The federal government will expand domestic fuel reserves under a plan it says will enhance national sovereignty.

Following several years of calls to expand its onshore reserves in an increasingly volatile world, Energy Minister Angus Taylor will on Monday call for submissions to store an extra 7 million to 15 million barrels. This would be the equivalent of 14 to 30 days of domestic consumption.

Mr Taylor will also announce a review into the refinery industry to secure its viability as companies use the pandemic shutdown to cut output and bring forward maintenance.

Refineries will also start producing diesel for cars and trucks from a large stockpile of aviation fuel that has developed due to the shutdown of the airline industry.

Before the last election, then Labor leader Bill Shorten promised, if elected, to establish a domestic fuel reserve, saying it was a matter of national security.

Mr Taylor rejected the idea then as too expensive, estimating it would cost between $10 billion and $20 billion, depending on how it was done.

In April this year, the government took advantage of the low oil prices caused by the coronavirus pandemic and a standoff between Russia and Saudi Arabia, and purchased $94 million worth of fuel.

But with no domestic storage capacity available, that extra fuel will be kept in the United States for 10 years as part of its strategic petroleum reserve.

This decision attracted derision from Labor and other critics that it was not much use as a reserve if the fuel was warehoused abroad.

90 days in reserve

At the time, however, Mr Taylor said the US decision was a “downpayment” on doing something more permanent in Australia which, after a period of closures, has just four refineries.

Under protocols laid down by the International Energy Agency rules, nations should hold at least 90 days of oil stocks in reserve. These so-called IEA days include oil on ships bound for Australia as well as that stored domestically.

At the end of March, Australia had 75 IEA days of oil in reserve. It has not had 90 IEA days since 2012. The bulk of Australia’s fuel is refined from imports on a “just in time” basis.

The plan to boost onshore storage by up to 15 million barrels will add between eight and 19 IEA days to domestic storage, taking it to the requisite 90 days by 2026.

Mr Taylor said the government would assess how it could “best partner with industry to increase our storage capacity to further enhance our onshore fuel security”.

Legislative, regulatory or financial support are all options.

He is not putting a cost estimate on his plan at this stage. However, building the necessary storage facilities would create an estimated 1600 to 3500 construction jobs, and up to 260 permanent operational jobs.

The government envisages that once a meaningful domestic reserve is established, the added security will put downward pressure on fuel prices.

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