The UK today joined its partners in the International Energy Agency (IEA) in releasing oil stocks to the market. A total of 60 million barrels of oil will be made available for purchase over the next 30 days, with the UK contributing some three million barrels.
This will prevent short-term supply disruptions leading to volatile oil prices that could damage the economy and threaten global economic recovery.
The Rt Hon Chris Huhne MP, Secretary of State for Department of Energy and Climate Change, said:
“This coordinated global action shows that both producer and consumer nations around the world are taking decisive steps to ensure enough oil is available. That’s why we strongly welcome Saudi Energy Minister al-Naimi’s statement earlier this month that Saudi Arabia and other Gulf countries will increase oil production to supply whatever the market needs.”
George Osborne, Chancellor of the Exchequer, said:
“I know that British families have been hit hard by the big jump in the world’s oil price. Events in the Middle East and North Africa have disrupted supply and contributed to the price spike. So we’ve been working closely with our international partners to take action with today’s release of oil stocks. It comes on top of the cut in fuel duty in the Budget, which means petrol is 6p a litre cheaper than it would otherwise have been.”
Violence in Libya and Yemen has disrupted the global supply of oil, and the Government expects the loss of Libyan production to continue for some time. As global oil demand increases over the summer it is vital adequate volumes of oil are available at a price acceptable to both producer and consumer countries.
The UK welcomes recent commitments from Saudi Arabia and other Gulf states to increase production. This will help ensure there is adequate supply to meet demand. The stock release is designed to complement the actions of producer countries by making additional volumes of light crudes and refined products immediately available to the market.
Notes for editors
- The UK is required to hold emergency oil stocks to help meet demand for oil in cases of significant disruption to oil supply. These stocks are held so the global economy can continue to function should a significant supply disruption occur.
- The EU requires member states to hold oil stocks equivalent to 67.5 days of consumption. The International Energy Agency requires members to hold 90 days of net oil imports.
- Within the UK emergency stocks are held by refiners and importers of oil at their facilities. The volume of the oil held by each is proportional to the company’s supply to the UK market.
- In the event of the International Energy Agency or the EU calling for a coordinated release of oil, DECC works closely with industry, and to enable them to make additional oil available to the market lowers their obligations to hold oil. Companies are then free to sell the oil on the open market. As part of the release, both the UK government and the EU and IEA will monitor the volumes made available.
- The UK’s oil stocks are substantially above the IEA and EU requirements and stand at over 80 days of consumption for most products. The UK’s contribution to IEA action is to reduce obligations on industry to make some three million barrels of oil available to the market during the next month. This is a proportionate and sustainable release to the global shortfall that does not significantly reduce the UK’s stocks of oil.
- On a global scale, this is the third time IEA member-country stocks have been used. IEA member countries released oil stocks in 2005, after Hurricane Katrina damaged offshore oil rigs, pipelines and oil and gas refineries in the Gulf of Mexico. The only other occasion IEA member countries mandated a stock release was at the time of Iraq’s invasion of Kuwait in 1990/1991.
- Full guidance on the oil stocking obligations, including the enabling legislation, how the obligations are set, monitored and enforced, is available on DECC’s emergency oil stocking webpage.