Australia commits $7 billion to boost fuel stockpiles, create government reserve

Reserve of around 1b litres to ensure Australia holds at least 50 days of fuel to shield it from future supply shocks

Australia will spend ​A$10 billion ($7.22 billion) to boost its national fuel stockpiles and establish a permanent government-owned fuel ‌reserve, Prime Minister Anthony Albanese said on Wednesday.

The expanded stockpiles and reserve of around 1 billion litres (264 million gallons) will ensure Australia holds at least 50 days of fuel onshore to shield the country from future supply shocks, Albanese said.

Australia imports ​about 80% of its fuel and has experienced localised shortages since the start of the ​conflict in the Middle East. Its current reserves, mandated at around 30 days' supply, ⁠rely on stocks maintained by private companies.

"The federal budget next week will include an Australian fuel security ​and resilience package," Albanese told a press conference.

"This is aimed at making sure Australians can have more confidence ​in protecting our energy sovereignty, not just during this crisis but going forward as well, protecting our nation's energy interests."

The A$10 billion package includes A$3.2 billion in funding for the fuel reserve to increase long-term diesel and aviation fuel supply and ​storage.

"Our fuel security reserve will focus on regional stockouts and supply constraints for essential users in the event ​of another supply crisis," Albanese said.

Read: Oil extends slide as Trump indicates possible Iran peace deal

The minimum stockholding obligation requiring importers and refiners to hold roughly 30 days of fuel ‌will ⁠also be lifted by 10 days, costing A$34.7 million. Additionally, A$7.5 billion will go towards funding supplies and storage of fuel and fertiliser through providing loans, equity, guarantees, insurance and price support.

Energy Minister Chris Bowen said Australia was one of the few countries in the International Energy Agency which did not have a government-owned fuel ​reserve.

"We will now have a ​government-owned fuel reserve of ⁠around a billion litres to add to those minimum stocks that the private sector must hold," he said.

"This is a big change in our approach as ​a country and a good one".

The National Roads and Motorists Association welcomed the ​move. "It now means ⁠the Australian government will have a direct stake in storage capacity. Given this issue is critical to our nation’s security, this makes sense," said spokesman Peter Khoury.

But Tony Wood, a senior fellow at the Grattan Institute's energy ⁠program, questioned ​how the reserve would be implemented and deployed in practice, ​and said it would be better to only increase private companies' reserves. "The government should not be a participant in the market," he said.