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Fuel emergency part 2: IEA plan

The issue of planning for and administering fuel emergencies is complex and multi-layered, involving a range of commercial interests, government agencies and a tangle of legislation, policies and jurisdictions, one of the largest and most influential of which is the International Energy Agency, an autonomous body within the framework of the OECD.

IEA Response Plan

The IEA itself was formed in response to the 1973 oil crisis and energy supply security is one of its stated core missions. The IEA emergency response mechanism was set up in its 1974 International Energy Program (IEP) Agreement which obligates its member countries:

  • to hold oil stocks equivalent to at least 90 days of net oil imports
  • to implement domestic measures to manage a major oil supply disruption
  • to share available oil with other member countries

(More information on the IEA’s work on energy security may be found here.)

The IEA response to a supply emergency consists of four strategies: production surges and stockdraw from industry and public reserves to increase supply, as well as fuel switching and demand restraint to reduce demand. The IEA itself indicates that two of its four cornerstone measures are unlikely to be very effective since “decreasing capacity to switch fuels in power generation or transportation and limited surge production capability now make these response measures less viable” (IEA Response, p. 6). That effectively leaves only two responses, stockdraw and demand restraint. In 2008 the European Commission released a couple of backgrounder documents as part of its consultation regarding the ability of EU countries to manage a major oil emergency. These documents identify several problems with relying on stockdraw as an emergency response measure. The second response, demand restraint, could involve voluntary and legislated measures at the domestic level, voluntary and/or compulsory "burden sharing" of oil resources with stricken countries if requested by the IEA, and at the last resort, rationing of oil and gasoline supplies.

This brings us into uncharted territory insofar as there have been very few fuel emergencies in the past half-century which required the imposition of a formal rationing system. However, recent warnings about peak oil and export decline (see Fuel Emergency #1, Jan. 19/09) should be sufficient to alert us to the increasing likelihood of such a scenario.

Questions which are sure to arise with any full-scale rationing program include:

  • what categories of users or uses should exist?
  • how will these be defined?
  • how will these users be identified/verified by suppliers of fuel?
  • should the public be advised of this identification (ie. who will receive preferred access to fuel, and who will not)?
  • how will service station personnel manage their new role (as verifiers and allocators to those who are entitled, and enforcers to those who are not)?
  • how will traffic flow, compliance and security at filling stations be managed?
  • will price caps be implemented?
  • if so, how will fuel companies be compensated should they find themselves in a money-losing situation?
  • if not, how will low-income citizens survive when fuel prices become prohibitive for them?

These are complex questions which cannot be resolved easily. The most comprehensive effort at addressing appears to be in Australia, which began a thorough and ongoing examination of its Liquid Fuels Emergency Act in 2004. Particularly noteworthy in this regard is the analysis of ACIL Tasman, a private sector company which was hired to assess Australia’s LFE Act. Their assessment totals hundreds of pages and addresses most of these questions in a very thoughtful manner.

I am not aware of any other study which examines the complexities in such detail. Most government plans prefer to side-step the contentious (but crucial) issue of identifying Essential Users until the situation requires it. However, given the swiftness and potential severity of an unprecedented oil supply emergency, governments may find that effective action is severely constrained by delaying such a task until a crisis is actually underway. Even the IEA (which appears to offer no guidelines for defining how Essential Users or Essential Uses might be determined) suggests that such measures be ‘ready-to-go’ in advance.

In its comprehensive document entitled “Oil Supply Security” (2007, 384 pgs) the following points are made:

  • “The need for strategic emergency response mechanisms has never been greater” (p. 3).
  • “Being ready for swift, concerted and targeted action is more crucial than ever before” (p.22).
  • “The more restrictive, mostly heavy-handed measures… may be most effective during the early stages of an oil emergency to help avoid “panic” behaviour, such as fuel hoarding” (p. 46).
  • “The IEA has enhanced, refined and strengthened its emergency response mechanisms to offset the impacts of short-term oil supply disruptions” (p. 3).
  • The IEA emergency policy… is not a tool for price management or long-term supply issues…” (p. 22).

