Britain facing fresh oil supply crisis, warn independents

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The Independent Online

Britain is in the grip of a fresh oil crisis, with supplies to hospitals, petrol stations and households all under threat, according to independent wholesalers and retailers.

NHS Trusts on interruptible gas contracts have begun frantically shopping around for oil supplies to heat hospitals, while petrol stations in the South-east are said to be begging independent wholesalers for fresh stocks.

Some heating oil distributors are reported to be refusing to supply business or domestic customers because they do not know when they will be able to get new stocks, and householders who rely on oil to heat their homes are facing delays in getting supplies just as the country braces itself for a cold snap.

The Association of UK Oil Independents (AUKOI), which represents the country's largest privately owned distributors and importers and all of the major supermarket chains apart from Asda, fears that once the extent of the problem emerges it will trigger panic buying, making the crisis still worse. There were reports last night of petrol stations in north-west London running out of supplies, with motorists having to drive miles to fill up.

The looming crisis has been caused by a combination of factors such as bad weather, Hurricane Katrina, the Buncefield oil depot fire and fears that the dispute between Russia and Ukraine over gas supplies would cause a run on oil. But it has been exacerbated by the sharp rise in gas prices, which has prompted some gas-fired power stations to switch to gasoil and kerosene. This has reduced the amount of refining capacity available to produce petrol and diesel and also threatens to squeeze supplies of home heating oil which many householders in rural areas rely upon.

Even though the state-owned Russian gas company Gazprom restored supplies to Europe yesterday, crude oil prices leapt by more than $1 to $62.40 - their highest level since late October - while UK wholesale gas prices rose as much as 8 per cent.

Phil Maud, the chairman of AUKOI and chief petrol manager for the Morrisons supermarket chain, said diesel supplies were particularly tight in the south-west of England because of a shortage of refining capacity. He also said he had heard of hospitals on interruptible gas supplies shopping around for oil before Christmas and gas-fired stations switching to kerosene, which had put pressure on supplies of domestic heating oil.

"The problems are rooted in what is happening in the gas industry and the problems the gas power stations are having in getting supplies. They have increased their use of other oil products and that has meant a lot of other users are having serious issues in getting hold of supplies," Mr Maud said.

He said that although petrol supplies were "tight", independent retailers and fuel suppliers had got around supply problems by drawing stocks from oil storage facilities on the Thames. But other sources said demand had been so heavy that these had run dry in the week before Christmas. He added that there was no danger of the UK running out of petrol but warned that if there was another incident similar to the Buncefield fire at one of the Scottish or east coast oil depots then it could have a serious impact because of the UK's reliance on transporting fuel shipments from coastal sites into the centre of the country.

Oil companies have been urging the Government to set up a state-funded agency to run Britain's strategic stockpile of oil products but the Department for Trade and Industry says it is the responsibility of the industry. Under international rules, countries are obliged to hold a 90-day stockpile. Because of its North Sea oil reserves, the UK has a derogation, requiring refiners to hold only 67.5 days' supply and non-refiners such as supermarkets 48.5 days' but this will end in the next few years as the UK's oil reserves run down.