The oil market is essentially global. Oil is traded and priced globally, and oil suppliy security is ensured on a global basis. Oil supply security is thus ensured by widespread international collaboration. No country can handle an oil supply crisis on its own.
The international collaboration is primarily managed by the International Energy Agency (IEA). The sector is also subject to EU regulation. The international obligations are decisive for the Danish emergency oil stockholdings. In the perspective of oil crises, it is of no consequence that Denmark is currently self-sufficient in crude oil because, in a crisis, Denmark will, as a result of international solidarity, experience the same problems as the oil-importing countries. Thus, the Danish oil sector is primarily vulnerable to oil supply disruption on the global market. Such crises have severe financial consequences for the global economy and for the various countries. Therefore, international collaboration has served to establish an extensive and efficient preparedness for such risk. This collaboration is based on solidarity among the countries.
The International Energy Agency (IEA)
The IEA has instituted joint action to counter supply crises three times:
- in 1990/1991: During Iraq’s invasion of Kuwait, and
- in 2005: When Hurricane Katrina damaged platforms, pipelines and refineries in the Mexican Gulf, and
- in 2011: The Libya crisis.
The emergency preparedness plans were ready to be put into action in connection with the Iraqi war in 2003, but intervention became unnecessary.
Denmark participated in the release of oil stockholdings during the Iraqi crisis in 1990/1991 and during Hurricane Katrina in 2005.
All the member states of the IEA are obligated to hold oil stockholdings equating to 90 days’ net import. Since Denmark is currently a net exporter of oil, Denmark has no stockholding obligation to the IEA at present.
The European Union (EU)
Like the IEA, the European Union has laid down rules for the stockholding obligations of the various countries. Under the EU rules, the member states must have stockholdings equating to at least 90 days’ consumption of each of the three separately defined categories of oil products. In so far as a member state has a domestic production of crude oil, the member state’s obligation stockholding obligation to the European Union is reduced by 25% of the said 90 days’ stockholding obligation. Denmark’s stockholding obligation to the European Union thus equates 67.5 days’ consumption.
The European Union has grouped the key oil products generated by refinement of crude oil into the following three product categories:
Category 1: Light distillates, especially motor fuel and aviation petrol.
Category 2: Medium distillates, especially gas and diesel oil as well as jet fuel and paraffin oil.
Category 3: Heavy distillates, especially fuel oil.
Compared to the IEA, collaboration with the European Union is primarily of a regional character, and it functions chiefly as a supplement to the IEA collaboration. The European Union’s crisis management is mainly based on experience-sharing and co-ordination of interventions between the member states, whenever this is deemed necessary.