Australia has released fuel from its strategic stockpile for the first time, as the Albanese government scrambles to address rising regional shortages and the political fallout from a global energy crisis caused by the Iran war.
Energy Minister Chris Bowen on Friday announced the Albanese government would inject about 20 per cent of its onshore fuel reserves, more than 400 million litres of diesel and 300 million litres of petrol, for a combined total of 762 million litres over the coming days and weeks.
Bowen said the fuel release was a “sensible, well-calibrated” action to address the growing local dilemma, but acknowledged that the deteriorating international situation could drive greater shortages and price pain in Australia.
Oil tankers are halted in the Persian Gulf and supply is virtually cut off as Iran attacks ships in the Strait of Hormuz, the narrow channel through which 20 million barrels usually pass each day.
“These international circumstances are uncertain. Let’s not kid ourselves that everyone knows exactly how the next few weeks are going to play out, because no one does. What governments can do is respond to the circumstances as they arrive.”
The unprecedented intervention is the second in two days. On Thursday, the Albanese government announced it had struck an agreement with Ampol Australia to supply the domestic market with fuel containing higher sulphur content, which would otherwise be exported. Ampol will prioritise the fuel to regional suppliers.
Bowen is under attack from the opposition, which is attempting to blame him for a lack of plan to fill the shortages as well as rising prices.
Analysts have predicted that without a swift end to the Iran war, which has stopped one-fifth of the world’s oil production from entering the market, petrol prices could rise above $3 a litre.
Opposition energy spokesman Dan Tehan said the government should have moved sooner to address Australians’ fuel security fears.
“There is nothing that has reassured me and reassured the Australian people, because it’s clear. He doesn’t have a plan. What I want is Chris Bowen to fix this problem,” he said.
National fuel stocks remain below where some argue they need to be, as well as in breach of an International Energy Agency requirement for member countries to hold emergency fuel reserves equivalent to 90 days of net imports.
However, Bowen assured people that no shipments had been disrupted and urged motorists to stop filling up jerry cans for extra supply and to only buy what they need.
“It’s understandable that Australians are concerned about the fuel supply in Australia,” he said.
“But I think Australians know that our fuel supply is currently secure. It’s arriving on schedule.”
He said petrol and diesel consumption had doubled and the supply chain was struggling to cope with the massive spike in demand.
Independent fuel suppliers, which play an outsized role in the regional supply chain, have reported difficulty in filling orders as major companies restrict distribution. Some regional service stations have run out of fuel, and farmers are struggling to fill orders.
The National Farmers Federation on Thursday called on the government for drastic measures, such as taking over regional fuel supply chains under the powers of the Liquid Fuel Emergency Act.
Australia relies on imports for about 90 per cent of its liquid fuel. The country has lost around 70 per cent of its fuel refining capacity in the past 15 years, and the Commonwealth financial support for the two remaining oil refineries, Viva Energy’s Geelong refinery in Victoria and Ampol’s Lytton plant in Brisbane, runs out in June 2027.
The Albanese government created a minimum stock obligation in 2023, which is a strategic reserve held on Australian soil. It currently holds 36 days’ supply of petrol, 34 days’ of diesel and 32 days’ of jet fuel stashed at facilities across the country.
These stocks include fuel carried in ships that are travelling to the country and are in the Australian Exclusive Economic Zone.
The government co-invested with fuel suppliers in giant new storage infrastructure and required fuel refiners and importers to maintain a baseline of physical fuel stock.
The current arrangements are a departure from the previous arrangements made by Energy Minister Angus Taylor, who now leads the federal Coalition. When Taylor was energy minister in 2020, the Morrison government spent $94 million to establish a stockpile of 1.7 million barrels of oil in the US.
In 2022, reserves were released from this stockpile when the government sold the fuel for around $230 million as part of a global effort to calm the world’s oil markets due to an energy crunch caused by Russia’s invasion of Ukraine.
Analysts predicted that without a swift end to the Iran war, which has stopped one-fifth of the world’s oil production from entering the market, the global benchmark Brent oil price could reach US$200 a barrel.
A rule of thumb states that for every US$10 rise in the Brent price, petrol prices rise 10¢ at the bowser in Australia.
Regular unleaded petrol is selling for an average of about $2.20 a litre in Sydney and Melbourne.
Brent oil on Thursday again surged past US$100 a barrel.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
