European Panic rush on fuel forthcoming? -------------------------------------------------------------------------------- ANALYSIS-UK risks panic rush on fuel as tax fury simmers

October 24, 2000 5:16am Source: Reuters

By Keyvan Hedvat

LONDON, Oct 24 (Reuters) - Britons hit by transport chaos last month may stampede back to the pumps as crunch day looms for government ministers facing a possible second fuel tax revolt, analysts say.

If government proposals expected to be announced in two weeks' time fall far short of most campaigners' demands, motorists are likely to start hoarding fuel amid fears of fresh refinery blockades.

``All major end-users will seek to fill their tanks in advance of the deadline,'' says Stephen Brooks, an oil analyst at consultants Wood Mackenzie.

The clock is ticking on a November 13 ultimatum from angry hauliers threatening a replay of refinery and oil depot blockades that brought Britain to its knees last month.

A pre-emptive nationwide burst of panic buying could hand more leverage to protesters by hastening the moment pumps run dry.

That would complicate the Labour government's attempts to resolve a crisis that resulted in its worst opinion poll since it came to power in 1997.

``The infrastructure is not there to cope with massive buying patterns,'' said Damien Kennedy of Paris-based Cambridge Energy Research Associates,

Although the government is dusting off an array of emergency measures to ensure energy flows, Britain's supply chain remains vulnerable if protesters are ready to risk prison to disrupt it.

CONTINGENCY MEASURES UNLIKELY TO HELP MOTORISTS

Like other European Union countries, Britain is required to hold strategic petroleum stocks of up to 90 days of consumption.

But Britain's spare stocks of 100 million barrels are mostly held at refineries, the prime targets of potential blockades.

``The problem last time wasn't producing the fuel,'' said Malcolm Watson of the UK Petroleum Industry Association.

``The ships were coming in, pipelines were bringing crude oil in from the North Sea; the problem was getting the fuel to the final consumer.''

Chancellor of the Exchequer (Finance Minister) Gordon Brown's is expected to address some of the hauliers' demands during his annual pre-budget statement, likely on November 8.

At 48 pence per litre, British fuel taxes are among the highest in Europe. The European average is just 19 pence.

While Treasury sources say nothing is yet set in stone, there is little doubt that the government will act. The fuel blockades in September left ministers looking helpless.

The Freight Transport Association, representing haulage firms, and the National Farmers' Union (NFU) have called for a 15 pence per litre cut in petrol and diesel duty.

But the more militant campaigners of the People's Fuel Lobby say they want nothing less than a 26.2 pence per litre cut.

``If the Chancellor does not indicate some movement, I think we will see panic buying after the (pre-budget) statement,'' said NFU deputy president Tim Bennett.

Analysts say that if the Chancellor fails to loosen the Treasury purse strings enough for the protestors, there is very little the government can physically do to prevent massive disruption to petrol supplies resulting from new blockades.

A government task force of oil firms, their transport contractors, transport unions and the police recently signed a memorandum of understanding to keep fuel flowing.

But observers say the memorandum is aimed mainly at ensuring oil for emergency services and essential users like public transport, leaving private motorists to fend for themselves.

PIPELINES NO USE

And while oil tanker drivers will be told by their union not to support any further protests, some fear for their safety.

British Home Secretary (Interior Minister) Jack Straw has warned against a repetition of what he called intimidation and thuggery by activists in September. Fuel campaigners deny the charge and say it is part of a government propaganda campaign.

Using army vehicles and pipelines to transport fuel and even drawing on Britain's emergency fuel stockpile are also options for the government to ensure supplies are maintained.

``All military units across the country -- army, navy, air force -- have stocks,'' said a Ministry of Defence spokesman. ``We'll ensure these are topped up to the maximum.''

But Brooks said an army-run state pipeline storage system dating from World War Two had ``no bearing on the problem.''

``The problem is going to be about blockading road deliveries - stopping deliveries by road tankers from depots or terminals to customers,'' he said.

Alternative transport modes like sea, rail and underground pipeline can all be used, but the last leg of the supply chain to end-users at petrol stations has to be made by road.

``You can use as many pipelines as you like, but you still need road tankers to make final deliveries,'' said Brooks.

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-- Carl Jenkins (Somewherepress@aol.com), October 24, 2000