Petroleum stocks: a symptom of bureaucratic incompetence

In a recent blog Paul Homewood highlighted an interesting video by Ed Conway of Sky News about the UK’s supplies of aviation fuel. While there is a lot to learn from the video I want to focus on one aspect to draw out its implications. Conway shows a graph of the level of stocks of diesel fuel expressed as a multiple of average monthly imports for countries that are members of the International Energy Agency (IEA).[1]

The average level of diesel stocks across IEA countries is 7.1 months, while at the top end Japan has 23 months of stocks. The UK’s stocks amount to 1.5 months of monthly imports, barely 20% of the average across countries and much less than 10% of the ratio for Japan. Conway shows that the stock position is very similar for jet fuel, whereas the situation for petrol/gasoline is entirely different because the UK is a net exporter of gasoline.

Diesel and jet fuel are important because they are critical for the operation of the commercial transport sector in the UK. If we run out of diesel fuel, most economic activity from the delivery of food to supermarkets and components and spare parts required by business will begin to freeze up. A world of just-in-time supplies is completely dependent on the diesel used by commercial transport. Jet fuel is nearly as important, both because air freight is critical for high-value supplies while passenger transport is crucial for an economy that is based on services and tourism.

There is a history to this issue. The IEA was formed after the oil shock of 1973 by members of the OECD who wanted to coordinate their energy policies. An important consideration was the selective embargo on exports of oil to certain OECD countries by Arab members of OPEC. Members of the IEA agreed to share oil stocks were a similar embargo to be applied in future. As part of that agreement, IEA members also agreed to maintain oil stocks of at least three months of net imports. Subsequently, the EU adopted a directive which increased the minimum level of oil stocks for EU member countries to four months of net imports. Countries in Europe in Europe have tended to hold stocks of between four and five months of net imports.

As always with such agreements there was substantial wiggle room in how the broad rules were interpreted. The UK was a major oil producer and until 2005 it was a net exporter of crude oil and petroleum products, so the IEA and EU rules did not apply. By the middle of the 2010s the UK had become a substantial net importer – the equivalent of about 500,000 barrels per day or 25 million tonnes per year. Net imports have continued to grow since 2015, driven by a decline in oil production and in refining capacity. They were about 33 million tonnes in 2024. UK production of crude oil was 31 million tonnes in the same year. More than 90% of this output is exported because it cannot be processed efficiently by the remaining UK oil refineries.

From the perspective of energy security, Conway’s focus on stocks of petroleum products relative to net imports is entirely correct. Stocks of imported crude oil – largely from the US and Norway – are not a substitute for stocks of products, because refining capacity is close to fully utilised and domestic output of diesel and jet fuel accounts for a modest share of domestic consumption.

At the end of 2025, the UK (just) met the IEA target that oil stocks should exceed 3 months of net imports with total oil stocks of 9.2 million tonnes, which is 3.3 months of net imports of 33 million tonnes per year. However, the composition of stocks is all wrong. The country’s stocks of middle distillates (kerosene, jet fuel and diesel) were only 2.7 million tonnes, while net deliveries (a proxy for total consumption) of middle distillates in 2025 amounted to nearly 41 million tonnes. In simple terms, the UK holds adequate stocks of crude oil and petroleum products that it exports but minimal stocks of the products that it imports.

This is a classic illustration of how an incompetent bureaucracy behaves. There is a target that was introduced in the past. Its purpose was to enhance energy security by reducing vulnerability to shocks in the world oil market and, especially, disruptions to the supply of imports. At the time, the target was of minimal interest to policymakers because the UK became a net exporter of crude oil and petroleum products. However, by 2015 the UK had become a substantial net importer of crude and petroleum products. Since then, the country has become heavily dependent on imports of middle distillates because of reductions in refining capacity and increasing consumption.

Has the bureaucracy adjusted in any reasonable way to the changing level and pattern of vulnerability? Of course not! Because the UK appears to meet the overall IEA target, it is probable that policymakers have not been briefed properly on the implications of the mismatch between stocks, consumption and imports. So, normal bureaucratic life rolls on until, suddenly, imports of critical petroleum products from countries like Kuwait are interrupted. What was intended as an insurance against precisely such an event proves worthless, because no-one in the Department of Energy Security and Net Zero (DESNZ) is even minimally bothered about the first half of the department’s name.

In its defence the bureaucracy may argue that it does not have powers to intervene in commercial decisions made by importers and fuel suppliers. Stocks of middle distillates are close to the minimum required for the operation of the domestic supply network. Maintaining higher stocks means that individual importers and suppliers will incur higher costs than their competitors unless a uniform obligation is imposed on everyone. Rather than focus on total oil stocks, the regulations on oil stocks should apply on a product basis. By neglecting this, the DESNZ bureaucracy has left households and businesses extremely vulnerable to the impact of disruption in petroleum product imports.

One final point. I noted that Japan has a very high level of stocks of petroleum products relative to net imports. Allowing for the difference in population, stocks of middle distillates in Japan are not significantly higher than the equivalent stocks in the UK. The difference is that the UK is far more dependent on imports of middle distillates than is Japan. It is the decline of domestic refining capacity in the UK that has made the country so dependent on imports of petroleum products. That decline is almost certainly irreversible, but the consequences have clearly not sunk into the perceptions of the bureaucracy and policymakers.

[1] The definition includes stocks at refineries, tank farms, and supply depots but excludes stocks at filling stations and other retail outlets.