The first three points stress the need for an effective plan which addresses current realities and which can be implemented on short notice. An earlier IEA examination of ways to reduce demand in the transportation sector is entitled “Saving Oil in a Hurry” (2005, 164 pgs). It recommends keeping the public well informed on the emergency plan so as to give everyone fair warning and to encourage mitigation planning by citizens and agencies well in advance. It points out that “the immediate public reaction to a drop in fuel supplies may be panic and hoarding behaviour …. It is not enough for countries to have a list of measures to use; they must be ready to implement those measures on very short notice. To do this, they generally must develop detailed plans and make certain investments ahead of time. Communicating this plan to the public also appears very important; if the public is not well informed of plans ahead of time, and supportive of them, they may be less likely to cooperate…” (p. 15).

One apparent deficiency is that while emergency response plans exist at the national level (as a condition of IEA membership), the practical implementation of rationing will be done at the local filling stations. However, there seems to be a communication gap between the various levels of government here in North America. Plans for fuel emergencies at the state and provincial level appear to rather minimal in many cases, and state and provincial authorities are sometimes not aware of the federal plan and how it works. Furthermore, I am not aware of any emergency plan at the municipal level (in any country) which would allocate fuel to the general public. However, the general public has significant fuel requirements and it at the local level that some very difficult allocation decisions must be made and implemented.

Many of the municipal officials with whom I’ve been in contact have indicated that they are not familiar with the federal plan, that they have doubts about the efficacy of provincial/state plans, and that they have serious concerns about the general lack of a fuel reserve cushion and our widespread reliance on just-in-time delivery. There are also doubts about how a ‘run’ on fuel supplies could be prevented (in which case locally available fuel could be depleted very quickly). In short, many municipal officials see their fuel supply as an issue which is remote and beyond their control (“We can only work with what we receive”) and thus primarily a matter for higher-level authorities.

Meanwhile, most citizens seem oblivious to even the possibility of a major oil supply problem, much less to these the details of how such an unprecedented scenario might be administered. (Indeed, some emergency planners and Ministry/State officials seem unclear on these details, so communication & awareness seem to be rather pervasive concerns.) The UK has a plan but it is a restricted document, not available to the public. This is clearly a hindrance to contingency planning, since citizens can hardly be expected to plan for a scenario when they are denied access to the ground-rules. As the Tasman study points out, “It is nigh impossible for fuel users to devise a sensible contingency plan without knowing how a fuel supply shortfall would be handled” (ACIL Tasman Report, p. 19).

Similarly, in countries where the plan is not restricted, but where the public has never been alerted to the plan (nor to the evolving circumstances which may suddenly require it), the result will essentially be the same: those citizens will not plan, either. Related to this lack of contingency planning is the apparent expectation by people that they would be identified as Essential Users and thus entitled to a fuel allocation. As the Australian Petroleum Institute pointed out, “the perception that all consumers are essential users has to change…. all jurisdictions need to define their essential users and make the definition known publicly” (Explanatory Memorandum, 2007).

Finally, the fourth point (above) indicates that the IEA itself recognizes the clear inadequacy of its own plan to deal with “long-term supply issues.” In light of the warnings in the IEA’s recent World Energy Outlook that “current global trends in energy supply… are patently unsustainable” and the growing recognition that conventional oil production will almost certainly peak before 2020, emergency planners need to acknowledge that it is entirely possible that we could get caught in an unprecedented oil supply squeeze, for which we have no plan at all. There are few problems which have greater potential to quickly unsettle the North American public and strain essential services than suddenly being denied access to fuel. Whether citizens, agencies and businesses are excluded under a rationing regime or simply priced out of the market, the result for them will effectively be the same.

The result for the larger community may be civil disorder.

Editorial Notes: You can find the first installment of this series here. KS

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