New fuel security package a 'step in the right direction', says NRMA

The Federal Government’s new Fuel Security and Resilience package has been welcomed by the NRMA, though officials argue more needs to be done to boost refinery capacity across the country.

The Albanese government announced on Wednesday that it would provide more than $10 billion to help secure short-term fuel and fertiliser security as part of next week’s Federal Budget, in the wake of recent fuel shortages which have driven prices to record highs.

“This is aimed at making sure that Australians can have more confidence in protecting our energy sovereignty, not just during this crisis, but going forward,” Prime Minister Anthony Albanese said ahead of Tuesday’s budget.

As part of the measures, a $3.7 billion fund has been allocated for a government-owned fuel security reserve that would hold 1 billion litres of emergency diesel and aviation fuel.

Australia’s minimum fuel supply will be increased from 21 days to up to 50 days, the government confirmed in a release – mirroring a similar policy put forward by the Federal Opposition last month.

“Unfortunately, the last two months have exposed Australians to the reality of our fuel security situation — and it’s clear we haven’t done enough up until this point,” said NRMA spokesperson Peter Khoury.

“Back in 2008, the NRMA released the Jamieson Report, followed by another report in 2013. And in 2013 the NRMA said if tragedy strikes, we have three weeks of fuel to survive on as a nation — and that’s not good enough.

“Here we are, 13 years later, and we are finally addressing this matter.”  

Refiners and importers in Australia are currently required to store between 20 to 32 days of emergency supplies, depending on the type of fuel they hold. Under the new measures, mandatory petrol stockpiles will increase to about 37 days, while diesel and jet fuel will lift to about 50 days.

Additionally, the announcement includes a $10 million provision to support “feasibility studies into new or expanded fuel refining capabilities”. It comes after Australia’s refinery network was slashed from eight sites to two.

In responding to the government’s new provisions, Khoury said Australia remains exposed to fuel security threats – especially with only two refinery sites nationally.

“The current oil shock has clearly exposed our vulnerability. While this is a significant investment, Australians now understand the importance of our national taking fuel security seriously,” he said.

“What today’s announcement does is go some way to address what we have failed to address now almost two decades and that is we don’t have enough strategic reserves in Australia and we don’t have enough refining capacity.

“It’s critical that the federal government has skin in the game, and that’s what makes this announcement so important. It’s not just about leaving it to oil companies.

“Refineries were shut down largely due to economies of scale — it became cheaper to import refined fuel from overseas. While that made economic sense, it has left us strategically exposed.

“Australia needs to continue to look at ways to reduce its dependence on imported oil.”  

Full details of the government’s Fuel Security and Resilience Package will be confirmed in next week’s Federal budget.

Your questions answered: What does the war in Iran mean for fuel prices?

According to data from ABC News, Australia had around 1.6 billion litres of petrol and 2.7 billion litres of diesel in reserve as of mid-March, while SBS Australia reported that Australia uses on average 44 million litres of petrol and 92 million litres of diesel per day.

Assuming these figures are accurate, that means Australia had around 36 days of petrol and 29 days of diesel in reserve as of March 15.

Extrapolating these figures indicates that as of March 27 Australia has 1.072 billion litres (24 days) of petrol and 1.596 billion litres (17 days) of diesel remaining in reserve.

This calculation does not take into account shipments of fuel currently in ports and en route to Australia, or the relaxing of sulphur content laws, both of which will extend supply.

How much of the world oil supply is affected by the war in Iran?

Approximately 20 per cent of the world’s oil and liquefied natural gas supply passes through the Strait of Hormuz. Iran is blocking this narrow waterway in retaliation for US military strikes. Oil exporting nations affected by this closure include Iraq, Qatar, Saudi Arabia and the United Arab Emirates. 

Which countries export the other 80 per cent?

The United States remains the world’s largest oil producer, extracting more than 600 million barrels per month. Russia, Canada, China and Brazil also number among the top 10 oil-rich nations, each producing well in excess of 100 million barrels a month.

China and Malaysia are already looking at curbing fuel exports to ensure they do not run low domestically.

Does Australia produce oil?

Yes, Australia produces around 12 million barrels of oil per month. Most of this oil is exported to countries in the Asia-Pacific region.

Does Australia refine its own fuel?

Eight major refineries operated in Australia as recently as 2005, but today only two remain: Viva Energy’s refinery in Geelong, and Ampol’s Lytton refinery in Brisbane. The fall in local supply created a commensurate need to import fuel. Around 80-90 per cent of Australia’s fuel supply is now imported.

Why did Australia stop refining its own fuel?

Economics. Australia has high transport and labour costs compared to many countries in the Asia-Pacific region, so it became more cost-effective to export oil and import refined fuel products.

Which countries supply Australia’s fuel?

Australia primarily obtains its refined fuel products from countries in the Asian region, including Singapore, South Korea, India, Malaysia and China.

Where does Australia’s petrol come from?

Source: Australian Petroleum Statistics

Where does Australia’s diesel come from?

Source: Australian Petroleum Statistics