Steps taken to safeguard domestic fuel security


ATA among those backing $211 million federal stockpile commitment

Steps taken to safeguard domestic fuel security
Australia has not experienced a significant fuel supply shock in over 40 years.

 

The federal government has pledged to include a $211 million allocation for domestic fuel storage reforms in its 2020-21 Budget.

Its investment would includes cash for new domestic diesel storage facilities, a new online reporting system and measures to support local refineries.

It comes as prime minister Scott Morrison admits Australia has been fortunate to not have experienced a significant fuel supply shock in over 40 years.

In a statement, he says his government will work with industry over the next six months on the legislative and regulatory design of the package.

The package is set to be delivered through a combined market and regulatory framework, with three key elements:

  • investing $200 million in a competitive grants program to build an additional 780ML of onshore diesel storage
  • creating a minimum stockholding obligation for key transport fuels
  • backing the refining sector by entering into a detailed market design process for a refinery production payment.

A minimum stockholding obligation will act as a safety net for petrol and jet fuel stocks, and increasing diesel stockholdings by 40 per cent.

"Our positive changes to the fuel market will ensure Australian families and businesses can access the fuel they need, when they need it, for the lowest possible price," Morrison says.

"Fuel security underpins our entire economy. Not only does it keep Australia moving, the industry supports thousands of people across the country and this plan is also about helping keep them in work.

"Like all sectors of the economy, the COVID-19 pandemic is having an impact on Australia’s fuel industry.

"The events of 2020 have reminded us that we cannot be complacent. We need a sovereign fuel supply to shield us from potential shocks in the future."


How the ATA made its case for local fuel security


The statement adds that refineries play an important role in securing Australia’s fuel security and putting downward pressure on fuel prices for consumers.

It quotes modelling that a domestic refinery capability is worth around $4.9 billion, over 10 years, in value to Australian consumers in the form of price suppression.

The Government pledges to design a market system for a production payment that recognises fuel security benefits and is designed to protect Australian industry from the around 1 cent per litre increase that modelling shows will hit fuel if all refineries close in Australia.

For refineries to receive support, they will be required to commit to stay operating in Australia.

Additional measures will also be introduced to reduce the burden on industry and improve fuel market information, including modernising the online fuel reporting system to make it easier for industry to report stock levels to Government and improve the timeliness of data.

Application fees for fuel standard variation requests will also be removed.

The statement acknowledges fuel-dependent stakeholders such as farmers, truckers, miners and tradies to benefit from the move.

Energy minister Angus Taylor insists that the government recognises that Australian refineries are under significant financial pressure and is committed to working with the sector to ensure it has a long-term future.

"Almost all Australians are reliant on fuel and it is the lifeblood of so many sectors in our economy," Taylor says.

"Our farmers and miners rely heavily on diesel to do their jobs and provide services, while the transport sector sources 98 per cent of its energy from liquid fuels.

"That’s why it is critical that Australia has control over its fuel security arrangements and the Government is making sure of that."

This new step follows a $94 million purchase of crude oil at record low global prices to be stored in the US Strategic Petroleum Reserve for access during a global emergency.

The Australian Trucking Association (ATA), which had been a vocal critic of Australia’s lack of fuel security, greets the recent announcement.

"The ATA has long argued for increased fuel security, and we are pleased the government is taking the next steps to ensure this," ATA CEO Ben Maguire says.  

"Fuel security is crucial to trucking, our economy, and keeping Australian communities supplied."

"Today’s announcement will see action to increase our onshore stocks, in particular diesel due to its critical importance to the trucking industry."

While also welcoming the move, the Australian Automobile Association is wary of the additional cost of fuel production payments – said to be 1.15 cents per litre for refiners.

"Fuel security is critical to Australia’s national security and economy," AAA managing director Michael Bradley says.

"This issue is important to more than just motorists, who should not be unfairly burdened with this national cost.

"The AAA looks forward to discussing the details of the government’s package, how it is to be paid for, and the degree to which any costs borne by motorists are proportionate to the benefits accrued by motorists and other interested parties."

 

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