Policy background Part 12: Core Fuel Sector Resilience
This part of the Act relates to measures which will help ensure that the resilience of the UK core fuel supply system is maintained, and which will apply to core fuels and core fuel activity. Core fuels in this measure are crude oil-based fuels and renewable transport fuels. Core fuel activity is the storage, handling, carriage, transport, conveyance, processing, or production of such fuels in the UK, which contributes to the supply of core fuels to consumers or persons carrying on business in the UK. Currently, crude oil-based fuels provide >90% of the energy for transport and so this subsector will initially provide the majority of persons likely to be within the scope of this Part. Crude oil-based fuels are also used by more than 1.5 million homes for heating. As the UK economy transitions towards net zero greenhouse gas emissions, the balance of this will change, with renewable transport fuels likely to grow in importance.
	A consultation held in 2017 investigated the resilience of the sector and identified a substantial level of risk to fuel supplies caused by changes to the industry over many years. Detail of the economic case is set out in the impact assessment that accompanies this Act.
	The supply of fuels is largely unregulated and has no central system coordinator. There is only limited regulation which addresses the risks to the supply of fuel before a state of emergency is declared. Examples of such limited sector regulation include: the National Security and Investment Act 2021 which now covers acquisitions of major core fuel sector companies; the Offshore Safety Act 1992 which allows the Department for Energy Security and Net Zero Secretary of State to direct the operator of an oil refinery for the purpose of preserving its security; and the Network and Information Systems Regulations 2018, to boost the overall level of security (both cyber and physical resilience) of network information systems of certain companies which provide essential services including in the oil sector.
	Following consultation, full regulation of the sector (i.e., creating a licensing regime) was considered inappropriate as the sector has no existing monopoly and the recent Competition and Markets Authority ‘Road fuel market study’ did not recommend a sector regulator. However, while the Government works closely with industry on a voluntary basis to try to address issues relating to core fuel sector resilience and risks to security of core fuel supplies as they arise, market participants have repeatedly told the Government that competition concerns remain a barrier to full co-operation on a voluntary basis, thus requiring legislative intervention.
	The purpose of the measures is to improve the resilience of the sector, reduce the risk of disruption to economic activities from the loss of fuel supplies, and reduce the risk of emergencies affecting fuel supplies. The intention is to give the Government powers to take pre-emptive action to encourage the sector to build resilience rather than respond to an emergency. The principal measures provide for powers to require information and to direct certain entities to take action to maintain or improve, or reduce risks to, resilience or continuity of supply of core fuels. The information powers will allow the Government to identify fuel supply risks. The powers of direction will allow the Government to support the industry in ensuring resilience ahead of any potential crisis and within the structure of the core fuel supply market, thereby reducing the need for the use of emergency powers. This is accompanied by a funding power if required.