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Interview with Fran Kelly, ABC RN Breakfast

10 March 2020

Fran Kelly

Subject: Australia's new fuel agreement with the United States, and the security of Australia's fuel supply.


FRAN KELLY:  Energy and Emissions Reduction Minister, Angus Taylor, is in Washington DC. He's just signed an agreement with the United States. Minister, welcome back to RN Breakfast.

ANGUS TAYLOR: Thanks for having me, Fran.

FRAN KELLY:  So this deal you've signed - how will it work, when do we get this oil, and how?

ANGUS TAYLOR: This is all about securing our fuel supplies in the event of a global disruption. What it'll mean is that, on top of other initiatives we're taking, we'll have access to fuel stocks in the US - which supplies about 20 per cent of our crude oil now - and those stocks will be available for use immediately on requirement either to go to Australia or to go into the global market to deal with a global disruption. It's all part of a broader IEA arrangement that's been in place since the 1970's to ensure that if there is a global disruption then countries around the world co-ordinate to deal with it. That puts downward pressure on prices when there's obviously a disruption which would otherwise put upward pressure on prices, but also make sure we've got those fuel supplies available when we really need them, Fran.


ANGUS TAYLOR: It's only been called on a few times historically. We've handled this very, very well over the years. But, as you said up front, we're importing more and more of our oil because Bass Strait is producing less - we're getting less domestically – and so it's crucial that we have stocks available when we need them if there is a disruption.

FRAN KELLY:  Okay. So of course, most people would agree with that - it's crucial we have fuel reserves when we need them - but this would not be stored here. It's like a Clayton's fuel supply, isn't it? The fuel supply you have when you don't actually have it? Why is that going to help?

ANGUS TAYLOR: Well that's not right. We need some onshore and we need some available to bring onshore quickly if we need it-

FRAN KELLY:  [Interrupts] So how quickly could we get this onshore?

ANGUS TAYLOR: Well, it depends on where it is in the US but it's as fast as from anywhere in the world-

FRAN KELLY:  [Interrupts] How many days would you predict from the time we made the request?

ANGUS TAYLOR: It depends where it is in the US, Fran. But at the end of the day what's crucial is that we can get it into the supply chain quickly because we've always got oil-

FRAN KELLY:  [Interrupts] Sorry Minister, but this is a pretty, this is a pretty important question. I mean you say it's depending on where it is in the US of course, but-

ANGUS TAYLOR: So it could be, it could be 30, 35 days depending on where it is in the US.

FRAN KELLY:  Alright. Well that's a problem isn't it? Because we only have reserves onshore of 28 days, so that would mean we've got at least a week uncovered?

ANGUS TAYLOR: Well, yes, but we have a great deal of oil coming to Australia at any point in time. So if you take the total amount of oil in Australia and on water coming to Australia at any point in time, it's about 85 days, Fran.

FRAN KELLY:  [Interrupts] Alright. Just on that though, Minister, isn't the point though-

ANGUS TAYLOR: Yeah so, just to finish.

FRAN KELLY:  Yeah, okay.

ANGUS TAYLOR: It does give us time to be able to get fuel into the supply chain. But look, this is also about global disruptions more broadly, and this is typically where it's been used in the past.


ANGUS TAYLOR: When there is a global disruption - was we saw in the oil shocks which is what brought this about back in the ‘70s - when there is a global disruption, countries co-ordinate, they need to push oil into the market as quickly as possible and this is a means of doing it. As I've said, we've only been required to use stocks like this around three times since that arrangement has been in place, and twice that has just been a global response, which has meant, in all occasions, we've been able to get the oil we need.

FRAN KELLY:  But Minister, given this is largely about global disruptions, isn't the point Australia is likely to need these extra supplies when there's a disruption to the fuel supply routes, to shipping lanes due to the conflict or crisis, so we're not getting our normal shipments of fuel? Why wouldn't that same conflict of crisis disrupt the supplies we're counting on from the United States?

ANGUS TAYLOR: Hang on, Fran - so that's not right. So the most common disruption we've seen historically is obviously in the Middle East and there's a need to get fuel into the market as fast as possible. Now, we already have a great deal of fuel on water coming to Australia at any point in time and we also have a significant amount of fuel in Australia-

FRAN KELLY:  [Interrupts] Yes, but what if something disrupted that? What if supply was disrupted from the Middle East or South East Asia to Australia?

