Two EU member states face infringement on low oil stocks

Apr 21, 2005 02:00 AM

EU Energy Commissioner Andris Piebalgs said that two member states were facing infringement procedures for letting their oil stocks cover fall below their legal level.
Piebalgs said the EU was also considering action against another pair of countries. He said they had dipped below the legally mandated capacities needed to cushion against interruptions to oil supplies. If these countries don't comply with EU standards on holding some 90-days' worth of cover, they could face action in the European Court of Justice and be fined.

Piebalgs also said a concrete plan would be put on the table in six months' time for the EU to operate its own strategic oil reserves -- or "Community Triggering Mechanism" -- similar to the US government-controlled SPR. A coordinated release of Organization of Economic Co-operation and Development oil stocks in an emergency is currently the responsibility of the Paris-based International Energy Agency.
But Piebalgs said this was inadequate: "You hear all the time what stocks there are in the US and in China. Do you ever hear about what oil stocks there are in the EU? ... We have reserves but we're not taken too seriously."

He said the Commission may later this year introduce legislation to standardize information on oil and product stocks in Europe, focusing on the triggering mechanism. It would, he said, likely work in conjunction with the IEA's current mechanism, though he said Europe would provide independent information on the stocks available. A study, dubbed the Energy Monitoring Observation System report, will likely come out in the autumn and will clarify how much data countries would need to provide and at what time intervals.
"We are not trying to put the people from the International Energy Agency out of a job." he said. "We are trying to do our homework."

But he was critical of the way the current system works and reiterated that Europe needed to assert itself as a huge consumer in the global energy markets. Piebalgs said of the 25 member states in the EU, only 17 are in the IEA and " this is really the difficulty."
Piebalgs, a Latvian and trained physicist, emphasized Europe shouldn't interfere heavily in the global energy markets, saying a well-functioning market would be a hallmark of his tenure. On the wider oil market, he said countries should recognize that oil was poised to keep rising.
"I wouldn't be surprised if oil goes above $ 60 a barrel," he said. Europe's response to this would focus on improving energy efficiency, he added.

Piebalgs stressed that energy efficiency is one of the most important ways to combat higher oil prices, but he was also quick to admit it is hard to enforce.
"Sometimes it comes down to the municipal level," he said. "Trying to get municipalities to not buy huge cars."
Nevertheless he said the EU still has a role to play in forcing countries to take energy efficiency more seriously.
"Where legislation is missing is in the vehicle and transport sector," he said.

He said voluntary agreements might be in the offing, but said the auto industry rarely improves mileage on its cars voluntarily. But while stressing energy efficiency, he also said that he was meeting with OPEC members for the first time in an attempt to drive home the need for transparency in the market.
"Our message to OPEC is that we're the largest energy consumer in the world," he added.

Source: Dow Jones
Market Research

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