Interview with Sky News, Laura Jayes
23 April 2020
Subject: Australian fuel security, US oil storage, fuel prices, energy prices
LAURA JAYES: Here at First Edition, we are looking always for the good news amid the doom and gloom, and this morning the price of electricity and gas, it appears to be the cheapest it has been in years. Joining me now is the Energy Minister Angus Taylor. Angus Taylor, thank you for your time. Is this a by-product of the coronavirus?
ANGUS TAYLOR: No, it was happening before that. In fact, the numbers that we've just got are for the first quarter, most of which was before the coronavirus. We are seeing reductions in both gas prices and electricity prices of 40 to 50 per cent, wholesale prices, that is. Now we want to see those passed on to consumers, that's enormously important. That's why we passed legislation through the Parliament recently to ensure that electricity price reductions at the wholesale level are passed through. They're about up to half of a typical consumer's overall bill. Significantly more for big commercial and industrial customers. And this is very, very important - there's a real opportunity here, as we see energy prices back to those low levels that we've enjoyed in Australia historically, to see a gas-fired, electricity-fired recovery of manufacturing in this country. It is a great opportunity. We want to see those prices passed through and we want to see investment in those downstream customer industries that are enormously important right across outer suburban and regional Australia.
LAURA JAYES: Okay, it’s only good news if bills are reduced. So how much? What kind of saving will people see on their bills? Whether you're retail, residential, or commercial on their next bill?
ANGUS TAYLOR: Yeah, sure. So the reductions we saw in the first quarter, as I said, are 40 to 50 per cent across electricity and gas. Every market is a bit different, Laura, but they're very significant reductions. And they're about half of a typical consumer's bill, they're significantly more than half for a big commercial, industrial customer's bill. Those big customers tend to be on longer term contracts, so depends on the timing of your contract, it depends when they roll over. But these are very significant reductions and we'll be watching very closely, as will the ACCC. I've been speaking to the Chairman Rod Sims about this, to make sure those reductions are passed through, they're very substantial and they have the potential to really fuel a recovery on the other side of COVID-19.
LAURA JAYES: Energy consumption has significantly dropped due to COVID-19. What kind of effect has the pandemic had on prices?
ANGUS TAYLOR: Well it's gone further than the 40 to 50 per cent. We're seeing reductions of 50 per cent plus since COVID-19 in the wholesale prices, since COVID-19 really set in. Demand hasn't fallen as much as you might think on electricity because households are actually consuming more, and this is something we are concerned about. Households are increasing their consumption of electricity, just as they're increasing their consumption of data when for the Internet. So that is something that every household is no doubt keeping an eye on, or many households are keeping an eye on. But we are seeing very significant reductions in liquid fuel demand, and that's why there's this great opportunity right now. We're seeing, to buy strategic fuel reserve, beginning building a strategic fuel reserve at historically prices. And that, of course, is very much demand driven. Very sharp reductions in demand, particularly for jet fuel, and to a lesser extent petrol. Diesel's hanging on, but it creates a great opportunity for Australia to build this strategic fuel reserve.
LAURA JAYES: Yes, you announced this yesterday, up to almost $100 million to be spent on building a strategic fuel reserve, but it's in the United States. So how strategic is it if it's not on home soil?
ANGUS TAYLOR: Well, initially it is, because there's no storage left almost in the world. We've seen this bizarre situation where we saw prices go negative in recent days because there was just nowhere to store it. Now we, through our very strong relationship with the United States, have the capacity to in the short term store fuel in the United States, store crude oil in the United States. Obviously we want to bring that strategic fuel reserve closer to home over time. We've been in discussions with the refiners about options to do that, locations to do that and that is the ultimate goal. But right now, it is such a good opportunity to start building this reserve. You know, 100 or $94 million goes a long way, buying fuel at current prices, that wouldn't have been the case even a few months ago. So we've decided to step in and start building that reserve. What it means in practice, Laura, and this is enormously important, if you are a fuel using industry - you're in farming, manufacturing, mining, transport, you're a truckie, as well as commuters - you know the government has your back. If there is a global fuel disruption, many of us remember the big disruptions we saw in the early 70s and the 80s, they had a real impact on those sorts of industries. If you're a farmer, you've got to get your crop off and there's no diesel, this is a calamity for you. So that's why we're building this reserve, enormously important. It will take time to get all located in the right places, but now's the time to get moving.