ANGUS TAYLOR: Then we need to get oil coming to Australia and that's why we'll have oil in the US to be able to do that, on call-

FRAN KELLY:  [Interrupts] But sorry Minister, that's my point. How would it come to Australia if supply routes are disrupted? How would it get here?

ANGUS TAYLOR: Well, there's lots of ways of getting to Australia - we're surrounded by ocean.

FRAN KELLY:  Yeah, but if there's a global shock or crisis that means that shipping lanes aren't functioning, that supplies are interrupted, couldn't that also interrupt the shipments coming from the United States? Isn't that the risk?

ANGUS TAYLOR: So, there is one very, there is one very extreme scenario, which is what you're talking about, where Australia is completely surrounded, right? That is not a scenario we've faced. It is a reason to make sure we've got some stocks in Australia, but it also means we've got to have stocks around the world, located strategically. At the moment, we've been in a position, or since this arrangement has been in place, we've been in a position where we've avoided disruptions. We have fuel that comes from 70 different countries right now and it means we have a pretty diversified source. One of the best locations strategically, given the scenarios that could unfold is to have oil in the US and you know, it doesn't preclude the need to have some oil in Australia, you're absolutely right. But it's a balance between both that will ensure we're able to deal with these shocks, should they arrive.

FRAN KELLY:  And just on that, because as we're speaking, the text-line is actually going crazy with people saying why don't we have our own emergency supplies? I mentioned we've got 28 days' worth of supply. The IEA Treaty requires member nations hold 90 days' worth. Why don't we just increase-

ANGUS TAYLOR: [Interrupts] Fran, can I correct you on this? This is not correct.


ANGUS TAYLOR: The IEA requires 90 days in total, in total.

FRAN KELLY:  Alright, okay. Let's not get distracted by that because you're almost out of time. But why don't we just increase our own domestic oil reserves?

ANGUS TAYLOR: We are absolutely focused on both. This is the point - we've got to have a balance.

FRAN KELLY:  [Interrupts] So we are increasing our domestic reserves?

ANGUS TAYLOR: We've got to make sure that local suppliers have enough supply in market and we have supplies that can get into market fast enough. Now that balance is important and you're right to raise it, but the point I would make is we also need supplies that can get into the supply chain as quickly as possible. So it's a mix of the two that will always be the right answer. That's been-

FRAN KELLY:  [Interrupts] I understand, but if we've only got 28 days' reserve here, should we be increasing that?

ANGUS TAYLOR: That's something we're continuing to look at, but I would say that you're not including in that the oil that is coming to Australia from Australian imports so-

FRAN KELLY:  [Interrupts] No, I said on Australian soil.

ANGUS TAYLOR: So there is a much larger amount of oil that will get to Australia under almost any scenario than what you're talking about here. But look, the point is we need a balance and that is exactly what we're aiming to do here. There is an opportunity to get more into our supply chain when it's needed, and that's what we're doing with the United States. The truth of the matter is the United States has been a very, very strong ally to Australia for a very long time and this arrangement will ensure that we have those supply chains when we really need them and it's worked extremely well for us, historically.

FRAN KELLY: And Minister, just further on oil, because overnight the price is in freefall now over the last few days, due to the fears, the impact of the coronavirus. But a falling oil price is good news for consumers because petrol will be cheaper - that should give the economy a bit of a boost at this time - if the petrol companies pass it on. As Energy Minister, would you be hoping they do say? Is there anything you're going to do to force them to do so? Because they don't have a great track record here, do they?

ANGUS TAYLOR: We do expect them to do so, you're absolutely right. Typically, because of fuel moving through the supply chain, it will take a couple of weeks but we'll expect it to move down as the global price is moving down. I know the ACCC and the Treasurer will be watching this very, very closely. Our expectation is-

FRAN KELLY:  [Interrupts] How quickly do you think we should see it at the bowser?

ANGUS TAYLOR: Well, typically we've seen that the supply chain clears in a couple of weeks, enough that prices should be coming down. And if it's not coming down in that sort of time frame, Fran, there'll be real questions to answer and we'll be watching this very, very closely.

FRAN KELLY:  Angus Taylor, thank you very much for joining us.

ANGUS TAYLOR: Thanks for having me, Fran.