Fuel Crisis Report

Executive Summary

In September 2000, British farmers and truck drivers launched a dramatic campaign of direct action to protest a fuel duty. Their campaign followed a similar one by farmers, truckers, and fishermen in France, which had resulted in concessions from the French government.

The UK protesters blockaded fuel refineries and distribution depots, and, within days, created a fuel crisis that paralyzed CI sectors and brought the country to a virtual halt. The impact of the protest was much deeper than anticipated because it struck at a particularly vulnerable point of the UK economy -- the oil distribution network, which had been organized along just-in-time delivery principles. This, combined with anticipated shortages by fuel consumers and consequent panic buying, magnified the impact of the protests on practically all CI sectors in the UK.

The disruption in the energy sector created a chain reaction among other CI sectors such as transportation, health care, food distribution, financial and government services due to their interconnectivity and interdependencies. The financial impact of the week-long fuel drought was estimated at over 1 billion.

In light of these events, the UK Government was compelled to develop special preventive measures to cover the gaps in the UK fuel delivery system and to design emergency solutions safeguarding the country's fuel supplies. As a result of the work of the special ministerial fuel taskforce, all major oil companies, unions and police chiefs have signed the Memorandum of Understanding (MoU) that set out a series of practical arrangements -- involving all the key parties -- aimed at maintaining continuity of oil supply against possible future disruptions.

Key elements of the MoU commit the relevant parties to:

• joint early-warning systems and coordinated contingency plans,

• joint crisis management systems, and

• action to prevent intimidation of tanker drivers.

All in all, the UK fuel price protests in the fall of 2000 demonstrated the direct and debilitating effect of the interruption of the fuel supply on other CI sectors underlining the interdependencies between the energy sector and other CI sectors.

INTRODUCTION

In the Autumn of 2000, a wave of protests against high fuel prices moved across Europe. The protests started in late-August with a blockade of English Channel ports by French fishermen, and then spread across France as disgruntled truck drivers and farmers blocked oil refineries and distribution depots to combat high fuel costs.

Within a week, concessions by the French government ignited similar protests in Belgium, Germany, Italy, the Netherlands and the UK, creating disruption in cities and cutting off essential services by blocking roads and highways -- reducing the flow of fuel to a trickle.

The fuel shortages affected millions of Europeans.

BACKGROUND

The escalating cost of crude oil contributed to the rise in fuel prices in the fall of 2000. The price of crude had reached a 10-year high. However, the steep increase in the price of crude oil was only part of the problem.

The level of taxation on fuel in Europe is quite high, more notably in Britain, where fuel costs are the highest in Europe. From January 1999 to June 2000, fuel prices increased by more than 40 percent. Depending on the grade of fuel, the tax and duties made up approximately 75 percent of the price of gas and diesel. The average price of a litre of premium unleaded gasoline stood at nearly 85p per litre in London in September 2000.

The actions in Europe followed the successful protests in France. At the beginning of September, the French government awarded fuel tax concessions to fishermen, truck drivers, farmers and others heavily dependent on gas and diesel sectors. Being forced to offer subsidies and targeted concessions, the French government has paid a heavy price for extinguishing the fuel price protests in the year 2000. Officials estimated the financial cost of ending the dispute at $460 million.

Consequently, the French government's retreat in the face of this public rally motivated fuel price protestors throughout Europe.

The September fuel crisis in the UK involved a number of players. Oil companies were often overlooked in the abundant flow of media information covering the week of September 6, aside of the two obvious players, the UK Government and protestors.

Some analysts described a rather peculiar position of the oil companies during the week of the protests and even provided evidence that the oil industries colluded with protesters to cut the country's fuel supply. The Keel University researchers argued that "while [oil companies] may lose short term sales [,] the longer term impact of reductions in fuel duty, or even simply preventing future increase in fuel duty, would be highly beneficial in terms of simulating demand".

CRONOLOGY OF THE EVENTS IN THE UK

Protests were triggered on September 5, 2000 when it was announced that fuel prices were to rise again following a rise in the price of crude oil. The Channel Tunnel was blockaded in protest on September 6. On September 7, the first oil refinery, at Stanlow, Cheshire, was blockaded.

Protests spread rapidly with more refineries blockaded on September 8 resulting in nation-wide panic buying of fuel on September 9. On Sunday, September 10, the protests had closed Britain's largest oil terminal at Kingsbury, West Midlands, and huge queues at gas stations were reported.

By Tuesday, September 12, protesters had blocked six of the UK's eight refineries. Over half of Britain's gas stations were shut. The protest ended almost as quickly as it had begun.

On September 14, the Stanlow blockage ended and on September 15 the first fuel deliveries were reaching some gas stations, although it was estimated that 90 percent of gas stations were empty of fuel. The termination of the fuel protests across Britain marked the beginning of the end of the crisis that disrupted UK CI sectors and brought the country to a virtual standstill.

On September 15, oil companies were concentrating deliveries on fuel stations designated as priority outlets by the government. The number of deliveries was increased from 2,500 to 3,300-298 for essential users only. On September 16, motorists were warned that they could still face a wait of up to two weeks for gas, despite the lifting of nearly all the blockades at UK refineries on September 14.

The demonstrators abandoned their protests before their demands for cheaper fuel had been met giving the government a 60-day deadline to reduce the fuel duty. But the government categorically ruled out a quick cut in duty. In September 2000, it set up a fuel "taskforce" comprised of ministers, police and oil firm executives, in an effort to put in place more robust systems to avoid disruption of fuel supplies.

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