Emergency laws will be rushed into parliament on Monday in an urgent bid to boost Australia’s fuel stocks, and importers will be given unprecedented government backing to scour the globe for increasingly rare and expensive shipments of petrol, diesel, crude oil and fertiliser.
The Albanese government on Saturday moved to seize the agenda on the unfolding crisis sparked by the Iran war, unveiling the new powers after criticism of its leadership and ahead of a meeting with state premiers when national cabinet is convened on Monday.
It will amend the Export Finance and Insurance Corporation Act to underwrite purchases by private companies. The government will not pay upfront for fuel, but public funds will be put up as insurance for importers that are having to buy fuel at the current sky-high prices.
The scheme is designed to send a signal to importers to buy up whatever supply they can and bring it to Australia, without worrying about suffering a loss.
Announcing the new laws, Prime Minister Anthony Albanese said that, while Australia’s fuel supply would remain stable over coming weeks, the country needed to be as prepared as possible.
“The longer this war goes on, the more the impacts will be,” he said.
“I want us to have the strongest possible plans so we’re ready for what may come. I want to keep our people, our economy and our nation moving.”
Oil prices have skyrocketed since the war began on February 28, as 25 per cent of the global oil supply – which typically comes from the Middle East through the Strait of Hormuz – is cut off.
A barrel of oil now costs $US115, up 60 per cent, which has driven petrol and diesel prices in Australia to record highs.
Fuel companies are concerned that, if they buy now at eye-watering prices and then the war suddenly ends, in several weeks they would incur massive losses after the market cools and their shipments land in Australia.
Australia imports 90 per cent of its fuel and nearly all of it comes from Asian refineries. The last seaborne shipments that left the Middle East before the war are now rolling into refineries, which may exhaust their stocks within a month.
Energy Minister Chris Bowen said on Saturday that fuel supply remained secure and in fact had increased slightly on typical levels. While six out of 81 fuel import shipments due by May were cancelled in recent weeks, the government and industry have secured three additional deliveries.
A statement released by the government said its agency Export Finance Australia, which offers loans to businesses, would manage the new scheme. It will enter into contracts of insurance or indemnity, give guarantees, make loans and enter arrangements needed to help secure fuel supply.
The support will be available to companies bringing in additional shipments, over and above typical rates of importation, as well as “cost-prohibitive” shipments that private buyers would otherwise not be able to purchase.
Support will also be available for shipments of fertiliser, which is crucial for farming, as well as other “vital strategic reserves as needed”. Supplies of goods made with petrochemicals in the Middle East are also cut off from the global market, including plastics and pharmaceuticals.
State premiers have been calling for a federal-led response, after Albanese last week said fuel rationing policies were “not a question for me”.
Monday’s national cabinet meeting is expected to consider potential measures to reduce demand for fuel, such as encouraging Australians to carpool or work from home.
The NRMA on Saturday welcomed the government’s move, which it said was required to deal with the extraordinary risks to fuel supply.
Spokesman Peter Khoury said that, while the government’s scheme would help companies import expensive fuel, the cost of petrol and diesel was secondary to ensuring there was sufficient supply to keep the economy moving.
“These are extraordinary circumstances that we live in, and they require extra measures from the government to ensure that Australia can keep moving,” he said.
“There’s nothing we can do about price, unfortunately, but we certainly can take steps to safeguard supply, which is what we need to do. Whatever cost comes with this policy is irrelevant.”
Fuel importers also welcomed the scheme, with Australian Institute of Petroleum chief executive Malcolm Roberts saying it would encourage importers to buy up fuel supply now, despite soaring costs.
“It’s helping companies that are facing significant commercial risks to go out and hunt for some additional supply for Australia. It’s really an insurance policy where the government and industry share some of the risks,” he said.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.