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The Department of Energy & Climate Change Case Study

Compulsory Stocking Obligations on Refiners and Non-Refiners in the UK


The Department of Energy & Climate Change


United Kingdom


IPA and Muse, Stancil & Co. were commissioned by the UK Government’s Department of Energy & Climate Change (DECC) to undertake independent research, modelling and analysis to assess the level of Compulsory Stockholding Obligation (CSO) arrangements that needed to be imposed on refiners and importers to ensure that the UK continued to meet its international oil stocking obligations.


IPA developed a bespoke model of the UK’s oil consumption, production and imports up to 2030, to forecast future stockholding requirements. The model was also designed to calculate the necessary individual obligations on market participants in order to meet the national aggregate obligation over the period to 2030, and assess the cost of meeting the obligation under different UK continental shelf production, declining refinery throughput and CSO policy sensitivities. IPA also undertook a cost assessment in order to assess the economic strengths and weaknesses of each policy sensitivity.


IPA also held stakeholder meetings with the trade associations the UK Petroleum Industry Association (UKPIA) and the Downstream Fuel Association (DFA) in order to discuss and understand their views on the current stockholding arrangements and their approach to meeting any changes to the stockholding differential and obligation.


IPA provided policy recommendations based on the assessment, and delivered a user-friendly model encapsulating all of the analysis with flexibility for additional sensitivities and to be updated with the latest market data and trends. Based on the findings, IPA drafted an independent policy paper for DECC.


IPA successfully delivered to DECC a quality-assured model and a report within time and budget.


A CSO consultation paper and impact assessment referring to IPA’s report has since been published on DECC’s website.