Government unveils $211m plan to secure diesel supplies

By Shannon Jenkins

Monday September 14, 2020


The government has announced a $211 million plan to build new domestic diesel-storage facilities and support local refineries.

Prime Minister Scott Morrison and energy minister Angus Taylor on Monday revealed the package would be delivered through a combined market and regulatory framework.

Under the plan, $200 million would be invested in a competitive grants program to build an additional 780ML of onshore diesel storage, a minimum stockholding obligation would be created for key transport fuels, and the government would work with refiners on a market design process for a refinery production payment.

The government would work with industry over the next six months on the legislative and regulatory design of the package.

Morrison said that in light of the impacts of COVID-19, Australia needed a sovereign fuel supply “to shield us from potential shocks in the future”. He said the government was committed to a sovereign on-shore refinery capacity despite the threat to the viability of the industry.

“This is why we will design a market system for a production payment that recognises those fuel security benefits,” they said.

“It has been designed to 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.”

Read more: Australia worse than US in proportional support for fossil fuels over clean energy, research shows

A minimum stockholding obligation would be introduced to “act as a safety net” for petrol and jet fuel stocks, and would increase diesel stockholdings by 40%.

The government also plans to modernise the online fuel reporting system and to remove the application fees for fuel standard variation requests.

Earlier this year the government purchased $94 million worth of crude oil at record low global prices and stored it in the US, sparking calls from Labor and the Maritime Union of Australia to build storage capability onshore.

As a member of the International Energy Agency (IEA), Australia is required to stockpile 90 days’ worth of fuel to act as a safeguard against global supply shocks. However, last month it was revealed that Australia only had enough fuel to last 28 days.

Energy shadow minister Mark Butler has repeated his calls for the government to act on fuel security.

“The Coalition government has sat idly by while Australia’s refining capacity has decreased by 40% over the last eight years and Australia has failed to comply with International Energy Agency fuel security requirements,” he said.

Morrison noted Australia has been “fortunate” to not have experienced a significant fuel supply shock in more than 40 years.

Read more: The Briefing: how the Morrison government plans to allow the CEFC, and potentially ARENA, to invest in gas


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