Where’s the Fuel?

Strange news from out of the Czech Republic, where it seems around 5.5 million liters (= 3,594 barrels) of oil from the state strategic reserve has just disappeared, according to Dagmar Klimovičová at Hospodářské noviny.

It appears the Czech government subcontracted the task of managing its strategic reserve to Viktoriagruppe AG, a German company headquartered in Munich. That was its first mistake; allowing Viktoriagruppe to take part of that reserve outside of the Czech Republic was its second.

The Viktoriagruppe company . . . has not been able to explain reasonably since 23 September where 5.5 million liters of this material has gone to from its German storage facilities at Krailling [just outside of Munich]. Rather, it has been firing employees as it faces legal proceedings from Czech and German customs and financial authorities.

Viktoriagruppe also runs oil storage facilities for the Czech strategic reserve – for now – at three separate sites within the Czech Republic. Not surprisingly, that state petroleum reserve company (known as ČEPRO) is now busy having the oil Viktoriagruppe stores there – 15 million liters of it, or 94,347 barrels – transferred to other facilities under ČEPRO’s direct control; that, together with doing the same with the remaining oil stored in Germany, is now “our primary interest” according to under-fire ČEPRO head Pavel Švager.

That oil still in Germany, according to this piece, is “many times more” than the 15 million liters ČEPRO is seizing back from Viktoriagruppe’s Czech facilities; journalist Klimovičová understandably won’t give the precise figure since, even though no doubt such a figure exists somewhere in the books, the real one won’t be known until the comprehensive audit of just how much Viktoriagruppe is holding there in Krailling for the Czech Republic is complete.

This isn’t the first such run-in ČEPRO has had with Viktoriagruppe, writes Klimovičová: just last summer there was another discrepancy, of around 700 million liters, discovered during another audit of the latter’s German holdings of the Czech reserve. Viktoriagruppe officials tried to blame the shortfall on losses due to the transport and storage processes, but ended up paying a CZK 500,000 (€17,960) fine anyway.

The larger issue though, of course, is that of storing one’s national “family jewels” on foreign soil, and therefore outside of direct national control. Perhaps it’s something to be avoided, whenever possible, as the Czechs are finally finding out now.

At least we are not talking here about the analogous case of the national gold supply: it is true that many countries have theirs stored outside their borders, for various historical reasons, at places like New York (mainly at the New York Fed) and London. I don’t know whether that applies to the Czech national gold supply; who knows what happened to it between Nazi and Soviet occupations of the country last century, and in any case what was left of it presumably was split with Slovakia during the “Velvet Divorce” at the beginning of 1993. The good news here – while also bad news – is that that petroleum reserve is now steadily dropping in value anyway, what with the recent fall in oil prices worldwide.

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