Interview with ABC Radio Brisbane
21 April 2020
Subject: Fuel reserves, fuel security
STEVE AUSTIN: Angus Taylor is the Federal Minister for Energy and Emissions Reduction. Minister, thanks for staying on the line for me. How much fuel does Australia have in reserve right now?
ANGUS TAYLOR: Well, look, it depends on what you count in there, but using the typical calculations for the IEA, the IEA days is about 55 days. Using a broader calculation, that's closer to 80 days. It ebbs and flows a day or two either way from time to time. But that is below our required amount, which is 90 days, so we're looking to top that up. That's why we will take advantage of the low prices we're seeing now to enhance our fuel security.
STEVE AUSTIN: You may recall that one of your own, Senator Jim Molan, has been calling for Australia to take close attention to our national reserves for some time now. So, the Federal Government's going to do that now at this price. What exactly are you going to do?
ANGUS TAYLOR: Well, start buying it and storing it. The challenge at the moment - and you just heard it from Mick Jarvis - is that you've got to find a place to store it. Now, we've been working on this for some time. Ultimately, we'd like to store it locally. We have run out of storage locally and we've been talking to the refiners about access to storage, but of course, they have seen their demand drop off and we've seen all the storage being used locally. So, the short-term opportunity is to store it in the US, where there is some spare capacity owned by the US Government. Over time though, we'd like to see that domestic reserve being held domestically and that's exactly where we'd like to go. But as I say, right now, it's great, in theory, to be able to want to buy oil - the challenge is to store it. The good news is that we've got a relationship with the US Government. We signed an MOU with them only a few weeks ago. I was over there, working on exactly this issue so that in the interim we can use their storages, and then over time bring them to Australia.
STEVE AUSTIN: So what does the memorandum of understanding, in simple terms, mean for both Australia and the US?
ANGUS TAYLOR: Well, it means we can store our fuel in the US. That's in very simple terms.
STEVE AUSTIN: Okay.
ANGUS TAYLOR: And in the absence of having immediately available storage here in Australia, that's our best option to start building this fuel reserve and then, as I say, over time, we'll look to build storages here in Australia.
STEVE AUSTIN: How much spare storage capacity is there here?
ANGUS TAYLOR: Well, there's none. That's the problem. I mean, the refineries are using their storages, understandably, completely right now because they are pumping out fuel. They don't like to slow down unless they go to a stop, as Lytton has, because it has to go through a maintenance upgrade. So, they're producing more fuel than the market can take. And this is the problem all around the world at the moment. The reason why we've seen negative pricing is the world has run out of storage. So we're in a very unique position with our relationship with the United States where we can access storage, this arrangement we've been working on, and that puts us in a position to start building a fuel reserve at a very, very attractive low price.
STEVE AUSTIN: Angus Taylor is the Federal Minister for Energy and Emissions Reduction. This is ABC Radio Brisbane. So, when Jim Molan has been calling for Australia to take seriously our shortfall of national reserves, are you telling me that we couldn't have stored it anyhow?
ANGUS TAYLOR: We didn't have enough storage to be able to deal with a situation like this, no. That's clear. Historically, that's been true. Now, we're looking at how we actually build that reserve domestically in the short term because there's such an opportunity in buying at low prices. Storing fuel in the US is a sensible option and it's a way of building that reserve at a very low cost, using that strong relationship we have with the United States.
STEVE AUSTIN: The US is a long way away.
ANGUS TAYLOR: Yeah, sure, but I mean, at the moment, the priority is to start building a reserve. That's the focus. Look, I've had I don't know how many calls in the last 24 hours with people saying: ‘Hey Angus, it's a great time to start building a fuel reserve’. I agree. The challenge is finding storages. As I say, we're in a unique position. Now, all that being said, our obligations are international obligations. It's all about holding enough in your supply chain. We can move oil from the US much faster than we can from Europe or many other places in the world. So it isn't a bad place to hold fuel. But of course, we do want to start building our domestically focused fuel security and fuel reserves.
STEVE AUSTIN: So what's the plan to build up holding facilities in the future for Australia?
ANGUS TAYLOR: Yeah, without making an announcement ahead of time, Steve, what I'd say is we've been in discussions with the refineries now for some time looking at the best way to do this. Obviously, the best way to hold fuel is as crude and it's for exactly the reason you discussed in the previous call, which is that if you hold petrol or diesel or jet fuel, it has a limited lifespan, whereas crude has a longer lifespan. So it's always better, if you can, to hold it as crude oil, but that means more storages in Australia, and that's something we've been in discussions with the refineries about and those discussions will continue.
STEVE AUSTIN: The fuel price levy, the price the government gets from the sale of fuel and diesel and oil, must be one of the few revenue streams of government at the moment.
ANGUS TAYLOR: Well, look, there's still big parts of the economy that are going well. It's great to see manufacturing and mining continue in many cases, in surprisingly good health, and the construction industry of course. Unlike New Zealand, we haven't shut those industries down, we've kept them going, and that's been a very good thing. That's meant diesel demand has been reasonably strong in contrast to jet fuel where we've seen a complete collapse in demand, almost around 90 per cent reduction, moving towards 100 per cent reduction because most of the airplanes are out of the air. So, it depends on the fuel source but we have seen these significant reductions in demand.
STEVE AUSTIN: I really appreciate you coming on this afternoon. So you'll have an announcement soon about actually building crude or petrol or fuel holding facilities in Australia?
ANGUS TAYLOR: Well, the immediate focus is to just take advantage of these low oil prices and build a fuel reserve and then over time, yeah, we want it to be a domestically focused reserve - exactly.
STEVE AUSTIN: Thanks very much for staying on the line for me.
ANGUS TAYLOR: Thanks Steve.