The House of Commons Energy Select Committee published its findings from its short inquiry on UK Oil Refining on July 26. UKPIA, along with some other downstream organisations and companies, submitted written evidence and gave oral evidence back in June. The key conclusions of the ECC are reported in the news story on page four. My response is progress indeed, but what we need is action, as time is not on our side.
The ECC inquiry complements the ’Call for Evidence’ from DECC on refining and the wider supply of fuels. As an evidence base, DECC’s study draws on a report published in May by energy analysts Purvin & Gertz. DECC’s aim is to develop a policy framework for the downstream sector, taking into account among other things security of supply and resilience both nationally and regionally. All in all, it has been a significant year, as DECC has also consulted on overhaul of the UK’s system for meeting our compulsory oil stocking obligations to ensure that a robust and transparent system is established in preparation for an increase in our stock obligation in the next decade. UK refiners are not seeking subsidies or special treatment, or indeed the rolling back of environmental or safety legislation merely a level playing field with competitors. You may ask what interest is all this to someone trying to run a filling station? Well, indirectly a great deal because it has a potential impact on future supply of diesel. Domestic refining provides optimum supply resilience with the flexibility to refine product or import. In a worst case scenario of further UK refinery closures our import dependence for this product could rise from the current level of around 48% to over 75%. Furthermore, the estimated legislative compliance cost for UK refineries of some £11bn between now and 2030 absorbs the whole refining margin making it impossible to make a commercial case for major investment by UK refineries to address the shortage of diesel production. There are grounds for optimism since we have an Energy Minister who clearly is aware of the issues and with his Dept for BIS hat is keen to see the UK improve its competitiveness.
Finally, some more positive news a new Petroleum Driver Passport for road tanker drivers, developed through the Downstream Oil Distribution Forum.