LAURA JAYES: I just asked, what the strategy is in building this in the United States? Why aren't you building it on home soil on Australia?
ANGUS TAYLOR: The strategy, well, there's no storage in Australia. We'd love there was. I mean, I'd love to be able to store in Australia tomorrow.
LAURA JAYES: But aren't you building a facility in the United States to facilitate?
ANGUS TAYLOR: No, no. Absolutely not.
LAURA JAYES: Right.
ANGUS TAYLOR: No, no, that's not, no - so the United States already has a facility. We wouldn't be building a new facility in the United States. You're right to say that would be the wrong way to go. We're absolutely not doing that. The United States has a long history of having underground storage capacity because their supply has increased so much, they've got spare capacity. We can use that now. But the goal is to ensure that we've got supply, enough supply onshore in Australia, enough supply right through the supply chain. I mean our international obligations on this are for our entire supply chain to be safe and secure. The US is a good place to get moving because of our strategic partnership with them - we've fought every war with them in the last 100 years - is a very, very strong one. They're obviously a very strong military and strategic partner.
LAURA JAYES: Why don't we, Angus Taylor, have the capacity to store fuel in Australia, more fuel in Australia? Under our international obligations, we are required to store 90 days in our fuel reserve. We haven't done that for a long time. So you know this is not a problem that's just cropped up.
ANGUS TAYLOR: No, actually let me correct you on that. There's no requirement to have 90 days all in Australia. 90 days is across the entire supply chain. And we have, depending on your definition, between 55 and 81 days right now across that supply chain, as required. It is short of where we need to be which is why we're buying. Anthony Albanese came in yesterday and got terribly confused about this. These purchases will contribute to our IEA days, our international obligations. He had that simply wrong. And of course, the whole supply chain is what's looked at. But you know we need to make sure that we're not just meeting international obligations, that we're looking after our fuel using industries and that's what this strategy-
LAURA JAYES: But we're not meeting international obligations, are we? Because it's 90 days of supply in the supply chain.
ANGUS TAYLOR: Well that's why we're buying a chain.
LAURA JAYES: Okay. But this has been a problem-
ANGUS TAYLOR: That's why we're buying.
LAURA JAYES: Has this Government over last 10 years ever met that 90-day requirement?
ANGUS TAYLOR: Well actually we went out of line, out of compliance under the previous Labor government. So well before-
LAURA JAYES: You've had a few years to fix it though, Angus Taylor, to be fair.
ANGUS TAYLOR: Yeah, I was just going through the history, as you were, Laura. So we went out of compliance under the Labor government and we're buying now at a price which is good value for taxpayers. Now, you know, if you buy at $80 a barrel, $100 million doesn't go very far. If you buy at the current prices, it goes a long, long way. So now's the right time to be doing this. We are doing it and we look forward to getting moving and ultimately, as you rightly point out, locating those reserves in Australia.
LAURA JAYES: Okay. So you will meet the 90 days, you think, maybe because the prices are so low. Is that still the goal?
ANGUS TAYLOR: The goal is always to meet 90 days. There's no question about that. As I say, it's across the whole supply chain, it's not the Anthony Albanese definition, which was clearly wrong, and these purchases will contribute to that. The head of the IEA came out last night, tweeted, confirming that that is the case. So we're looking to get to those 90 days, of course. That is our international obligation, but the more important obligation in all of this is to our fuel using industries - our truckies, our farmers, our manufacturers, and of course, commuters, tradies who so reliant on having access to fuel to get around and do their work.
LAURA JAYES: Angus Taylor, appreciate your time this morning.
ANGUS TAYLOR: Thanks for having me, Laura.