment, there is more than enough supply to meet demand - but we need to ensure that the different stocks being maintained are kept in balance to prevent the market price from rocketing unnecessarily."

"We need an assessment of the levels of stocks throughout the wholesale production and distribution chain in the UK. To prevent the threat of panic buying if underlying prices continue to rise, we need to be certain that there is enough stock at all stages in the distribution chain. The fuel blockade in September 2000 showed the speed with which supplies can dry up if the chain of supply is interrupted."

"With the market at its current levels, it's time to ask whether the Strategic Oil Reserve requirements imposed on countries belonging to the International Energy Agency should now be relaxed. During the first Gulf War there was such reluctance to relax these requirements that prices had already begun to fall before the emergency measures agreed by the IEA kicked in. If these reserves are to do their job, then we should be prepared to consider using them when the time is right."

ENDS

Notes to Editors

The International Energy Agency (IEA) is an autonomous body set up under the auspices of the Organisation for Economic Co-operation and Development. Its website can be found at: www.iea.org http://www.iea.org> .

IEA members are committed to holding oil reserves equivalent to 90 days of net oil imports, which can be used in the event of market disruption to ensure continuity of supply, and thus head off exaggerated market moves.

The IEA details emergency response measures to be applied in the event of major disruptions (involving a reduction in supply of 7% or more), and lesser disruptions.

For EU member states, there is an additional stock requirement based on oil consumption (this impacts on net exporting countries, such as the UK).

In October 2002, Dr Cable tabled the following written question to the Secretary of State for Trade and Industry (Rt Hon Patricia Hewitt MP):

"To ask the Secretary of State for Trade and Industry whether the national oil emergency stock is above the level required by international obligations; and if she will make a statement".

He received the following answer from the energy minister, Brian Wilson:

"At 31 August 2002 the UK provisionally had stocks equivalent to 76 days consumption of petroleum products, which is above the stock level of 67½ days worth of consumption of oil products that the UK is obliged to hold at any one time in accordance with EU legislation."