UK oil refining - Energy and Climate Change Contents

4  Conclusion

39. The UK needs to maintain the health of its refining industry. A mix of domestically refined products and imports is an important ingredient of energy security and the UK refining industry is a welcome provider of jobs and tax revenue for the economy. We agree with witnesses who called for Government to set a long term framework for the industry to help secure its future.[86] A clear Government message and policy can provide oil companies with the confidence and incentive to continue operating refineries in the UK, and to continue investing to maintain a viable UK refining industry in the future. Over time the fuel mix supplied by UK refineries adapt to respond to demand. This will require investment in infrastructure, on top of the significant investment the industry will be required to make to meet legislative and regulatory burdens.

40. As part of its review DECC should:

  • Investigate whether the industry has sufficient access to finance to make strategic investments beyond legislative compliance requirements;
  • Ensure regulations and taxes are not more onerous in the UK than elsewhere;
  • Address elements of taxation and economic policy that impact UK refiners adversely compared with importers; and
  • Continue urgent requests to the European Commission in regard to the scope and timing of EU Fitness Checks.

41. The scale of legislative and regulatory burdens on the industry may undermine long term sustainability. In some cases investment motivated by compliance with such burdens goes beyond doing the bare minimum and this may be beneficial. But while the regulation of the industry for environmental and health and safety reasons is clearly essential, Government has a responsibility to ensure that it is also rational, coordinated, and designed to minimise the cost implications for industry.

42. DECC's strategic objective should be to level the playing field between domestic refiners and importers, approaching these sectors as an integrated industry of two parts. It must also carefully consider the consequential impact of any structural changes on ancillary industries, which make a valuable contribution to the economy. We hope that this short report, and the evidence we are publishing alongside it, will be useful material for DECC in its review. We look forward to seeing the results of this review before the end of the year.

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Prepared 26 July 2013