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Australia’s fuel security package

Australia’s fuel security is essential for our national security and underpins our economy. We have been fortunate to have not experienced a significant fuel supply shock in over 40 years. But we currently import around 90% of our liquid fuels.

To support our long-term fuel supplies, the Australian Government has developed a comprehensive fuel security package. The government’s long-term fuel security goal is to increase our domestic storage and to hold a sovereign refining capability that meets our needs during an emergency, as well as into the future. We will secure our local industry’s capabilities, while keeping fuel prices in Australia among the lowest in the OECD.

The fuel security package will also secure jobs in the fuel sector and in fuel-dependent industries.

Next steps in the Government’s fuel security package is:

  • investing $200 million in building new diesel storage in Australia through a competitive grants program
  • creating a minimum stockholding obligation for key transport fuels
  • developing a long-term income stream to refineries that values their contribution to national security and sovereign capability
  • modernising Australia’s current suite of liquid fuel legislation to support a more effective government response in the event of market disruptions.

These actions build on the steps already taken by the government this year to purchase Australian Government‑owned crude oil at a historically low price, and to work with industry to test the market for domestic storage and assess the long term capability of the refining sector.

Australia’s Fuel Storage Program

A $200 million competitive grants program will be implemented to provide support to industry to build additional domestic fuel storage. Holding more fuel stocks in Australia will increase our resilience to supply disruptions, thereby protecting consumers and the economy from fuel shortages. An additional 780 megalitres of diesel storage is expected to be required to allow industry to meet the new minimum stockholding obligation.

By helping industry with this storage grants program, the impact on fuel prices of implementing the minimum stockholding obligation is predicted to be less than one cent per litre. The grant program is expected to launch in the first quarter of 2021.

The grant guidelines will take into account findings from the recent Request for Information (RFI) process. The grant program will focus on projects that are in strategic regional locations, are connected to refineries or have connections to existing fuel infrastructure. Grants will also need to be matched by state governments or industry.

A minimum stockholding obligation for industry

Australia needs more fuel stocks to increase our resilience to supply disruptions and protect consumers and the economy. A minimum stockholding obligation is the most efficient, and least distortionary way to achieve the construction of new storage and increase domestic fuel stocks. Minimum stockholding obligations are common within the international community, with nations such as Japan and the United Kingdom adopting this approach to national fuel security.

Stocks can be called upon in times of crisis. Diesel is the most important and versatile fuel needed to cover us during a significant fuel supply disruption. It is vital for emergency services and is the backup power source for electricity generation in critical services like hospitals, water and sanitation and electricity generation in remote communities.

The minimum stockholding obligation will require industry to hold a guaranteed minimum level of fuel stocks. The minimum for Australia’s jet and gasoline stocks will be held at current levels. However, the minimum level of diesel stocks will be increased by 40% by 2024, reflecting the importance of diesel to the economy. It is also the fuel our refineries have the lowest capacity to produce.

The Australian Government will work together with industry as these stockholding measures are developed.

Supporting Australia’s refinery capability 

A recent strategic study of the refining industry showed that Australian refineries are at risk of closure due to low refining margins made worse by COVID-19, ageing infrastructure and regional competition.

To provide support for Australia’s refiners and prevent flow-on effects at the bowser, the government will design a market system for a production payment, both in recognition of refineries’ contribution to national security and sovereign capability, and to secure their continued operation in Australia. For refineries to receive support, they will be required to commit to stay operating in Australia.

Maintaining a viable domestic refinery industry will support Australia’s economic recovery from COVID-19.

Modernising our legislation

Modernising existing liquid fuel legislation will support a more effective government response in the event of market disruptions. The new legislation will bring together the Liquid Fuel Emergency Act 1984 and Petroleum and Other Fuels Reporting Act 2017. It will also give effect to the minimum stockholding obligation, as well as other fuel security reporting requirements.

Governments, industry and consumers will all benefit from an improved fuel-related legislative framework that is fit for purpose.

Forging Australia’s path to compliance with the International Energy Program Treaty

Australia is committed to returning to full compliance with the International Energy Agency’s 90-day oil stockholding obligation by 2026. Earlier this year, Australia took advantage of historically low oil prices and entered into an arrangement with the United States to hold 1.5 million barrels of oil in the United States Strategic Petroleum Reserve.

Australia’s fuel security package will assist Australia to comply with the International Energy Agency stockholding obligation by 2026.

More information

Australian Fuel Storage Program Request for Information

Boosting Australia’s fuel security The Hon Scott Morrison MP, Prime Minister, and the Hon Angus Taylor MP, Minister for Energy and Emissions Reduction, joint media release 14 September 2020

Enhancing Australia's fuel security The Hon Angus Taylor MP, Minister for Energy and Emissions Reduction, media release 15 June 2020

Australia to boost fuel security and establish national oil reserve The Hon Angus Taylor MP, Minister for Energy and Emissions Reduction, media release 22 April 2020