TNAG-0947-FCO40-1166-Oil-developments-in-and-around-Hong-Kong-1980 — Page 134

CONFIDENTIAL

For discussion

on 20th May 1980

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MEMORANDUM FØR EXECUTIVE COUNCIL

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REGISTRY

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RESERVES OROIL PRODUCTS

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tion 9th October 1979, Members considered memorandum

On (79)08, sought advise on whether the Advertising, Display Fibberghting (Restriction) Order 1979 should be cancelled.

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Members are informed in that memorandum that the possibility of mandatory strategic reserves in respect of oil products of critical importance to Hong Kong was being considered, and that Members' advice on the subject would be sought at a later date.

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The purpose of this memorandum is to seek Members' advice on whether action should be taken to arrange with importers of fuel oil, gas oil and naptha for them normally to hold security reserves of these products at all times, equivalent to not less than 30 days of their imports minus their re-exports of those products during the previous calendar year.

Background

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The political upheaval in Iran in 1978 disrupted the production of oil in, and export of oil from, that country. Out of total world exports of about 53 million barrels (bbl) a day, Iran, in early 1978, contributed about 6 million bbl a day or something more than 10% of total world exports. In the fourth quarter of 1978 Iranian production ceased altogether, and when exports resumed in March 1979 the amount was only about 1 million bbl a day. To help ease the resultant world shortfall, Saudi Arabia increased her exports by 1 million bbl a day, but this extra production could be curtailed at any time.

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To meet the remaining shortage, which was reckoned to be about 5%, the International Energy Agency (IEA) (set up by the major countries in the Organisation for Economic Co-operation and Development (OECD) after the 1973-74 oil crisis) recommended, in March 1979, that oil importing countries should take whatever action they considered necessary to reduce their oil demand by 5%. Several countries in the region, such as Singapore and Japan, immediately announced the measures they were taking to comply and in May 1979 Hong Kong in- troduced a package of economy measures, some of them voluntary, some mandatory.

CONFIDENTIAL

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