The Federal Government has announced the formation of a national fuel supply taskforce, led by the former CEO of the Australian Energy Regulator and the Energy Security Board, calling it a “sensible measure” as the Middle East conflict continues.
Anthea Harris will act as the fuel supply taskforce coordinator in a newly created role within the Department of Prime Minister and Cabinet.
She will drive coordination between the federal, state and territory governments on matters of fuel supply and national resilience, working with appointed representatives in each state and territory.
The government has announced additional measures to secure Australia’s fuel supply, including a temporary 20 percent reduction of the Minimum Stockholding Obligation (MSO), which will release up to 762 million litres of petrol and diesel from Australia’s domestic reserves.
It will also temporarily amend Australia’s fuel quality standards to keep more Australian-made fuels onshore, increase surveillance of the fuel sector to crack down on price gouging and work with industry to increase fuel supply to service stations.
“Australia has entered this period of global uncertainty better prepared than before – our fuel reserves are now held onshore, we’ve invested in our refineries and we’ve acted quickly to address localised supply shortages,” said Minister for Climate Change and Energy of Australia Chris Bowen.
“Today’s announcement of the eminently qualified fuel supply taskforce coordinator is the next step in preparing and responding to the supply chain challenges coming from overseas.”
Opposition leader Angus Taylor welcomed the appointment of the national taskforce, but said the government could have acted sooner.
“The taskforce should be the minister and his team. I’m not against having a taskforce if that’s going to solve the problem,” he said.
“The prime minister should step in. I’ve been saying that for days, because the minister’s not doing his job. He failed Australians and this is the consequence.”
The announcement comes as Asian fuel suppliers start to feel the impact of the Middle East conflict, increasing pressure on Australia, which receives almost all of its petroleum products from refineries in Asia – particularly South Korea, Singapore, Malaysia and China. It also, to a lesser extent, relies on deliveries from India, Brunei, Taiwan and Japan.
While Australia receives almost 80 percent of its fuel from Asian suppliers, they, in turn, receive around 60 to 70 percent of their crude oil from the Middle East, mostly via the Strait of Hormuz.
The remaining 20 percent of Australia’s fuel demand comes from its two domestic refineries, which are located in Brisbane and Geelong.
Industry commentators are calling this “crunch time” for Australia, which has yet to feel the full impact of oil shortages caused by the war in the Middle East.
The final oil tankers to leave the Strait of Hormuz before its effective closure have only just arrived in Asia, with a further 10 to 20 days added on for an oil tanker from an Asian refiner to reach Australia, hence the lag.
MST Marquee head of energy research Saul Kavonic said this places Australia in a vulnerable position due to its place at the end of the supply chain.
“Now you can see what the problem is there: if you’re South Korea, you’re going to prioritise your own citizens first before you think about what you’ll do with the leftover refined product that you have,” he said.
The Federal Government has assured the public that the nation’s fuel supply is secure until mid-April – despite six oil tankers cancelling or deferring their shipments to Australia last week – and has said fuel rationing is not required at this stage.
Fuel rationing was last implemented in the 1970s during two major oil crises, and has been called a “smart option” by some industry experts.
“It is better to act sooner rather than later, given our limited reserves and the spectre of early fuel price buying, queuing and hoarding,” said former head of the ACCC Allan Fels yesterday.
“There’s already discussion of some relatively soft steps which could include rationing of access to petrol based on odd/even number plates; driving every second day; working from home and speed limits.
“One problem with soft approaches (often proclaimed by governments with much fanfare) is that rather than reducing demand, they induce a rush to the bowsers by a public troubled by the adoption of rationing.”
Mahdi Abolghasemi, who researches demand forecasting in supply chains at QUT, told the ABC that if the tension continues, countries will look to source from other oil providers in the market, and some will probably ramp up production themselves.
“Of course, we don’t know what will happen with war, so I can’t comment on that [fuel rationing] because it’s highly uncertain,” he added.
“But I can say that in the supply chain and energy market, we usually find a way to stabilise the market.
“Over the longer term, geopolitical conflicts like this highlight the importance of strengthening energy system resilience through improved supply chain planning, strategic reserves and gradual diversification towards electrification and alternative energy sources.”
Treasurer Jim Chalmers has also weighed in, saying the federal government is expecting fuel prices to remain above pre-conflict levels for the rest of this year.
He also added that fuel prices could remain elevated for three years if the conflict lasts longer than expected.
Meanwhile, the National Farmers’ Federation and National Road Transport Association (NRTA) have both said they expect food prices to rise within the next few weeks.
Speaking on ABC National Radio, NRTA chief executive Warren Clark said the nation was heading towards a “broken freight supply chain”.
“Come the 21st of April, when a lot of the fuel bills start to come in, and the fuel price will have increased steadily by then, we’re going to see some major changes in this freight industry,” he said.
“You could see food prices increase dramatically. It’s the only way that people can grasp how bad this situation is – when they go down to their supermarkets and shops, the stuff’s just not there to buy.”
Yesterday, the Federal Government announced the commissioning of a National Food Supply Chain Assessment, which will inform the work of the new fuel supply taskforce and provide advice to the government on preparing for disruptions to food production and supply chains.
Minister for Agriculture, Fisheries and Forestry Julie Collins said the assessment will initially focus on diesel supply chains, and will then expand to other critical agricultural inputs, such as crop protection products and fertilisers.
“Our farmers and producers feed millions of people both here and abroad, but events like the conflict in the Middle East reaffirm why we cannot be complacent,” said Collins.
“While Australia is food secure, we recognise the importance of supply chain resilience, including the supply of fuel and fertiliser, which is why we have commissioned this assessment.
“We continue to progress our National Food Security Strategy, which is about keeping food production and supply chains moving, and ensuring Australia continues to remain competitive on the global stage.”
