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Australia is Almost Entirely Reliant on Imported Diesel to Transport Food and Medicine Around the Country But, Should There be a Market Failure, the Federal Government’s Australian Petroleum Statistics State It Has Just 22 Days’ Worth in Reserve

Australia is almost entirely reliant on imported diesel to transport food and medicine around the country but, should there be a market failure, the federal government’s Australian Petroleum Statistics state it has just 22 days’ worth in reserve.

In the event of a war, Australia has only:

– Chilled and frozen goods for seven days
– Dry goods for nine days
– Hospital pharmacy supplies for three days
– Retail pharmacy for seven days
– Fuel to service stations for three days

Australia’s fuel security falling short as ‘war-game’ report, released under FOI, reveals vulnerabilities

A decade after exposing Australia’s dire vulnerability to global fuel disruptions, a former high-ranking air force officer says there has been little improvement, with government documents revealing its frailty through an all-too-realistic training exercise.

Australia is almost entirely reliant on imported diesel to transport food and medicine around the country but, should there be a market failure, the federal government’s Australian Petroleum Statistics state it has just 22 days’ worth in reserve.

“Our way of life depends upon cheaper oil and fuel coming from overseas, but it does so at the cost of our security and resilience,” retired air vice-marshal John Blackburn said.

A man in a suit looks at the camera

Retired air vice-marshal John Blackburn has lobbied to improve fuel security for a decade.

Mr Blackburn has been lobbying the federal government since 2014 when he warned Australia only held enough fuel to deliver:

  • Chilled and frozen goods for seven days
  • Dry goods for nine days
  • Hospital pharmacy supplies for three days
  • Retail pharmacy for seven days
  • Fuel to service stations for three days

While there has been some improvement, it remains well short of its International Energy Agency (IEA) obligations to hold 90 days’ worth of oil stocks, with member countries expected to release stock onto the market to shore up supplies in times of disruption.

Australia has 48 days’ worth of net imports (total imports minus exports), including 22 for diesel, 17 for jet fuel, and 29 for petrol consumption.

This includes stock on land and in domestic and coastal waters.

A chilling scenario

The National Oil Supplies Emergency Committee (NOSEC) periodically conducts emergency response exercises that draw from real-world geopolitical tensions.

Former senator for South Australia Rex Patrick secured the Exercise Catalyst Report 2019, about that year’s exercise, under Freedom of Information.

With detailed realism, it described a mock scenario in which shipping through the Strait of Hormuz in the Middle East came to a halt following attacks on United States drones and Japanese and Norwegian oil tankers.

The US sent ships and aircraft to the region, as crude and refined fuel imports to Australia fell to 70 per cent and alternative crude suppliers found it difficult to meet the shortfall worldwide.

Insurance companies refused to cover ships transiting the region.

As part of the imaginary scenario, tensions then escalated dramatically in the South China Sea and tankers to Japan and South Korea were halted, prompting insurers to refuse to cover vessels in that region too.

Many Asian refineries, including those in Singapore, Japan, and South Korea, which supply most of Australia’s refined fuel, shut down because they were unable to source crude.

The exercise found that governments did not honour their IEA commitment and chose to stockpile supplies instead because conflict seemed imminent.

Oil rig

Just 18 per cent of our refined fuel comes from Australian sources.

Meanwhile, the exercise detailed a deteriorating situation in the Middle East, with attacks on oil plants in Saudi Arabia knocking out more than half its crude output or about 5 per cent of global supply.

Crude and refined fuel imports in Australia reduced to just 35 per cent and the Liquid Fuel Emergency Act was activated, meaning petrol, diesel, and jet fuel were rationed.

Australian refineries tried to process local crude, but throughputs were extremely low due to a lack of feed or poor quality. Refinery output dropped to about 50 per cent and closures seemed imminent.

The report detailed that: “Whilst public sentiment and the media have ‘understood’ that this has been an international issue, there are concerns about the impact that rationing will have on them and are questioning why the government wasn’t more prepared.”

Too little, too late

Mr Patrick pointed out that it took 21 days to declare the liquid fuel emergency during the exercise, which was far too long when the country only held 22 days of diesel fuel stock.

“By that time, the bulk of our national buffer may already be depleted,” he said.

“Things could turn ugly fast and rapidly move beyond the scenarios the federal and state governments have war-gamed.”

Rex Patrick sitting at a desk, wearing a suit and purple tie, with a laptop in front of him.

Rex Patrick refers to himself as the “transparency warrior”, having made 297 FOI requests.

The exercise report also found there were varying levels of understanding regarding the processes, roles, and responsibilities between participants throughout the exercise, and “key areas of concern around indicative time frames for decision and declarations by responsible ministers and the ambiguity around the processes for activation”.

A subsequent Liquid Fuel Security Review intended to address this, along with the timeline for activating the emergency response.

