Boosting Australia’s fuel security
The Morrison Government is taking action to secure Australia’s long-term fuel supply, keep prices low for consumers and create over 1000 new jobs through a new domestic fuel security package.
As part of our 2020-21 Budget, the Government will deliver a $211 million investment in new domestic diesel storage facilities, reforms to create a minimum onshore stockholding, and measures to support local refineries.
This will 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; and
- Backing the refining sector by entering into a detailed market design process for a refinery production payment.
Prime Minister Scott Morrison said Australia’s fuel security was essential for our national security and that we had been fortunate to not have experienced a significant fuel supply shock in over 40 years.
“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,” the Prime Minister said.
“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.”
Minister for Energy and Emissions Reduction Angus Taylor said the Government recognised 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. 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,” Minister Taylor said.
“That’s why it is critical that Australia has control over its fuel security arrangements and the Government is making sure of that.”
Federal Member for Bonner Ross Vasta MP said the construction of additional diesel storage would not only secure our diesel supplies but support up to 950 jobs, along with 75 new ongoing jobs, many in regional areas.
“Supporting our refineries will ensure Australia has the sovereign capability it needs for any event, protect families and businesses from higher prices and support thousands of jobs across the economy as we recover from COVID-19,” Mr Vasta said.
A minimum stockholding obligation will act as a safety net for petrol and jet fuel stocks, and increasing diesel stockholdings by 40 per cent.
The Government will work with industry over the next six months on the legislative and regulatory design of the package.
Refineries play an important role in securing Australia’s fuel security and putting downward pressure on fuel prices for consumers. Modelling has shown 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 is committed to a sovereign on-shore refinery capacity. We will design a market system for a production payment that recognises the fuel security benefits Australia’s refinery sector provides. It will protect Australian families and businesses 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.
The Government recognises that the future refining sector in Australia will not look like the past. However, this framework will protect Australian families and businesses from higher prices and will secure jobs in the fuel sector and in fuel-dependent industries, such as our farmers, truckers, miners and tradies.
Additional measures will also be introduced to reduce the burden on industry and improve fuel market information.
This includes modernising the online fuel reporting system to make it easier for industry to report stock levels to Government and improve the timeliness of data. The Government will also remove the application fees for fuel standard variation requests.
This domestically-focused package builds on Government action to purchase up to $94 million of crude oil at record low global prices to be stored in the US Strategic Petroleum Reserve for access during a global emergency.