Oil Security: Frequently Asked Questions
Frequently Asked Questions for Oil Security
1) Who owns the emergency oil stocks?
IEA Member countries use three approaches to meet their stockholding obligations: industry stocks, government stocks, and agency stocks. Most countries use some combination of these three approaches.
Industry stocks are stocks held by industry, whether for commercial purposes or in order to comply with national emergency stockholding regulations. Both commercial stocks and obligated stocks count towards IEA Member countries’ stockholding commitments. Most IEA Member governments require that certain companies (e.g. importers, refiners, product suppliers, wholesalers, etc.) hold a minimum amount of stocks, related to the company’s share of oil imports or sales in the domestic market.
Government stocks are those owned directly by the state, typically financed through the central government budget and held exclusively for emergency purposes.
Agency stocks are stocks held by a separate agency, either on behalf of the government of domestic industry. Several countries have established a separate agency defined by state legislation and endowed with the responsibility of holding all or part of the obligated emergency stocks. The agency structure and arrangements vary from country to country and can range from government-sponsored schemes to industry-created initiatives, but in all cases compulsory stocks can only be released with government authorisation.
Overview of oil stockholding systems in IEA member countries:
• Government stocks: Czech Republic, New Zealand, United States
• Agency stocks: Belgium, Estonia, Germany, Hungary, Ireland, Slovak Republic
• Industry stocks: Greece, Luxembourg, Norway*, Sweden, Switzerland, Turkey, United Kingdom,
• Combination of Government and Industry stocks: Japan, Korea, Poland
• Combination of Agency and Industry stocks: Austria, Denmark*, Finland, France, Italy, Netherlands, Portugal, Spain.
*As net-exporters of oil, Canada, Denmark, and Norway do not have a stockholding obligation under the International Energy Programme. Australia relies on industry stocks, but does not place a compulsory obligation on industry.
2) What are the costs and benefits of holding emergency oil stocks?
In 2013, the IEA published a study on the costs and benefits of holding emergency oil stocks. The study estimates stockholding costs based on the size and type of storage facilities (e.g. above ground tanks and underground caverns) as well as the composition of stocks (i.e. crude vs. product). The economic benefits are avoided GDP losses and import costs. These are derived primarily from offsetting supply losses, and thereby limiting significant increases to oil prices. Taking these factors into account, annual net benefits derived from existing emergency stocks amount to some USD 40 per barrel of oil per year.
3) Does the IEA specify whether stocks should be held in the form of crude or refined products?
No, the IEA does not stipulate the form of stocks. It depends on several factors such as the market conditions and geographical features of a region. Countries with a large refining industry are likely to store more crude for its flexibility. Although maintaining refined product stocks is generally more expensive than maintaining stocks of crude, for certain types of supply disruption (e.g. natural disasters), it may be more efficient to maintain product stocks in vulnerable areas as they can be accessed more easily in recovery situations.
4) How is the reporting done for the emergency oil stocks?
Every IEA member country reports its oil stocks on a monthly basis to verify compliance of national stockholding practices with IEA and European Union obligations (if applicable). This monitoring consists of checking reported stocks data, and may include the confirmation of physical stock levels through inspections or spot checks if needed.
5) Are countries able to hold emergency oil stocks abroad?
Yes, member countries may store emergency oil stocks outside of their national boundaries and may count such stocks as part of their 90 day requirement. Amounts of stocks held abroad are cross-checked between the relevant Administrations.
6) How does the IEA collaborate with countries outside of its membership?
Since the IEA was established, there have been significant shifts in the global energy landscape, with new emerging countries becoming major oil consumers. The IEA now works closely with countries outside of its membership to find solutions to shared energy and environmental concerns. Part of this work involves sharing IEA expertise regarding the handling major oil supply disruptions. For example, the IEA is working closely with China, India, Indonesia and Thailand to highlight the benefits of maintaining oil emergency stocks and of being prepared in the event of a major disruption to global oil supply.
More information on IEA’s collaboration with non-member countries can be found here.
7) Are emergency oil stocks only used during the IEA collective actions?
No. While IEA Member countries maintain emergency oil stocks in order to participate in an IEA collective action, they also enable Member countries to respond to domestic crises. In the event that a Member uses its emergency stocks, it informs the IEA Secretariat of the details and circumstances. Many Member countries maintain stock levels well above the IEA obligation, so using emergency stocks does not necessarily entail dropping below the 90 day threshold.
8) Does the IEA consult OPEC during major oil disruptions?
Yes, during a major oil supply disruption, the IEA would consult with OPEC and its larger Member Countries to determine the ability and willingness of its members to use any spare production capacity to bring additional oil to the market.
9) Does the IEA communicate with other major oil consumers during major disruptions?
Yes, the IEA communicates with major consuming countries beyond its membership. This would include determining the ability and willingness of these Partner countries to bring additional oil to the market or to refrain from stockpiling during an IEA stock release.
More Information Link to “Energy Supply Security: Emergency Response of IEA Countries 2014”.
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