Agreement on fuel reserve organization debated

  • 2004-09-22
  • From wire reports
RIGA - Though the onus of setting up strategic fuel reserves is required by EU directives, a Sept. 16 meeting between the Union of Fuel Traders and Producers, Parliament's economy committee and the Economy Ministry failed to reach an agreement.

Responsibility for establishing the reserves lies with Latvia's fuel wholesalers and retail companies, but the union said it believes that a specific organization, one that enjoys state-guaranteed loans, should be set up for the job. Union President Jevgenijs Kisiels said that in addition to investing in reserve facilities, such an organization could buy up fuel when the prices were low and sell it off when they rose 's thus covering costs of operations.

What's more, the union is against the state-defined regulations requiring both fuel importers and wholesalers to cover the required fuel reserves, claiming that this would cause bankruptcy en mass for local wholesalers, leaving only a few large players on the market and rising prices for consumers.

Kisiels said that although similar plans had been carried out in Lithuania and Estonia, "Here it's all put on the shoulders of the businesses."

Ugis Sarma, director of the Economy Ministry's energy department, said he doubted whether a single centralized state agency could reduce the pressure on fuel consumers. He added that such centralized organizations could be established but not by the state.

He suggested the German example of using associations.

MP Aigars Kalvitis, chairman of the economy committee, referred to the issue as a "ticking bomb" since there was nowhere to store the fuel. However, he added that, by definition, the state could not deal with storing fuel.

Fuel trading company representatives pointed out that Latvia has no EU-level oil product reservoirs and that the construction of such facilities is hindered by businesses' lack of security and stability.

The union said that the Economy Ministry ignored certain directives when developing the regulations for strategic fuel stocks, causing an unequal situation for businesses in Latvia compared with other EU countries.

The ministry is currently working to amend the regulations, which should ease the process for businesses.

As of July 1 this year, fuel importers in Latvia must provide for 30 days of strategic fuel reserves. The amount will have to reach 60 days of fuel reserves by 2009, and the European Commission has suggested that countries build up fuel reserves of 120 days in order to prevent or lesson the effects of a fuel supply crisis.

Together the Latvian Union of Fuel Traders and Producers includes around 70 percent of the country's retail companies, 60 percent of wholesalers and also bio-fuel producers.