Treasury and DTI split over oil stockpile

The Government is thought to be split over proposals to set up a state-managed non-profit agency to maintain Britain's strategic stockpile of emergency oil supplies.

The Government is thought to be split over proposals to set up a state-managed non-profit agency to maintain Britain's strategic stockpile of emergency oil supplies.

The Treasury and the Office of Fair Trading are believed to be sympathetic to the idea put forward by the oil industry. However, the Department of Trade and Industry, which is in charge of energy policy, remains opposed to the creation of an agency, arguing that oil refiners and importers themselves should be required to maintain the 90-day stockpile of petrol, diesel and aviation fuel.

A three-hour session was held at the DTI's headquarters on Thursday to discuss the proposal but it ended with the chair of the meeting, Ann Egginton - the director of international and infrastructure energy policy at the DTI - refusing to budge.

However, Treasury and OFT officials present at the meeting are thought to have been more supportive of the idea. The oil industry claims that if it is forced to keep 90 days' inventory at refineries, it could force up petrol prices. There are also fears that the cost burden of holding such large stockpiles will squeeze out independent oil wholesalers who supply petrol to the big supermarket groups.

The industry delegation, led by the UK Petroleum Industry Association, the Association of UK Oil Independents and the Federation of Petroleum Suppliers, is now expected to press for a meeting with the Energy minister, Mike O'Brien.

Because of the UK's extensive North Sea oil reserves, it has a derogation requiring it to hold only 67.5 days supply in the case of refiners and 48.5 days in the case of non-refiners such as supermarket groups rather than 90 days. However, as the UK's North Sea supplies run down, the derogation will end, probably sometime between 2010 and 2015. The US and most big EU states, with the exception of Italy, have set up agencies to run their stockpiles.

A spokesman for the DTI said yesterday: "The Government's position remains that companies should hold the stockpile themselves. We are prepared to continuing discussing the proposal for an agency but we are still not convinced this is the way for the UK to go."