Among the sectors that depend on a reliable supply of oil are private and commercial transport, shipping, aviation, heating, and manufacturing. As we have seen in the past, better energy efficiency, energy conservation and a switchover to technologies relying on other sources of energy can help reduce our dependency on oil. Given our high level of dependency on oil imports and the risks affecting the world market, we do, however, need to take precautions against short-term disruptions of our supply. Within the Federal Government, the Federal Ministry for Economic Affairs and Energy is in charge of ensuring energy security and taking precautions to shield ourselves from the effects of energy crises.
As of 1966, oil companies have been required to create reserves to be used during supply disruptions. Since then, the legal requirements underpinning Germany's reserves of petroleum and petroleum products have been amended several times, notably to bring them into line with European law and with the provisions of the International Energy Programme of 1974 - the programme under which the International Energy Agency (IEA) was established. Thanks to Council Directive 2009/119/EC on Stocks of crude oil and petroleum products (PDF: 801 KB) of 14 September 2009, the same stockholding requirements have applied since 2013 across all 28 EU Member States and the 29 countries that are members of the IEA. As far as Germany is concerned, the relevant provisions were transposed into national law by way of the Act on the Stockpiling of Oil and Oil Products, of 16 January 2012 (Federal Gazette I p.74 of 16 January 2012).
The Federal Office for Economic Affairs and Export Control is in charge of sending monthly updates about the amount and make-up of Germany's petroleum reserves to the European Commission and to the IEA Secretariat. Other important tasks of the Office include those of compiling the official petroleum statistics and monitoring compliance with stockpiling requirements by the organisation in charge of establishing and maintaining reserve stocks of petroleum. At EU and IEA level, the various Member States have formed working groups to discuss their policies around emergency oil supply and developments on the oil market.
Strategic petroleum reserves equivalent to 90 days' worth of domestic consumption
Since 1998, responsibility for Germany's strategic petroleum reserves has laid solely with the organisation in charge of establishing and maintaining reserve stocks of petroleum. This organisation is an institute under public law with legal capacity and answers to the Federal Ministry for Economic Affairs and Energy.
Under current rules, the Petroleum Stockpiling Association must ensure that Germany keeps strategic reserves of petroleum and petroleum products that are always equivalent to 90 days' worth of net imports. In other words, these strategic petroleum reserves are sufficient to offset three months of total disruption of all oil imports.
At present, the Petroleum Stockpiling Association keeps reserves of some 15 million tonnes of crude oil and 9.5 million tonnes of finished petroleum products to fulfil its legal requirements. Gasoline fuel, diesel, extra light fuel oil, and kerosene-type jet fuel are the most important fuels derived from oil, which is why Germany is keeping reserves of these finished products. Other products can be derived from the crude oil reserves that are being kept. Germany keeps reserves of petroleum products in all parts of the country, which allows it to respond quickly and successfully to any regional disruptions of supply. Most of the petroleum reserves are situated in caverns in the north of Germany. Using pipelines and tankers, the oil can be taken to the refineries to be turned into petroleum products.
The cost of the reserves is borne by the companies in Germany that import or produce gasoline fuel, diesel, extra light fuel oil or kerosene-type jet fuel. They are subject to fixed contributions of €3.56 per tonne, which is equivalent to 0.3 euro cents per litre of diesel or extra light fuel oil, 0.27 cents per litre of gasoline fuel, and 0.285 cents per litre of kerosene type jet fuel.
Fast response in the event of disruption
The petroleum and petroleum products that are held in reserve can quickly be put on the market in the event of impending or acute disruptions to supply, thus helping to prevent shortages. In such an event, the Federal Minister for Economic Affairs and Energy would issue an ordinance pursuant to the Oil Stockpiling Act, reducing the storage requirements for a limited period of time time. The Petroleum Stockpiling Association would then offer the reserves that have thus been "freed up" to its member companies at market prices. Within just a few days, this would enable market players to access additional amounts of gasoline fuel, diesel, kerosene, and heating oil.
The exact circumstances under which reserves can be freed up are listed in Section 12(1) of the Oil Stockpiling Act. They include situations whereby action is needed to counteract an impending or actual disruption to the energy supply, a substantial and sudden drop in deliveries of petroleum or petroleum products, and situations whereby action is taken pursuant to a decision by the IEA Governing Board.
Within the spirit of the Oil Stockpiling Act (rather than according to the letter), the main criterion to be taken into account is "a disruption to the physical supply of petroleum/petroleum products". Nevertheless, any impending or actual disruption must also be considered in terms of its economic impact. Reserves must, however, not be freed up for the primary purpose of bringing down market prices.
In Germany, there have so far been three cases in which strategic oil reserves have been freed up, always on the basis of a joint decision taken by the members of the International Energy Agency. These were during the Gulf War of 1990/91, in 2005 following the havoc wreaked by hurricanes Katrina and Rita in the U.S., and in 2011, when supplies from Libya were interrupted.
Amendment of the Oil Stockpiling Act
There are four main objectives that are to be achieved by the amendment:
- the Petroleum Stockpiling Association is to be opened up for member firms based not only in Germany, but also in other EU Member States, Norway and Switzerland.
- Domestic petroleum companies are to be granted permission to hold reserves for parties from third countries that are required to hold such reserves.
- In light of the fact that shipping fuels, which are not subject to stockpiling requirements, are now often mixed with diesel to make them more environmentally friendly, companies are to be given the choice whether they want to continue to pay the relevant contributions after storage or make the payment right after the fuel has been mixed. This second option has the advantage of eliminating the need for companies wishing to be reimbursed to ensure that the exact quantities of diesel contained feature on all documents throughout the supply chain between mixing and storage.
- The Petroleum Stockpiling Association is to be given greater leverage when it comes to contracting, so that it can better respond to the specifics of the petroleum business and of each individual storage site.
On 3 August 2016, the Federal Cabinet adopted draft legislation on the stockholding of oil, on the collection of data on mineral oil, and on the transition to high-calorific gas. Click here (PDF: 209 KB, in German only) to read the text of the draft legislation. For the comments submitted by industry associations, other associations and the Länder, please click here (in German only). Comments are available subject to stakeholders' approval.