Guidance

Energy Security Bill factsheet: Core fuel resilience

Updated 1 September 2023

These measures will assist Government in its vital task to protect the UK’s fuel supply against long and short-term changes which may threaten its resilience, during the decarbonisation of the economy.

Why are we legislating?

One of the Government’s top priorities is to ensure that the UK has a secure and reliable energy supply. The current core fuel supply market is flexible and for the most part effective in ensuring continuity of fuel supply. This sector will continue to be important to both the UK economy and quality of life for years to come, especially in industries which have proven challenging to decarbonise, e.g., aviation, road freight and marine. However, there remains a risk of disruption to the UK core fuel supply market due to various factors e.g. from the sudden loss of critical supply infrastructure sites due to either operational or financial events.

As the UK progresses to a low carbon economy, and the downstream oil sector comes under increased pressure, the measures in the Bill will support industry in this time of transition. It will help ensure a smooth path to net zero without disrupting fuel access. The Bill will provide the Government with the tools necessary to manage the transition to the new net zero emissions targets and protect against fuel supply disruptions during the transition.

In June 2021, we brought forward the draft Downstream Oil Resilience Bill. This set out our intention to introduce measures allowing Government additional oversight over the infrastructure sites that are essential in maintaining regional and national fuel supplies and granting it powers to minimise risks that failures of such sites could result in fuel shortages. Following parliamentary scrutiny by the BEIS Select Committee, and external feedback we are now bringing forward these measures in the Energy Security Bill to allow Government to ensure the core fuel sector takes measures to maintain or improve fuel supply resilience, if needed.

How the Bill will achieve this

The Bill will provide three key powers to the Secretary of State to maintain continuity of core fuel supplies and ensure that industry maintains or improves its resilience to reduce the risk of emergencies affecting fuel supplies.

Direction making power

The direction making powers would provide Government with the tools to address failures that could cause disruptions in the sector. The measure is designed as a power to address circumstances that have the potential to escalate, specifically aimed at improving core fuel supply resilience rather than responding to emergencies.

In autumn 2021 there was a disruption to fuel distribution that resulted in forecourts not having sufficient fuel stocks. The Government activated several contingency measures to assist industry to ensure continuity of supply. The shortage at the forecourts was not caused by an overall shortage of fuel but driven by increased demand and an underlying shortage of HGV drivers. The measures in this Part are focused on encouraging industry to build resilience rather than respond to an emergency. However, the powers under this Part also have the potential to assist the Government to be cognisant of such risks as these prior to them escalating and to have more tools to obtain more comprehensive information about events as they unfold and, if necessary, to be able to direct relevant industry actors to take steps to shore up their own resilience or reduce the impact of any disruption or failure to fuel supply.

Government intervention in each case would need to be fair, reasonable and justifiable.

There are two limbs to the direction-making powers:

• A power to issue directions to individual enterprises and in some circumstances, to more than one enterprise. E.g. Secretary of State may direct an operator to prioritise the production of a particular fuel, if he/she considers there to be a supply threat.
• A power to make regulations to impose similar requirements that can be imposed on individual companies by directions to apply re a class of enterprises.

Information power

The information powers will enable the Government to obtain a broader understanding of core fuel supply across the sector. Access to comprehensive information would assist Government in assessing the impact of any loss of supply and enable us to look at resilience across the sector which we cannot currently do with existing legislation. Under these powers, Secretary of State may impose a duty for major operators to report an incident which poses a significant threat to the continuity of fuel supply.

Government will be able to use the information provided to build a consistent, accurate and up-to-date picture of the health of core fuel supply resilience in the country. This will help in identifying supply issues before they develop into emergency situations.

The information required from industry will be limited to what is necessary and Government will work with industry to minimise any administrative burden incurred.

Financial assistance power

The financial assistance power gives Government spending power for the purposes of maintaining or improving core fuel sector resilience or securing or maintaining continuity of supply. It will enable Government to support industry in implementing resilience protection or improvement measures to protect UK core fuel supplies. Provision of such assistance will need to comply with subsidy control and other relevant requirements.

FAQ

How is this different from the measures in the Draft Bill?

The draft Bill included restriction on acquisitions powers. Feedback from Industry suggests that the powers in the National Security and Investment Act 2021 already cover this so these powers have been taken out. We have also widened the scope of the information-gathering powers in the Bill in order to enable Government to get more information on forecourts when necessary.

We have also included renewable transport fuels in these measures to allow the provisions to operate in a future scenario where the main transport fuel is not crude oil based.

Will the proposed measures cause further increases in fuel prices?

The proposed measures will have no significant impact on fuel prices.

Government will continue to work to ensure that impacts to industry are proportionate to risk and are fairly distributed avoiding market distortions on competitiveness.

Will the Government be able to use these powers in disruptions such as Just Stop Oil, and what kind of directions might the Secretary of State give?

The powers in the Bill will grant Government the tools to proactively address failures that could cause disruptions in the sector. These measures are specifically aimed at improving core fuel supply resilience rather than responding directly to emergencies.

Direction notices will only be given by the Secretary of State for the purposes of improving or maintaining overall sector resilience, or in addressing a current disruption to or significant risk to continuity of fuel supplies or to reduce the potential adverse impact of such a risk.

Background

The core fuels sector comprises over 200 companies involved in the refining, importing, distribution and marketing of petroleum products. The sector includes renewable transport fuels which we expect to become more dominant as we transition into Net Zero.

The sector plays a key role in our energy security, supplying products vital to our economy and way of life. In particular, crude oil based fuels provide 98% of the energy for the transport sector.

The sector is usually efficient, flexible and effective in ensuring the continuity of fuel supply. However, it is also responding to global market factors and, as it changes, the ability of the UK supply system to protect the continuity of fuel supplies and be resilient to disruptions needs to be maintained.

The sector has also faced new and growing pressures and risks in recent years. In addition to the additional stress imposed by the Covid-19 pandemic, the sector is now faced with an increasingly ambitious trajectory for reduction of greenhouse gas emissions.

Further information

The following documents are relevant to the measures and can be read at the stated locations:

• Draft Bill (2021)
• Consultation response (2022)
• Consultation (2017)
• Select Committee, Pre-legislative scrutiny: draft Downstream Oil Resilience Bill (2021)