Finland to dip into state oil reserves to ease US shortage

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Finland is to begin selling oil from the emergency stockpiles held by the state. The move is prompted by the shortage of gasoline in the United States resulting from the damage caused to the US oil industry by Hurricane Katrina. It is the first time that Finland uses its strategic oil reserves to help another country.
      The International Energy Agency (IEA) decided last week to take the stockpiles into use. Finland is one of the 26 member states of the IEA. The move is not expected to have an immediate effect on petrol prices for individual consumers.
     
The IEA proposed on Friday that its 26 member states should dip into their reserves and sell a total of two million barrels of refined fuels each day for the next month. Finland’s share would be 40,000 tonnes, which is one half of a percent of the total amount.
      Mika Purhonen, director-general of Finland’s National Emergency Supply Agency, says that the amount of fuel to be released is considerable. "Two million barrels is the equivalent of the daily output of an average-sized oil producing country, such as Iraq", he explains.
      The emergency stockpiles have previously been used only to meet domestic needs, such as covering for shortfalls of fuel during oil refinery shutdowns, or when there are interruptions in oil deliveries.
      The move is exceptional for the IEA as well. During the war in Iraq, the agency was prepared to dip into reserves, but an increase in output by Saudi Arabia made intervention unnecessary.
     
Finland’s stockpiles contain enough oil to meet the country’s needs for about five months. The state reserves are located in subterranean caverns in coastal areas and inland. There are also storage tanks at the Neste Oil refineries in Porvoo and Naantali.
      EU member states are required to maintain oil reserves equivalent to three months’ consumption. Finland maintains larger stockpiles because of local conditions: the country’s cold climate, long transport distances, and Finnish industry’s needs for large amounts of energy.
      "The IEA decision has already affected the markets, which have calmed down", Purhonen says. The fuel will be sold from the stockpiles at market prices to Finnish and foreign wholesalers, and consequently the move is not expected to lead to any sharp drops in retail prices of petrol.
      "The purpose is to shore up the US gasoline deficit. If the world market price for oil declines, prices could go down in Finland as well", Purhonen says.


Previously in HS International Edition:
  PM Vanhanen: Use of strategic oil reserves under consideration (5.9.2005)
  Gas price spike will be immediate and abrupt at Finnish pumps (2.9.2005)
  Gas prices may rise by ten cents a litre in wake of Gulf Coast hurricane (1.9.2005)

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