An overview of frequently asked questions concerning oil crisis management and their answers.
What does “oil crisis” mean?
An oil crisis is a situation in which the supply of crude oil and/or oil products is disrupted in a way that significantly hampers the normal distribution toward the end users.
How long can an “oil crisis” last?
Predicting the length of oil crises is no easy task. Their duration can vary depending on their cause and the solutions implemented.
What are some of the causes of oil crises?
International oil crises can occur for a wide variety of reasons:
- geopolitical circumstances (such as wars in oil-producing countries or regions, blockades of crucial shipping routes or pathways such as the Strait of Hormuz, etc.);
- incidents at production sites or refineries (such as the Abqaiq-Khurais attack in Saudi Arabia);
- natural disasters (such as the hurricanes in the United States);`technical reasons (such as the obstruction of crucial shipping routes);`etc.
In addition, national or local one-off situations (such as civil unrest, low water levels in certain rivers, or an accident in a refinery) can also lead to local supply problems.
Have measures been taken to limit the impact of oil crises?
In order to curb the effects of oil crises (such as in the 1970s), the International Energy Agency (IEA) was created within the Organisation for Economic Co-operation and Development (OECD).
The governments of most OECD member countries have adopted the Agreement on an International Energy Program. Each country that signs it (30 to date):
- engages in a shared oil crisis management policy based on building up emergency oil stocks, demand restraint, and demonstrating mutual solidarity;
- works together on an international scale to achieve energy efficiency and foster renewable energy;
- holds discussions with oil-producing countries; and
- monitors the international oil market.
In addition to this IEA programme, the European Union (EU) has established comparable regulations to ensure security of supply for its member States. For members countries of these two institutions – which is the case of Belgium – both regulatory frameworks apply.
The IEA and the EU regularly evaluate their member states’ crisis policies.
APETRA (Agence de Pétrole – Petroleum Agentschap) manages Belgium’s emergency stocks. APETRA injects these stocks into the market when national or international oil crises occur to limit the crisis impact on society.
Does Belgium have emergency oil stocks?
As a member of the International Energy Agency (IEA) and the European Union (EU), Belgium maintains emergency oil stocks to comply with the obligations imposed by these two international bodies. Belgian emergency stocks can be used:
- within the context of a joint IEA initiative aiming to boost global oil supply;
- to assist other member countries of the IEA (called a “collective action”); or
- as an initial response to national or local problems.
These emergency oil reserves correspond to at least 90 days of net oil imports.
How large are Belgium’s emergency stocks?
The minimum amount of emergency reserves that each country must maintain to meet International Energy Agency and European Union requirements represents the equivalent of 90 days of net oil imports in the preceding year. Countries are free to maintain larger emergency stocks.
Belgium complies with this 90-day requirement. However, the actual size of the stocks varies from year to year. On average, it is equivalent to 3.5 million tonnes of crude oil.
What emergency stocks does Belgium maintain?
Belgium’s emergency stocks are made up of crude oil and refined petroleum products (such as diesel fuel).
Who manages Belgium’s emergency stocks and what does this management imply?
Member countries can entrust the management of their emergency stocks to oil companies active in their country and/or to an agency created specifically for this purpose – which is the case in Belgium.
The International Energy Agency (IEA) and the European Union (EU) provide for two systems of emergency stocks management:
- stocks “in property”: member countries have purchased stocks of oil products;
- stocks “under the form of tickets”: member countries purchase the right to buy an agreed amount of products if an oil crisis arises. “Tickets” are commercial contracts, and the products are physically held by the oil companies.
In Belgium, the emergency stocks are managed by APETRA (Agence de Pétrole – Petroleum Agentschap), a “société anonyme de droit public à finalité sociale” (public limited company with a social purpose).
These management tasks include:
- funding and purchasing oil stocks;
- concluding contracts for the storage of these stocks;
- performing quantitative and qualitative inspections of these stocks and, as needed, replacing them;
- concluding insurance policies;
APETRA works with the Directorate General for Energy of the FPS Economy on several fronts, including drafting and amending the national oil crisis policy and reporting to international bodies. APETRA maintains close ties with similar agencies in other IEA countries.
What is APETRA? How is it funded?
APETRA (Agence de Pétrole – Petroleum Agentschap) is a “société anonyme de droit public à finalité sociale” (public limited company with a social purpose) created by Belgium’s Law of 26 January 2006. The Belgian federal government is its sole shareholder.
APETRA’s activities are funded by a contribution on the volumes of transport and heating fuels (gasoline, diesel, heating oil, lamp oil, jet fuel and heavy fuel oil) sold in Belgium.
