Albanese seeks Singapore deals to avert petrol and diesel shortage
Updated ,first published
As Prime Minister Anthony Albanese flies to Singapore to secure extra shipments and avert a looming shortage, Australia is opening its checkbook to outpace rivals in the global fuel fight.
Despite initial hopes that a fragile two-week ceasefire in Iran would ease blockages on oil shipping routes and provide relief at the petrol pump in the coming weeks, Australia remains dangerously exposed to the risk of supply shortages unless the government can negotiate extra deliveries of gasoline, diesel and jet fuel.
On Thursday Albanese said the government had the support of the country’s biggest fuel importers, Viva Energy and Ampol, to join a plan to urgently increase shipments to Australia.
In this program, taxpayers insure losses to fuel companies if they purchase expensive shipments before a sudden drop in oil prices in an increasingly unstable market.
He said the government would seek deals that give taxpayers value for money, but stressed that the top priority was ensuring security of supply.
“We want to protect taxpayers’ interests. We want to minimize taxpayer exposure. But to be very clear, our first priority is supply,” Albanese said during a visit to Ampol’s Lytton oil refinery in Brisbane.
Analysts warn that even if the Strait of Hormuz is opened immediately, the six-week journey for new crude from the Persian Gulf means aid may not come quickly enough to Asian refiners that typically supply 80 per cent of Australia’s fuel. These refineries are running out of oil and are already reducing their production.
With regional fuel stocks rapidly depleting and countries such as Malaysia already signaling moves to prioritize domestic needs, Albanese also plans to leverage Australia’s status as Asia’s critical coal and gas supplier to secure bilateral trade deals with partners in the region to avert shortages.
Since the outbreak of war in Iran on February 28, Australian fuel importers and the federal government have moved to diversify their supply chains, securing additional shipments from around the world. Shipping data shows a huge increase in the number of scheduled oil and refined fuel deliveries to Australia over the past two weeks. More than 50 shipments are expected to arrive this month from as far away as Europe and North America.
But more cargo will be critical for Australia to bridge the looming supply gap. Speaking from Lytton refinery on Thursday, Energy Minister Chris Bowen said the government would encourage fuel companies to buy all the fuel they can.
“We will not stop Ampol, Viva and other companies from where they can buy fuel,” Bowen said.
“Australia, of course, primarily gets most of its fuel from Asia. But there are also online purchases from North America, from Mexico, which are available at short notice.”
Albanese will meet Singapore Prime Minister Lawrence Wong on Friday to discuss a potential deal to increase supply from the Asian nation’s expanding fuel refineries. Singapore relies on Australia for about 40 percent of the liquefied natural gas (LNG) needed to power its electricity grid.
The government has also started negotiations with other neighbors regarding fuel supply. Earlier this week, Albanese spoke by phone with Brunei Sultan Hassanal Bolkiah about the impact of the Iran war on energy supplies and with Chinese Premier Li Qiang about energy security.
Analysts believe Australia’s negotiating position to lock up more fuel cargoes from the region has strengthened significantly.
The conflict in the Middle East has led to the disruption of large quantities of LNG usually sent to Asia, as Qatar, the world’s second-largest LNG supplier, stopped refrigerating the gas for export. This has left Asian economies, including Singapore, South Korea and Japan, subject to crippling shortages and helpless to lock in urgent replacement cargoes, including those from Australia.
Albanese hopes that by keeping Australian coal and off-contract LNG flowing, Australia can outpace other countries competing for declining refined oil and diesel output from Asian refiners.
The country’s two largest fuel suppliers, Ampol and Viva Energy, have agreed to the terms of participating in the program.
“We understand how critical fuel is to keep drivers, farmers and businesses moving,” said Viva chief Scott Wyatt. “We are proud to be able to support the Australian government to go above and beyond to secure additional fuel supplies and see the country successfully navigate these challenging and uncertain times.”
News that Iran and the United States agreed to a last-minute ceasefire to avoid the worst of military tensions caused oil prices to fall sharply on Wednesday. The cost of a barrel of Brent oil, the global benchmark, fell 15 percent to below $91, raising hopes that this could be the “beginning of the end” for fuel price increases in Australia.
Since Iran began blockading the Strait of Hormuz, disrupting a fifth of the world’s oil and gas tankers, the price of regular unleaded oil has risen more than 30 percent to record levels above $2.50 per liter.
Australian fuel suppliers have said lower global oil prices could begin to ease Australian petrol and diesel prices later in the month. But they said the looming supply crunch remained a risk for import-dependent neighbors such as Australia as Asian refiners depleted existing oil stocks and reduced production of fuel products.
Malcolm Roberts, president of the Australian Petroleum Institute, which represents the country’s oil refiners and fuel importers such as Ampol, BP, Mobil and Viva, said shipments from the Middle East had stalled, causing a bottleneck in Asia. “The main problem is still the supply shortages reaching refineries in Asia, and this is not going to change quickly,” he said.
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Nick Toscano is an economic correspondent for The Age and the Sydney Morning Herald.Connect with: X or email.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
