Danish oil industry critical of EU oil arbitration plans

Jan 22, 2003 01:00 AM

Danish oil industry representatives are sceptical of the EU strategy to augment and control national oil reserves. The EU Commission is pushing member-states to invest billions in boosting their national oil reserves, a move that could help the EU avoid costly price hikes on oil and petrol as a result of unrest in the Middle East.
Representatives of the Danish oil industry voiced its doubts over the strategy. The price of oil carries enormous significance for economic growth and unemployment rates throughout Europe. But as the situation stands today, the EU is virtually powerless when oil-exporting countries dictate prices.

Currently, all EU member-states are required to store enough oil reserves for 90 days' consumption. Under the terms of a new proposal, the EU Commission would mandate increasing that store to 120 days' worth by 2007, in a move to wean the union from OPEC's price barometer.
Today, Denmark has just 84 days' worth of oil, per an agreement with the International Energy Agency. The country's special dispensation was secured by the fact that Denmark produces twice the oil it consumes, and therefore has direct access to extra reserves.

If the EU Commission's plan to boost reserves by 2007 is carried out, the Danish Petroleum Industry Association (OFR) says that Danish consumers will foot a EUR 175-mm bill, as oil reserves will have to be increased by a staggering 46 %.
"There's no one else to finance the buy except consumers, who will probably subsidize the whole operation in the form of extra surcharges on oil. The EUR-175 mm figure is a low estimate, if current oil prices remain stable," OFR director Per Thorkildsen told.

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