This contribution is calculated by the FPS Economy on a quarterly basis taking into account a number of cost factors. It fluctuates more specifically according to the international oil price and interest rate.
Where are Belgium’s emergency stocks held?
Belgian emergency stocks are located both within Belgium and in neighbouring countries. For stocks located abroad, agreements on control, declaration and repatriation in case of an oil crisis have been signed with the governments of the countries concerned.
Have these emergency stocks ever been used?
Since the creation of the International Energy Agency, the emergency stocks have been deployed three times in an internationally co-ordinated action:
- prior to the Gulf War in 1991;
- following the damage to the drilling platforms and oil infrastructure when Hurricanes Katrina and Rita struck the Gulf of Mexico in 2005; and
- in the context of the 2011 Libyan Civil War.
At a country level, Hungary, Germany and France – to name just a few – have recently injected emergency oil reserves into their local markets. These injections were in response to issues with a pipeline, low water levels in certain rivers or a state of civil unrest.
Who decides to declare an oil crisis?
If there is a threat of an international oil shortage, the Governing Board of the International Energy Agency (IEA) decides whether there is an oil crisis. It then assesses whether a coordinated action should be undertaken and determines its scope, nature, and duration. When the IEA decides that collective action is necessary, Belgium’s participation is mandatory.
If Europe’s oil supply is threatened, the European Union (EU) can also declare an oil crisis. As most EU Member States are also members of the IEA, unilateral action by the EU is highly exceptional. As a general rule, when the IEA makes a decision, the EU follows suit. These two bodies work together closely, and the EU defends the position of its member states who are not IEA members.
In the event of national or local supply or distribution problems, national authorities have the authority to declare an oil crisis. In Belgium, it is the Federal Council of Ministers that decides whether the government should take action; the Federal Energy Minister then sets the concrete conditions for this action.
Can other countries assist Belgium during an oil crisis?
Yes. Other International Energy Agency and European Union member States can make their emergency reserves available to Belgium, and vice versa. These two institutions operate on the basis of international solidarity.
What happens in the event of an imminent oil crisis? Who decides the magnitude of a shortage?
When an event occurs somewhere in the world that might have an impact on global oil supplies or supplies in International Energy Agency (IEA) member countries, the IEA’s Secretariat enters a state of alert. Events are closely monitored and their potential impact on oil supplies is assessed in light of the current state of the oil market and the level of stocks available. The IEA Secretariat shares this information with all its member countries.
If the event begins to show signs of becoming an actual oil supply disruption, the IEA’s Governing Board may decide to take “collective action”. When this occurs, the European Commission acts as a go-between between the IEA and
the EU member states who are not part of the IEA.
In Belgium, the state of the market and possible disruptions to this market are monitored by the National Petroleum Board (BNP). This body has a comprehensive view of the available commercial and emergency stocks, as well as of the oil operators and their infrastructure.
In the event of an imminent oil crisis, the BNP advises the Federal Energy Minister on whether emergency stocks should be used, how best to inject them into the market, and what quantities and period of intervention will be required. On the basis of this advice, the minister issues a decision that may or may not be made after discussion in the Federal Council of Ministers.
How are Belgian emergency oil stocks made up?
APETRA (Agence de Pétrole – Petroleum Agentschap), which manages Belgium’s emergency stocks, maintains stocks of crude oil and refined oil products. To a limited extent, it also acquires purchase rights on stocks held by oil companies (also called “tickets”).
APETRA’s emergency stocks are kept in Belgium or near the Belgian border. They can generally be transported in bulk.
To plan ahead for the possibility of an oil crisis, APETRA has implemented general terms of sale applicable to its emergency stocks. It has also concluded agreements with its potential buyers and optimised the underlying logistical aspects.
How does APETRA make its emergency stocks available in the event of a crisis?
APETRA (Agence de Pétrole – Petroleum Agentschap) does not have its own logistical resources. Were an oil crisis to occur, APETRA would sell the oil products from its emergency stocks to market operators who then would distribute them as they do in normal market conditions.
APETRA, thus, sells them the amounts necessary to ensure proper supply levels in accordance with the strategic decisions made by the minister.
What price are APETRA stocks sold at?
APETRA (Agence de Pétrole – Petroleum Agentschap) sells its emergency stocks at the going market price at the time of the oil crisis. They are sold to the operators who ordinarily supply the bulk of the oil market.
Emergency reserves cannot be used, whether nationally or internationally, for the sole purpose of curbing high oil prices.
Will I be supplied by my normal supplier during an oil crisis?
Oil companies are legally required to comply with existing contracts (purchase or sale between operators, transport, distribution to end users). The use of emergency stocks simply aims to ensure the best possible supply of oil products.