2024-10-31 18:50:00
For his proposal to ‘hoard’ a number of critical raw materials and components, Minister Dirk Beljaarts (PVV) of Economic Affairs is returning to an old idea. The Netherlands has been maintaining large fuel reserves since the late 1970s.
The Netherlands started this in 1979. These were the years after the oil crisis, caused by a boycott of oil producers in the Middle East. Countries that were members of the OECD, a club of 38 rich economies, agreed to jointly build up large stocks.
“If an oil-producing country no longer wants to supply the West, it is wise to work together,” says Gertjan ten Broeke. He is director of the Central Body for Stockpiling Petroleum Products (COVA), the foundation that manages oil reserves on behalf of the Netherlands.
The Dutch stock covers ninety days’ consumption and is stored in above-ground and underground storage tanks. This concerns crude oil, petrol, diesel and jet fuel that have been ‘kept off the market’. Imagine swimming pools full of fuel that are never used. It just lies there.
Limited shelf life of stock
Cova only touches the stock if maintenance is required on the tanks, or if fuel is in danger of spoiling. Especially with gasoline, the quality can deteriorate so quickly over time that it becomes unsuitable for commercial use. Cova must therefore occasionally refresh its stock.
A report that Beljaarts had drawn up shows that the shelf life of most metals is long, often several years or even infinite. But there is also a form of aluminum that only has a shelf life of twelve months and a form of nickel that only has a shelf life of one month.
“It is good that the shelf life has been mapped out,” says raw materials expert Elmer Rietveld of TNO. “You want to avoid political blunders. That you get pictures in the newspaper of warehouses full of rusted and unusable metal.”
Ukraine war
Cova actually took action five times, most recently in 2022 when the war in Ukraine disrupted the oil markets. Then Cova sold some of its stock and oil companies could bid on it. The idea is that by increasing the supply, the price peak will be limited.
Minister Sophie Hermans (VVD) of Climate and Green Growth determines how large the stock should be and how much fuel is sold. It is bound by international agreements. They prescribe that countries must sell part of their supplies if 7 percent of international oil trade suddenly disappears.
Shortly after the outbreak of the Ukraine war, the disruption was less than 7 percent. OECD countries then agreed that, if they felt it necessary to take action, each country could decide for itself whether it wanted to participate.
In only one case can countries decide for themselves how to use oil reserves: in the event of national emergencies.
Mass purchasing leads to a price spike
Rietveld emphasizes that there are always ‘customers’ for Cova’s oil products. This does not necessarily apply to the metals and components that the Netherlands is now investigating whether it wants to hoard.
“The Netherlands must first find out what the industry really needs here,” says Rietveld. He thinks it would be wise for the Netherlands to encourage industry to maintain larger stocks themselves. There must be financial compensation from the government in return. “Because it is expensive to purchase large stocks.”
Speaking of the price. If countries increase their stocks, this can lead to higher prices, especially if all countries stock the same products at the same time. To prevent price spikes, Cova proceeded extremely slowly, says Ten Broeke. The first barrels of oil rolled into storage in 1986 and only fifteen years later the tanks were full.
Beljaarts can also follow such a strategy for metals. Or he must purchase metals from which more can be mined in the short term, says Rietveld of TNO. Lured by the rising price, mining companies are offering more of it. Which again puts the price down a bit.
Also read:
The Netherlands wants to continue operating if China no longer supplies critical metals
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**Interview with Elmer Rietveld, Raw Materials Expert at TNO**
**Editor:** Thank you for joining us today, Elmer. The Dutch Minister Dirk Beljaarts has proposed a plan to hoard critical raw materials, drawing parallels to the fuel reserves maintained since the 1970s. What’s your initial reaction to this proposal?
**Elmer Rietveld:** Thank you for having me. I think it’s an interesting approach, especially considering the geopolitical context. The idea of stockpiling critical raw materials can provide a strategic advantage, particularly in times of international conflict or supply chain disruptions. However, it’s essential to consider the volatility in the market for these materials—like aluminum or nickel—that have very limited shelf lives.
**Editor:** You mentioned shelf life—why is this an important factor for the proposed raw materials stockpiling?
**Elmer Rietveld:** The shelf life is pivotal. As shown in the report from Beljaarts, many metals can last for years, which makes them more feasible for long-term storage. But some materials, like certain forms of aluminum and nickel, only retain their usability for a brief period. If these materials degrade while in storage, it could lead to significant waste and costs, which we want to avoid.
**Editor:** Given the historical context of the Netherlands maintaining fuel reserves, do you think a similar model for raw materials can be effective?
**Elmer Rietveld:** Absolutely, but it requires careful planning. The oil crisis of the 1970s taught us valuable lessons about the importance of reserve management and international cooperation. Creating a robust stockpile could indeed help stabilize the market and protect against future crises, but it necessitates ongoing evaluation and refreshment of stock—not just hoarding.
**Editor:** There are concerns regarding how mass purchasing could lead to price spikes in the raw materials market. How can the government manage this?
**Elmer Rietveld:** That’s a crucial point. Transparency and careful management of these stockpiles can mitigate the risk of inflating prices. Collaborating with international partners and sticking to agreements could help distribute supplies more evenly, preventing sudden spikes that could further strain the market.
**Editor:** Lastly, as the geopolitical landscape continues to evolve, including tensions from the Ukraine war, how should the Netherlands approach this raw materials strategy?
**Elmer Rietveld:** The Netherlands needs a flexible strategy that allows it to respond adeptly to global events. Developing a resilient supply chain while reinforcing alliances with other countries can enhance our position. We must balance between being prepared and ensuring that our actions don’t inadvertently disrupt the market or contribute to shortages elsewhere.
**Editor:** Thank you, Elmer. Your insights on this matter have been invaluable, and we appreciate your time.
**Elmer Rietveld:** Thank you for the opportunity!
