Industry stocks

Stocks held by industry, whether for commercial purposes or in order to comply with national stockholding rules, count towards meeting a country’s IEA stockholding commitment. Most member governments require certain companies, such as importers, refiners, product suppliers or wholesalers, to hold a minimum number of days of stocks. Generally, the required amount is set in proportion to the company’s oil import share or its share of sales in the domestic market. These obligated industry stocks are included in the overall industry stock levels reported for a country. IEA data on industry oil stocks, unless otherwise noted, are defined as all primary stocks on national territory, including stocks held by industry to comply with national emergency stockholding rules.

As of 2013, 20 of the 29 current IEA member countries opted to meet all or part of their obligation by placing a stockholding requirement on industry. Of those 20 countries imposing minimum stockholding obligations on industry, six use this approach to meet the totality of their IEA obligation. They are Greece, Italy, Luxembourg, Sweden, Turkey and the United Kingdom. As a net exporter, Norway has no IEA stockholding obligation; however it places an obligation on companies that produce or import petroleum products in Norway to store product stocks corresponding to 20 days of normal consumption, which would then be used for emergencies. The following countries do not place such an obligation on industry: Australia, Canada, the Czech Republic, Estonia (which became a member in 2014), Germany, Hungary, New Zealand, the Slovak Republic and the United States. Although these countries place no formal obligation on industry, their industry commercial stocks count towards the IEA obligation of 90 days of net imports.

Government stocks

Government-owned stocks are one of the means by which countries can ensure their IEA minimum stockholding requirement. These are typically financed through the central government budget and held exclusively for emergency purposes. In 2013, eight countries held government stocks: the Czech Republic, Ireland, Japan, the Republic of Korea, New Zealand, Poland and the United States.

Agency stocks

Some countries have a stockholding arrangement that involves establishing a separate agency endowed with the responsibility of holding all or part of the stock obligation. The agency structure and arrangements vary from country to country but in all cases are clearly defined by state legislation. Several countries have government-administered schemes (e.g. Belgium, Estonia, Finland, Hungary, Ireland, the Netherlands, Portugal and Spain). Others are industry-led and/or industry-owned entities (e.g. Austria, Denmark, France, Germany and the Slovak Republic).

Public stocks

The IEA refers to government and agency stocks as “public” stocks (including stocks held by industry-owned stockholding agencies). Such stocks have the advantage of providing a clear indication of oil available solely for emergency purposes. In recent years, the role of public stocks has increased noticeably in the overall emergency response potential of the IEA, both in terms of the number of countries holding public stocks and in the total volume being held.

In 2013, 19 out of the 29 IEA countries held public stocks. This compares to 10 out of 21 member countries in 1984. This increase reflects a rise in the number of countries with stockholding agencies, which has increased from 4 to 12 since the early 1980s. With the recently adopted changes to the EU minimum stockholding rules, Italy has recently decided to create an agency and a number of countries are currently considering establishing agencies (e.g. Greece, Luxembourg and the United Kingdom). This could further raise the number of member countries holding public stocks in the future.

The relative portion of the minimum stockholding obligation covered by public stocks varies from country to country. In most cases, public stocks, including both crude and refined products, cover more than half of the country’s minimum stockholding obligation. In other countries public stocks cover well beyond 90 days of net imports (see Figure 2.2). In some instances, this is because of declining net imports, resulting in a greater number of days’ cover for a given volume of public stocks. In the case of Estonia, the IEA stockholding requirement in terms of net imports is substantially lower than the level of stocks the country must hold to meet its 61 days of consumption as a member of the European Union. Denmark also holds public stocks to meet its EU stockholding requirements; however, as a net-exporter, Denmark has no IEA minimum stockholding requirement.

In ten IEA countries, public stocks are combined with a minimum stockholding obligation on industry. These include Poland, Portugal and Spain, where the proportion of public stock cover is lower compared to other public stockholding member countries. In these countries, the remainder of the IEA minimum requirement is met by stockholding obligations set on industry. In the case of New Zealand, while there is no stockholding obligation set on industry, the country relies on industry’s commercial stocks to cover the bulk of its IEA minimum requirement and holds public stocks in the amount necessary to meet the remaining portion of the 90-day level.

One general attraction of a mixed system, where both public stocks are held and a minimum obligation is set on industry, is that it can improve overall “visibility” of emergency stocks while maintaining an operational link with the oil companies. This should help to ensure rapid drawdown in an emergency. Nevertheless, there is no single, perfect system for maintaining the required minimum stockholding level. Any given stockholding arrangement will have both advantages and disadvantages in terms of efficiency, cost and equity. Ultimately, the choice will depend on the particular country’s circumstances.