Updated ,first published
Australia is opening its chequebook to outbid rivals in a global scramble for fuel, as Prime Minister Anthony Albanese flies to Singapore seeking deals to secure extra shipments and avert a looming shortfall.
Despite early hopes that a fragile two-week ceasefire in Iran would unclog oil shipping routes and bring relief at the petrol pump in the coming weeks, Australia remains dangerously exposed to the risk of a supply crunch unless the government can negotiate extra deliveries of petrol, diesel and jet fuel.
On Thursday, Albanese said the government had secured the support of the nation’s biggest fuel importers, Viva Energy and Ampol, to participate in a scheme to urgently boost shipments to Australia.
In this scheme, taxpayers guarantee fuel companies’ losses if they bought expensive shipments before sudden oil price falls in an increasingly volatile market.
He said the government would seek deals that delivered value for money to taxpayers, but stressed that the top priority was ensuring security of supply.
“We want to protect taxpayers’ interests. We want to minimise taxpayers’ exposure. But our first priority, to be very clear, is supply,” Albanese said during a visit to Ampol’s Lytton oil refinery in Brisbane.
Analysts warn that even if the Strait of Hormuz opened immediately, the six-week voyage for new crude oil from the Persian Gulf means relief may not come fast enough to the Asian refiners that usually provide 80 per cent of Australia’s fuel. These refineries are running out of oil and scaling back their output already.
With regional fuel stocks rapidly depleting and nations such as Malaysia already signalling moves to prioritise domestic needs, Albanese also intends to lean on Australia’s status as a critical coal and gas supplier to Asia to secure reciprocal trade arrangements with partners across the region to head off shortages.
Since the outbreak of the war in Iran on February 28, Australian fuel importers and the federal government have been moving to diversify their supply chains and have secured additional shipments from around the world. Maritime shipping data indicates a steep increase in the number of scheduled deliveries of oil and refined fuels to Australia over the past two weeks. More than 50 shipments are due to arrive this month from as far afield as Europe and North America.
However, more cargoes will be critical for Australia to bridge the approaching supply gap. Energy Minister Chris Bowen, also speaking from the Lytton refinery on Thursday, said the government would encourage fuel companies to buy up all the fuel they could.
“We are not going to hold Ampol and Viva and the other companies back from where they can get fuel,” Bowen said
“Primarily, of course, Australia gets most of its fuel from Asia. But also there are purchases coming online from North America, from Mexico that become available at short notice.”
Albanese will meet Singaporean Prime Minister Lawrence Wong on Friday to discuss a potential deal to boost supply from the Asian nation’s sprawling fuel refineries. Singapore relies on Australia to provide about 40 per cent of the liquefied natural gas (LNG) needed to power its electric grid.
The government has also opened discussion with other neighbours about fuel supply. Earlier this week, Albanese spoke on the phone with the sultan of Brunei, Hassanal Bolkiah, about the impact of the Iran war on energy supply, and with Chinese Premier Li Qiang about energy security.
Analysts believe Australia’s negotiating position to lock in more fuel cargoes from the region has been significantly strengthened.
The conflict in the Middle East has cut off large volumes of LNG that are usually shipped to Asia, as Qatar, usually the world’s second-largest LNG supplier, has stopped cooling gas for export. This has left Asian economies including Singapore, South Korea and Japan exposed to crippling shortages and desperate to lock in emergency replacement cargoes, including from Australia.
By ensuring the continued flow of Australian coal and uncontracted LNG, Albanese hopes Australia can leapfrog other nations vying for Asian refiners’ dwindling output of refined petrol and diesel.
The nation’s two biggest fuel suppliers, Ampol and Viva Energy, have agreed to terms to participate in the scheme.
“We understand just how critical fuel is to keep motorists, farmers and businesses moving,” Viva chief Scott Wyatt said. “We are proud to be able to support the Australian government in going above and beyond to secure additional fuel supply and see the country successfully navigate these challenging and uncertain times.”
News that Iran and the United States had agreed to a last-minute ceasefire, avoiding a worst-case military escalation, sent oil prices falling sharply on Wednesday. The cost of a barrel of Brent oil, the global benchmark, plunged 15 per cent to below $US91, raising hopes that it could mark the “beginning of the end” for Australia’s fuel price increases.
The price of regular unleaded has risen more than 30 per cent to record highs of above $2.50 a litre in the weeks since Iran started blockading the Strait of Hormuz and disrupting up to one-fifth of the world’s oil and gas tankers.
Australian fuel suppliers said lower global oil prices could begin delivering relief to Australian petrol and diesel prices within the month. But an imminent supply squeeze, as Asian refiners exhausted their existing oil inventories and reduced their output of fuel products, remained a risk for import-dependent neighbours such as Australia, they said.
Australian Institute of Petroleum chief executive Malcolm Roberts, who represents the nation’s oil refiners and fuel importers including Ampol, BP, Mobil and Viva, said shipments from the Middle East had stalled and caused a bottleneck in Asia. “The underlying problem is still shortfalls of supply reaching the refineries in Asia, and that’s not going to change quickly,” he said.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.