Russia’s invasion of Ukraine prompts energy security concerns with Australia well short of emergency stockpile obligations

Scott Morrison has played down the prospect of fighting “temporary” fuel price hikes with a cut in excise tax, as Russia’s invasion of Ukraine reignites concerns about Australia’s energy security.

With petrol prices at the bowser already north of $1.80 and headed to $2.00, the expected invasion has added to global oil price pressures and led to concern for gas supplies to Europe – although experts say there is little Australia can do about either.

The government has come under pressure including from independent senator, Rex Patrick, to cut fuel excise, which is 44.2 cents a litre. Labor so far has attacked the government on fuel security but has not weighed in on tax.

On Thursday Morrison acknowledged that Australia’s petrol prices are “very high” but explained there was a “a global issue with fuel prices”.

“The advice we’re getting, particularly out of the [International Energy Agency], is that this impact is likely to be short term, it’s likely to be temporary,” he told ABC Radio.

“You don’t go and completely recalibrate your budget based on fluctuations in oil prices. They’ve gone up, they’ve gone down.

“The movement in oil prices quickly overwhelms any sort of movements [in tax]. So people make these points politically, but governments, I think, have to look at these things in a bigger context.”

On Thursday the energy minister, Angus Taylor, said Australia stands “ready to take action to help alleviate these pressures” including through using its oil stocks held in the United States’ strategic petroleum reserve as part of a coordinated International Energy Agency (IEA) action to increase supply.

In a statement, Taylor said Australia “cannot control international price spikes” but is “closely monitoring the situation with the IEA and the United States”.

The Australian government has purchased just under 1.7m barrels of oil stored in the US reserve and entered deals to secure the longterm future of the only two remaining oil refineries in Australia: Viva refinery in Geelong and Ampol’s Lytton refinery in Brisbane.

Under IEA rules, each country has an obligation to hold emergency oil stocks equivalent to at least 90 days of net oil imports as part of planning to avoid a hit from any major disruption to oil supplies.

In December Australia still fell short of the requirement, with 67 days’ worth of petrol onshore, with a further 12 days’ worth on vessels coming to Australia and 10 days’ held offshore.

Taylor said because of “strong international partnerships and diverse supply chains” he is “confident Australia is well supplied to keep us moving”.

Labor’s Anthony Albanese said fuel prices had gone “through the roof” in part because “half of the refineries in Australia have shut down during this term of government”.

Albanese said the government had “not met its obligations under the IEA for fuel reserves” and had bolstered stocks “in the Gulf of Mexico”. “Well, that’s useful, that is.”

Albanese argued Australia’s fuel dependency would already be lower if the government had prioritised higher take-up of electric vehicles and hydrogen, which it had originally derided, claiming EVs would “end the weekend” and hydrogen was “snake oil”.

Energy program director at The Australia Institute, Richie Merzian, said Australia is “incredibly liquid fuel insecure” with 90% of fuel imported from overseas, just two local refineries, and “no flag carrying oil tankers” outside those used by the navy.

Head of energy at the Australian Industry Group, Tennant Reed, said Australia “may be bystanders to whatever transpires” because it would take “many years” to grow hydrogen production and reduce demand through more transport electrification.

There is also “formally not a lot Australia can do” to help European supply of gas, Reed said.

He noted Australia’s domestic gas security security mechanism could only be used if legislative or regulation change is made, and it “requires a determination far in advance”.

“If the government swung into action now to make a decision, they could possibly limit some gas exports from next year.”

Associate professor Liam Wagner said that the majority of Australia’s gas exports were “already contracted for delivery” to other markets, including Asia, South East Asia and Japan.

Extracted in full from: Scott Morrison dismisses fuel excise cuts amid ‘temporary’ petrol price hikes | Energy | The Guardian

SHARE THIS ARTICLE: