Striking An Oil Bargain

Energy Minister Angus Taylor has scored a good deal to restore Australia’s commitment to fuel reserves, despite what his critics say. By Will Jefferies.

For too long Australia has remained complacent about its amount of fuel reserves.

However, this week Federal Energy Minister Angus Taylor put minds at ease, taking advantage of record low oil prices and announcing that Australia would spend $94 million on building a strategic fuel reserve in the United States. 

Although the fuel will be held offshore and transported across the Pacific mostly by foreign owned ships, this is a promising step in the right direction for Australia’s security and capacity to be self-sufficient.

The Minister made it clear that the fuel would be stored in the United States for the time being as “we do not have a good starting point to start building our reserves’ and that “over time we will have much of the reserves held in Australia.”

He also noted that there is no storage available almost anywhere in the world, one of the reasons why the oil price went negative. It was our strategic relationship with the US that enabled us to find a short-term opportunity to store oil in their pre-existing storages. In the meantime, the Minister was working with Australian industry to establish local storages, “to ensure we’ve got a local supply as well as a full supply chain across the globe.”

The policy has nevertheless drawn criticism. Australian Trucking Association chairman Geoff Crouch said, “the move to establish our strategic reserve in the United States is a national security issue… It could take up to 40 days for fuel to make its way from the US to Australia.”

Labor leader Anthony Albanese, failing to recognise that Australia went out of compliance with our international obligation to hold 90 days of fuel reserves under a Labor government in 2012, chastised the policy, saying that storing the fuel in the US was a “rather bizarre” strategy that it rendered Australia vulnerable to “the sort of international conflict or issues that provide disruption to sea lanes.”

Not so, said the Minister. “The sea lanes to the US are probably the last ones that would ever be cut off,” he said. “There is no question that enhancing domestic oil stocks is something we are focusing on. (The Government has) been holding discussions with a number of refineries over recent months, starting to look at the best possible options for local storages.”

What critics must understand is that Minister Taylor has struck a great bargain for the Australia people. He has bought a significant amount of fuel at record low prices and found somewhere for it to be stored at a time when storage is scarce.

Once oil prices rise again and storage space is cleared in Australian refineries, the fuel stored in the US can easily be shipped over here to replenish our domestic reserves.

Although some will continue to chastise the Minister for storing our new fuel reserves offshore, they must recognise that this is merely a pragmatic aspect of a long-term policy to ensure Australia can adequately sustain itself in an increasingly contentious and uncertain geopolitical environment.

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