Published in The Australian.
This pandemic has had a profound impact on global oil markets.
As households and businesses have curtailed travel, consumer demand for oil products has dropped dramatically, with the price of US oil recently falling into negative territory. With this comes an opportunity to strengthen our fuel supply chain and build a strategic reserve, while boosting our local fuel sector and supplies. We are seizing these.
When it comes to our energy supplies, Australians have been well served and we continue to enjoy ample supply of electricity, gas and liquid fuel. Our fuel supply chains have proven to be resilient during the past 40 years, despite many disruptions. We produce fuel ourselves, and we import fuel from more than 70 countries, with no one source providing more than 20 per cent of our total petroleum products.
This supply chain resilience has meant that during the COVID-19 pandemic we have not faced shortages. However, with the significant drop in demand, our fuel sector is adapting. Our local refineries are working to much tighter margins but are finding ways to respond to COVID-19 impacts while keeping Australian motorists’ tanks full.
No local refineries have been forced to permanently close as a result of these pressures, despite some recent commentary. Refineries are bringing forward scheduled maintenance and reducing output to match demand but remain committed to operations.
The government has been assisting the refining sector. Since early last month the Australian Competition & Consumer Commission has allowed the major petroleum refiners to put in place measures to ensure fuel availability throughout the economic hibernation.
But it is time to build our future capacity and the Morrison government has announced it will support this work with a three-part fuel security package. With a domestic focus, the package will underpin our economic prosperity for the next decade and beyond. It also will protect future jobs in our fuel-using industries such as our truckies, farmers, manufacturers and tradies.
First, we will establish Australia’s first government-owned oil reserves for domestic fuel security.
We will boost our stockholdings by taking advantage of the historically low fuel prices. Put simply, the time to buy is now. Not only will we get the best value for our $94m investment, but we also will use our privileged position and access the US Strategic Petroleum Reserve when there is very limited cost-competitive, timely storage available across the world.
Second, we are committed to working with the private sector to develop options for more local storage as quickly as possible. If we could store fuel locally now, we would. In the meantime, we need to get more storage into place as we build our reserves at record low prices.
A sustainable refining sector is central to this, and we are working closely with refiners to give them the best chance of sustainable ongoing operations. More local supply of crude oil will help, which is why the government is focused on opening up the Beetaloo Basin in the Northern Territory.
Third, we are considering temporary change to the fuel standards.
This will provide refiners with more flexibility to adapt their operations and ease storage pressures. The changes will be closely managed to ensure motorists and the environment are protected.
These three measures are a down payment on our future fuel security, strengthen our national sovereignty and deliver more fuel supply for Australian households, motorists, industry and the national economy.