It found that a big reduction in supply from the Middle East was unlikely to result in shortages in Australia (provided the global market kept functioning and people were prepared to pay higher prices).

But a major disruption in North-East Asia could create shortages along with a number of small disruptions happening at the same time.

The review recommended that Australia:

  • Maintain stocks at or above current levels for petrol and jet fuel, and increase stocks of diesel
  • Maintain a domestic refining capacity
  • Ensure adequate information on fuel stocks and supply issues
  • Ensure legislation to allow for effective coordination across industry, governments, and fuel users.

Provided it took those steps, it said Australia was well-placed to overcome vulnerabilities as its fuel supplies came from 70 different countries and, if there was an issue in one region, fuel could be sourced from another.

The 2019–20 Australian bushfire season and then the COVID-19 pandemic prevented the review from being finished, but it was updated to reflect the fuel security implications of those two events and to reflect federal policy as of September 2020.

An aisle in Woolworths supermarket with mostly empty shelves labelled Toilet Paper

As COVID-19 spread into Australia, panic buying saw items like toilet paper temporarily sell out.

Mr Patrick said there was “no sensible reason” as to why Australia’s lack of fuel security had not been properly addressed over the past decade.

“All I can really suggest is that fuel storage tanks aren’t quite as sexy as submarines, frigates, and fighter jets even though, as the review shows and as the exercise shows through documents released under FOI, it doesn’t take a direct conflict with Australia to cause a fuel security shortage,” he said.

“But the thought of not having food in cupboards and fridges or prescription medicines would likely exercise people’s minds a lot more than the ill-informed thoughts they had during COVID about toilet paper.”

Attempts to increase storage

In 2020, former Coalition energy minister Angus Taylor invested $200 million in a competitive grants program to build an additional 780 megalitres of onshore diesel fuel storage.

He also brought in production payments to help shore up Australia’s two remaining fuel refineries in Geelong and Brisbane — down from four in 2014 and eight refineries about 20 years ago.

Two large refinery tanks.

Victoria’s Altona refinery is one of the most recent to be decommissioned in Australia.

“Four years since this announcement was made … the program is well behind the original schedule,” Mr Blackburn said.

“Nine grants [to build storage] were offered, eight were taken up, but I understand as of a year ago only three had actually done anything.

“These steps are important but they’re certainly not enough.”

Mr Blackburn said Australia was also failing its own legislative requirements under the Liquid Fuel Security Act 2021.

“The legal obligation as of July this year was 32 days of diesel,” he said.

Holding ‘more diesel than ever before’

A Climate Change, Energy, the Environment and Water spokesperson said Australia was “holding more diesel than ever before” and had met its Minimum Stockholding Obligation (MSO) requirement from July 1.

Under the MSO, which he said was a different measure from Australian Petroleum Statistics, total stocks held by industry in the September quarter 2024–25 included 33 days for diesel, 33 days for kerosene, and 42 days for gasoline.

“Australia is fuel secure and stock levels are healthy with industry exceeding the stockholding requirement for all three fuels,” the spokesperson said.

The MSO measure is higher because it includes stock in pipelines and on the water in Australia’s exclusive economic zone, which can be up to 200 nautical miles from shore, or fuel on a ship that has “temporarily exited Australia’s exclusive economic zone while en route to the Australian port”.

“Australia has continued to demonstrate its capacity and commitment to global energy security, including contributing to International Energy Agency calls for global collective action in 2022,” the department spokesperson said.

A ‘disingenuous step’

But Mr Blackburn described the MSO legislation as a “disingenuous step” introduced by the former federal government to “deter concerns” that Australia was not meeting its IEA obligations for 90 days.

“It’s an accounting figure. You can’t count it if it’s not in your port,” Mr Blackburn said.

“There is often re-trading of stocks while they’re underway.”

After more than a decade of lobbying to improve the shortfall, particularly in recent years where COVID-19 and then the Ukraine and Russia conflict demonstrated global energy and trade disruptions, Mr Blackburn said he had come to the “conclusion that economists lived in a parallel universe where security was not an issue”.

Old silver pumps stand next to each other at the refinery

Australia has just two oil refineries left, down from eight more than 20 years ago.

“When it’s not an election issue, politicians who try to address it generally get stamped down,” he said.

“Our failure of leadership in this country to deal with our risk and vulnerabilities will backfire on us, and it’ll happen incrementally and then everyone will try and blame each other.”

The ABC asked Climate Change and Energy Minister Chris Bowen and his department whether the unfinished Liquid Fuel Security Review would be completed.

“Government and industry continue to refine our shared operational response to threats to fuel security, and are well positioned to act quickly,” a spokesperson said.

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Resources:
https://t.me/AussieCossack/30820
https://www.abc.net.au/news/2025-01-07/australia-fuel-security-falling-short-foi-war-game-report/104745210

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