THE Australian Government is taking advantage of the slump in global oil prices to buy cheap fuel to store in the United States under the Strategic Petroleum Reserve (SPR) arrangement signed with the US Government in March.
Under the agreement, Australia can hold oil in the US SPR as strategic reserve stocks for an initial period of 10 years.
Australia will spend $94 million to buy oil at the current low global prices to top up supplies in the SPR.
Global oil prices have hit new lows due mainly to a significant drop in demand caused by the COVID-19 pandemic and a lack of cost-effective long-term storage options.
Under International Energy Agency agreements, Australia has committed to holding at least 90 days of fuel on hand. At the end of February, it had 81 days’ worth of oil supplies, including 25 days of stocks in overseas ports and in transit to Australia.
In addition to the immediate moves to purchase cheap fuel, Federal Minister for Energy and Emissions Reduction Angus Taylor said the Government would shortly launch a process to work with the private sector to consider options for further strengthening fuel security in Australia.
This would focus on investment options, supporting the refining sector and assessing the most effective stimulatory options.
National Farmers’ Federation chief executive, Tony Mahar, welcomed the Government’s decision to invest $94 million in establishing an Australian strategic fuel reserve.
“This is a sensible, prudent investment in the security of Australia’s fuel supply. With oil trading at negative prices for the first time in history, there could not be a better time to establish a strategic fuel reserve in Australia,” he said.
“Fuel is essential to allowing farmers to produce the food and fibre that keeps our nation, and indeed many other nations, running in a time of crisis such as the present.
“The strategic reserve will make Australia’s fuel supply more secure and resilient, thereby giving farmers certainty that they will not run dry.”
Offshore storage risk
The arrangement to store the nation’s fuel reserves in the off-shore US facility hasn’t been without its critics.
Federal Opposition leader, Anthony Albanese, said counting supplies stored in the US as domestic reserves didn’t meet the obligation of having 90 days of supply on hand.
Others have warned that the fact it would take 25 days to ship the fuel to Australia made the nation vulnerable in a crisis.
Ensuring fuel security
GrainGrowers chairman, Brett Hosking, said GrainGrowers didn’t have a strong opinion either way on the Government’s move to store fuel reserves overseas.
“Ideally one day we would like to see it stored here in Australia, but the reality is we don’t have the storage at the moment. That’s the next step. It’s good the government has decided to step up and take a role in it,” he said.
Mr Hosking said GrainGrowers had been talking with government for some time about ensuring Australia maintained adequate fuel supplies.
“Australia is meant to be carrying 90 days of fuel reserves. We know it doesn’t. We have to have a serious think about this, particularly for agricultural industries,” he said.
“We talk a lot about food security and we are very good at growing crops, but if we don’t have the fuel to harvest them then all the effort that has gone in isn’t worth it.
“We hope we never get to that situation, but if the potential is there we need to make sure we are covered.”
Farmers take advantage
Mr Hosking said farmers had been taking advantage of the opportunity to buy fuel at low prices.
“It seems there are some cheap oil prices out there at the moment if you have the storage for it,” he said.
“I think most growers have been taking advantage and building up their own supplies on-farm, carrying what they can.
“They will probably put the crop in and make sure the tanks are full for the rest of the season.”
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