Prime Minister Anthony Albanese’s plan to subsidise shiploads of extra fuel following the outbreak of war in the Middle East has almost ground to a halt because a supply glut has forced vessels carrying taxpayer-funded diesel to park off the coast for months while they wait for storage to become available.
The $7.5 billion plan to secure fuel supply was rushed through parliament in April as the conflict between Iran and the US threatened to choke the supply of diesel and petrol.
But stockpile releases by China and the US have bolstered supply and left the local wholesale fuel market in surplus.
Two fuel importers, speaking on condition of anonymity, said the decision to subsidise 19 extra shipments of fuel over the past 15 weeks had distorted the wholesale market because there had been no equivalent increase in demand or storage capacity.
That meant importers who were not subsidised by the government had lost money on some shipments because the cost of buying the fuel was higher than the selling price.
Data published by the Australian Institute of Petroleum shows industry profit margins were close to zero in early May and again in early July, and have been below the two-year average since early April.
Australian Institute of Petroleum members such as BP, Viva Energy, IOR and Ampol successfully applied for taxpayer support to bring in extra cargoes, and the slim profit margins revealed in the data suggest that importers denied the same subsidies would have been losing money on shipments.
“The data suggests something is happening,” said Adam Martin, executive director of energy research at Evans and Partners.
“We are seeing retail fuel margins reduce in the last couple of months. It is probably good for the consumer but maybe tougher for the companies for a bit.”
A lack of transparency over why some importers were selected at the expense of others has sparked claims of favouritism in the sector and fears that public funds will unfairly allow some importers to expand market share.
The domestic glut has forced vessels such as the PIS Madura, which is carrying diesel owned by Viva, to anchor off the Sunshine Coast for months and rack up potentially millions of dollars worth of demurrage costs.
Demurrage is the daily cost of leasing a ship that cannot offload its cargo. The government agency in charge of the scheme, Export Finance Australia (EFA), confirmed that some demurrage and storage costs on certain shipments would be covered. Viva declined to comment.
The PIS Madura was loaded with diesel at Ulsan, South Korea, and departed for Australia on April 23. The journey normally takes about 16 days.
However, 102 days after leaving Ulsan, the vessel has still not offloaded its diesel, despite a brief call to the Port of Brisbane in June.
On Monday, it remained anchored east of the Queensland town of Mooloolaba, according to several ship tracking services, including Kpler Marine Traffic.
Industry sources, who spoke on condition of anonymity, estimated that demurrage costs for a vessel like PIS Madura would be $US40,000 ($57,000) a day, or almost $US3.4 million ($4.9 million) over the past three months.
Another tanker, the Xing Tong 799, berthed at the Port of Geelong on the weekend, ending an 86-day journey from Brunei that began on May 8.
Fuel importers say federal officials have told them the scheme has been unofficially paused while the domestic fuel glut is worked down.
EFA said the facility for subsidising imports was still in place, but publicly available data suggests the number of taxpayer-backed shipments arriving in Australia has slowed dramatically.
Fourteen shipments were supported by taxpayers in the first four weeks of the program. However, only five have been made with taxpayer backing in the past 11 weeks, taking the total to 19 shipments.
“Through the facility, Export Finance Australia has supported 19 fuel transactions comprising 16 diesel cargoes and three jet-fuel cargoes,” said an EFA spokesman.
“These transactions have secured nearly 800 million litres of additional diesel and 150 million litres of additional jet fuel.”
Aside from BP, Ampol and Viva, taxpayer funds have helped Freedom Fuels and IOR buy diesel and jet fuel cargoes.
Energy Minister Chris Bowen said he supported EFA’s management of the scheme and defended it against allegations of favouritism.
“Some companies were unhappy that they didn’t get to execute their deeds in time and … didn’t get imports underwritten,” said Bowen.
“But it’s a two-way street. It takes agreement between both parties, and not every party was able to get their deeds done in time to have imports underwritten.”
Before the outbreak of war in the Middle East, the government was taking 52.6¢ of tax revenue on every litre of fuel sold to motorists.
It reduced the tax to 20.6¢ per litre between April 1 and June 30 in an attempt to shield motorists from rising fuel prices.
The tax was set at 36¢ per litre in July, but was not extended at the end of the month, returning it to its previous level.
Extracted in full from: https://www.afr.com/companies/energy/labor-s-plans-to-find-more-fuel-leaves-shipments-stranded-at-sea-20260802-p60krh
