Australia taps fuel stockpile for first time in urgent bid to fill regional shortages
Australia has released fuel from its strategic stockpile for the first time as the Albanian government struggles to find solutions to growing regional shortages and the political fallout from the global energy crisis caused by the Iran war.
The Albanian government will inject nearly 20 percent of its onshore fuel reserves, more than 400 million liters of diesel and 300 million liters of gasoline, for a total of 762 million liters in the coming days and weeks, Energy Minister Chris Bowen announced on Friday.
Bowen said deregulating the fuel was a “sensible, well-calibrated” action to address the growing domestic dilemma, but acknowledged the worsening international situation could lead to greater shortages and price distress in Australia.
Oil tankers have been stopped in the Persian Gulf and supplies have all but been cut off as Iran attacks ships in the Strait of Hormuz, the narrow channel through which 20 million barrels pass each day.
“These international conditions are uncertain. Let’s not kid ourselves by saying everyone knows exactly how the next few weeks will go, because no one does. What governments can do is respond as conditions arise.”
The unprecedented intervention was the second in two days. On Thursday, the Albanian government announced an agreement with Ampol Australia to supply the domestic market with high-sulfur fuel that would otherwise be exported. Ampol will prioritize fuel to regional suppliers.
Bowen is under attack from the opposition, which is trying to blame him for a lack of plans to fill shortages and rising prices.
Analysts predict that oil prices could rise above $3 per liter if the Iran war, which prevents one-fifth of the world’s oil production from entering the market, ends quickly.
Opposition energy spokesman Dan Tehan said the government should have acted sooner to address Australians’ growing security fears.
“There is nothing that reassures me and the Australian people because it is clear. He has no plan. What I want is Chris Bowen to solve this problem,” he said.
National fuel stocks remain below what some argue they should be, violating the International Energy Agency’s requirement that member countries maintain emergency fuel reserves equivalent to 90 days of net imports.
But Bowen reassured people that no shipments were being disrupted and urged drivers to stop filling bins for extra supplies and only buy what they need.
“It’s understandable that Australians are concerned about fuel supplies in Australia,” he said.
“But I think Australians know our fuel supply is secure now. It’s arriving on schedule.”
He said gasoline and diesel consumption had doubled and the supply chain was struggling to cope with the huge increase in demand.
Independent fuel suppliers, which play a large role in the regional supply chain, have reported difficulties filling orders as large companies restrict distribution. Some regional service stations have run out of fuel and farmers are struggling to keep up with orders.
The National Farmers Federation on Thursday called on the government to take drastic measures, such as taking over regional fuel supply chains under the powers of the Liquid Fuels Emergency Act.
Australia depends on imports for approximately 90 percent of its liquid fuel. The country has lost nearly 70 per cent of its fuel refining capacity over the last 15 years and Commonwealth financial support for its two remaining oil refineries, Viva Energy’s Geelong refinery in Victoria and Ampol’s Lytton plant in Brisbane, ends in June 2027.
The Albanian government has established a minimum stockpile obligation, a strategic reserve held on Australian territory, in 2023. There are currently 36 days of gasoline, 34 days of diesel and 32 days of jet fuel stock stored in facilities across the country.
These stocks include fuel carried on ships traveling into the country and located in the Australian Exclusive Economic Zone.
The government has co-invested with fuel suppliers in massive new storage infrastructure and required fuel refiners and importers to maintain a baseline of physical fuel stock.
The current arrangements differ from previous arrangements made by Energy Minister Angus Taylor, who now leads the federal Coalition. Taylor while Minister of Energy in 2020 Morrison government spent $94 million to create a 1.7 million barrel oil stockpile in the United States.
Reserves from this stockpile were released in 2022 when the government sold the fuel for approximately $230 million as part of a global effort to calm world oil markets due to the energy crisis caused by Russia’s invasion of Ukraine.
Analysts have predicted that the global benchmark Brent oil price could reach US$200 per barrel if the Iran war, which has prevented one-fifth of the world’s oil production from entering the market, ends quickly.
A rule of thumb states that for every $10 increase in the Brent price, oil prices in Australia increase by 10 cents.
Regular unleaded petrol sells for an average of $2.20 per liter in Sydney and Melbourne.
Brent oil rose above $100 per barrel again on Thursday.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
