Labor war-games budget plan to boost fuel supply
Updated ,first published
As Prime Minister Anthony Albanese moves to two more major Asian oil suppliers, the federal government is playing the war game with a series of budget initiatives to increase the amount of petrol and diesel in the country to protect the country’s long-term fuel security.
As Albanese flew to Brunei and then Malaysia on Tuesday to bolster supplies of diesel and fertilizer, senior ministers declared “nothing is off the table” within the government as they discuss ways to protect Australia’s economy from the fallout from a war on Iran that some analysts say could plunge the country into recession.
Climate and Energy Minister Chris Bowen said on Monday the government would consider “everything” to strengthen Australia’s fuel supply, including accelerating the electrification of Australia’s light vehicle fleet, extracting more natural resources and increasing Australia’s fuel storage capacity.
Australia can hold about 30 days of diesel and about 40 days of oil, but is a signatory to the International Energy Agency’s “international energy program agreement” that requires countries to store 90 days of oil onshore.
Achieving the 90-day goal would cost an estimated $20 billion over four years, Bowen said.
“This is a medium and long-term priority of the government. We are currently focused on ensuring we emerge from this uncertain international environment,” he said.
“We’re not making any other announcements today, but obviously… we’ll always look at things that make sense in due course to ensure our ongoing resilience.”
He said the fuel crisis had encouraged the uptake of electric vehicles and the growing number of electric vehicles on Australian roads meant around 15 million liters of fuel had been eliminated. EVs made up 15 percent of cars sold in March.
Currently, 205 service stations nationwide, or about 2.6 percent, are diesel-free. About half of this (106 stations) are in NSW.
Three government sources downplayed the possibility of Labor announcing an increase in fuel storage in its May 12 budget but confirmed talks were ongoing about increasing storage in the medium term in response to the fuel crisis.
A senior source, speaking on condition of confidentiality, said the main issue will remain crude oil supply, no matter what the government does.
“You still need supplies, from the refinery to new tanks, and that’s everyone’s problem,” they said.
It is considered extremely difficult, if not impossible, to rehabilitate previously closed refineries. But there is scope for the federal government to financially support the expansion of two existing refineries in Brisbane and Geelong.
The government has a number of existing programs that can be used to provide support, including the National Reconstruction Fund.
Another senior source said the government was examining all options to increase supply.
“Nothing is off the table,” they said.
On the same day that the government announced it would halve excise duty on gasoline and diesel, it was also revealed that Finance Minister Katy Gallagher would provide up to $2 billion through Export Finance Australia to finance the purchase of tanker fuel from the global spot market.
Such unusual actions have been highlighted as an example of the government’s determination to consider all alternatives to protect fuel supplies.
The cost of building a new refinery is seen as prohibitive.
Prime Minister Anthony Albanese cited support for biofuels, such as those made from agricultural oils such as canola, as another way to ensure long-term fuel security.
Last week, HAMR Energy, which aims to convert biomass into liquid fuels, was one of four companies to receive support under the government’s Investor Front Door program, which streamlines approval processes.
Albanese’s visit to Malaysia and Brunei continues his “crude oil diplomacy” after last week’s visit to Singapore, where he vowed to do everything in his power to continue supplying oil to Australia. Brunei supplies about 9 per cent of Australia’s diesel, as well as most of the country’s fertiliser. Malaysia supplies more than 10 percent of the country’s diesel and gasoline.
“This week’s trip will be very important and the daily impacts along with the announcements reinforce the fact that we are living in very uncertain times,” he said.
“And once you have that, what you have to do is act with precision. We act with precision… to maximize Australia’s opportunities to secure supply.”
Oil prices rose above $100 a barrel on Monday after US President Donald Trump said he would blockade the Strait of Hormuz.
Both West Texas Intermediate and Brent crude rose more than 7 percent, erasing a decline last week when Trump announced a two-week ceasefire with Iran.
Concern among investors has also spread to foreign exchange markets. The Australian dollar, which was close to 71¢ last week, fell below 70¢ on Monday morning.
The ASX200 continued its roller coaster ride, losing 0.4 per cent despite a rise in the share prices of a number of energy companies including Woodside, Beach and Santos.
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Shane Wright is senior economic correspondent for The Age and The Sydney Morning Herald.Connect with: X or email.
James Massola is the chief political commentator. He was previously national affairs editor and Southeast Asia correspondent. He won the Quill and Kennedy awards and was a Walkley finalist. Connect securely to Signal @jamesmassola.01Connect with: X or email.
Brittany Busch is the federal politics correspondent for The Age and the Sydney Morning Herald.Connect via email.
