Albanese has announced plans for a $10bn fuel and fertiliser supply package. What will this mean at the petrol pump?
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The federal government will invest more than $10bn to shore up fuel supplies amid the Middle East conflict and attempt to shield the country from future global oil shocks.
A government-owned reserve for diesel and jet fuel will be established under a plan to increase Australia’s backup stocks to 50-day supply.
“We know that the international environment is getting more unstable, not less. And so, we have to look at what we have done in this crisis and see what we can do to build Australia to be better prepared even for the next international crisis, whenever it might occur,” the energy minister, Chris Bowen, said on Wednesday.
What – if anything – will the package mean for fuel prices? Could the $10bn have been better spent elsewhere? And what about actually refining more fuel onshore?
‘A big change in our approach’
The $10.7bn package, which will be funded in next Tuesday’s federal budget, contains two major pieces.
Taxpayer money to the tune of $7.5bn has been allocated to underwrite cargoes of fuel and fertiliser and help companies boost storage capacity through a combination of loans, equity, guarantees, insurance and price support.
Export Finance Australia has already struck several of these deals under emergency powers that passed the federal parliament in late March.
A further $3.2bn will be spent establishing a publicly owned fuel reserve that will hold about 1bn litres of diesel and jet fuel. Bowen indicated the fuel would be stored at private facilities rather than at a new government-owned site.
Private companies will be required to hold an extra 10 days of fuel under the so-called minimum stock obligation (MSO), taking Australia’s overall reserves of diesel and jet fuel to 50-day supply.
As of 28 April, there were 43 days’ worth of petrol, 33 days of diesel and 28 days of jet fuel in reserve, according to government figures.
Last month, the Coalition announced a plan to increase fuel stocks to 60 days, which would bring Australia closer to the International Energy Agency’s 90-day standard.
Guardian Australia understands the new MSO requirements will probably start in 2027 but won’t be fully implemented until 2030, giving companies time to increase storage capacity.
“This is a big change in our approach as a country and a good one,” Bowen said, noting 22 of the 32 IEA member countries had government-owned reserves.
‘This is not an energy security plan’
The $10.7bn investment won’t have an immediate impact on petrol and diesel prices at the bowser – but nor is it designed to.
The package is about long-term fuel security rather than short-term relief, which the government provided via a three-month halving of the fuel excise.
Environmentalists have criticised the government for doubling down on petrol and diesel rather than using the international oil shock to reduce Australia’s reliance on fossil fuels.
“I hope there’s an encore because this is not an energy security plan, it’s a short-term petrol supply plan,” said Greg Bourne from the Climate Council.
“We’ve been bitten twice in five years, and need to get off the treadmill of global supply shocks. This is a once in a generation opportunity to provide genuine energy security, with renewable energy that that we own and control. The sun and wind can’t be embargoed, blockaded, or weaponised.”
Heidi Lee, the chief executive of Beyond Zero Emissions, said while the plan might offer “short-term reassurance” it doesn’t “address the underlying problem”.
“Australia remains deeply exposed to global fuel markets and long, complex supply chains for everything from refined petroleum to manufactured goods. In an increasingly unstable geopolitical environment, that is a growing economic risk,” Lee said.
The shadow energy minister, Dan Tehan, said Wednesday’s announcement was a belated acknowledgment from the government that Australia was in a “national fuel crisis”.
NRMA spokesperson Peter Khoury said the new measures would “go some way to future-proofing” Australia’s fuel and energy needs.
“The global events of the last two months have opened our nation’s eyes to the immediate need for Australia to take its fuel security seriously,” he said.
Roughly 90% of refined fuel products are shipped in from overseas after the closure of all but two local refineries – Ampol’s Lytton refinery in Brisbane and Viva Energy’s facility in Geelong.
The federal government wants to increase domestic refining capacity and has allocated $10m from the new fuel security package to help bankroll feasibility studies into new or expanded projects.
The prime minister, Anthony Albanese, said one “serious proposal” had already been put forward and would be receiving the support of the commonwealth and a state government.
Albanese did not disclose further details, including which state the proposal was based, and his office would not comment when contacted by Guardian Australia.
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