Almost two weeks after the start of the war in Iran, the member countries of the International Energy Agency decided on March 11 to put 400 million barrels of oil from their emergency reserves on the market. This corresponds to four days’ global consumption. The move was intended to offset the already sharp rise in oil prices. Although this did not work, oil companies have since been able to access the released quantities and buy them at market prices. This happened for the first time in Austria on Monday.
OMV bought 56,000 tons of the total 325,000 tons of crude oil available. They are now pumped from the storage facilities of the state oil storage company (ELG) to the Schwechat refinery. “Due to the closure of the Strait of Hormuz, there is currently less crude oil available to the world market and this coordinated measure is intended to counteract this and thus contribute to calming the market. ELG is well prepared for such outsourcing and is also well equipped for possible further crisis scenarios,” said ELG’s managing director, Michael Niklas, in a statement from the Ministry of Economic Affairs. In total, ELG manages 2.47 million tons of oil and fuel reserves. About ten percent of this is gasoline, the rest is about half crude oil and middle distillates (diesel, kerosene, heating oil).
The ministry continues that the purchase of OMV from the emergency reserve is not a sign of an acute supply problem. However: “Austria is not isolated from the world market. If the international situation does not ease, it will also have an impact on Austria.” The previous week, the Minister of Economics, Wolfgang Hattmannsdorfer (ÖVP), who is responsible for energy, said that there could be less supply of diesel and kerosene in Europe from May. Specifically, five percent of the required diesel and 15 percent of the required kerosene could be missing.
The supply situation for aviation fuel is therefore particularly precarious. This has already become apparent in recent weeks, when several smaller airports in Europe reported that they no longer had enough kerosene for all commercial flights. In Germany, the federal government called for a summit on Monday, attended by, among others, Economics Minister Katherina Reiche (CDU) and representatives from utilities, airports and airlines. But in Berlin it was also stated that the supply situation remained secure for the time being despite the worsening situation.
But why are diesel and especially kerosene the first to become scarce? There are several reasons for this. First of all, crude oil cannot be processed into the various products arbitrarily, but three groups are always created: light products such as gasoline, middle distillates such as diesel and kerosene, and heavy oils, such as those burned in ships. However, there may be shifts depending on the starting crude oil (the lighter, the more light products) and the refinery’s setting. Due to the heavily gasoline-heavy vehicle fleet in the USA, US refineries usually produce almost half gasoline, around a third diesel, ten percent kerosene and the rest heavy oils. In Europe, however, diesel is the most important refinery product with up to 45 percent. Followed by gasoline with a third, kerosene again around ten percent and the rest heavy oil.
In particular, the area of middle distillates cannot be increased at will – but this is where the greatest demand is often found. Air traffic has increased steadily in recent years. And diesel not only powers the majority of cars in Europe, but is also crucial for the transport industry. A shift would only be possible within the middle distillates – i.e. more kerosene and less diesel. But this usually doesn’t happen because the margins for diesel are higher than for kerosene.
All of this means that Europe has long been a net importer of diesel and kerosene. Diesel often comes from the USA, while at the same time gasoline is brought to the United States from Europe. The import share of diesel is almost ten percent. However, import dependency is significantly higher for kerosene, where it amounts to around 25 percent. About half of this shortage is covered by the Gulf region and East Asia. Saudi Arabia in particular is an important exporter of kerosene – and also diesel. And these supplies, like crude oil, are now stuck in the Persian Gulf due to the closure of the Strait of Hormuz.
In Austria, however, people are much more relaxed when it comes to the issue of kerosene supplies. Vienna Airport is supplied with kerosene entirely through a pipeline directly from the Schwechat refinery. As long as there is enough oil, there can be no kerosene shortages at the airport, they say.
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