Victorian taxpayers could be on the hook for tens of billions of dollars in the event of a major fuel crisis under legislation that allows payment for those suffering economic loss.
The prospect of a budget black hole of up to $80 billion had forced the state government to consider updating its 1970s-era fuel emergency laws, which allow the preservation and allocation of fuel supplies during declared fuel emergencies.
The rethink came in June amid higher fuel costs due to the war in the Middle East and as the federal government extended fuel excise relief.
But the legislative amendments were ultimately not introduced before the end of the parliamentary sitting year, meaning any changes would now have to wait until the next parliament, with the state election due in late November.
Federal, state and territory governments can declare fuel emergencies, with the Victorian government initially appearing concerned over what liability it could be exposed to in the event it used powers under its laws.
Such declarations are made if any kind of fuel is likely to become unavailable, allowing compensation to be paid to those who suffer financial losses as a result of being forced to comply with ministerial directions.
The broad powers allow the minister to control, direct, restrict or prohibit the production, supply, distribution, sale, use or consumption of the fuel; or direct at what times and places services may be used.
The laws also allow people to be compensated for complying with the directions if they suffer losses or damages.
“Any sums required to be paid or provided for the purposes of this Act shall be paid out of the Consolidated Fund,” the law states, referring to the state’s primary financial account into which all revenue is paid.
Declaring a state of emergency under the Fuel Emergency Act is rare. A 2020 parliamentary library research paper found the most recent declaration was in 2004, after a factory fire triggered a briquette shortage. The state government invoked the powers and secured the remaining briquette supply to keep hospital boilers running.
At the time, and still today, there was no indication of any immediate threat to Australia’s or the state’s liquid fuel supply.
Prices, however, have risen across the country following the end of temporary fuel excise relief, and against the backdrop of continued conflict in the Middle East and volatility in global oil markets.
The war has also sparked questions over Australia’s energy security and how the nation might be impacted if there were severe disruptions or shortages.
In the case of Victoria, if it were to expose itself to compensation claims through the use of emergency powers, the state government could face a legal burden of up to $80 billion that would ultimately fall to taxpayers, according to a June draft government proposal seen by SBS News.
The potentially heavy cost was a key driver for the changes, the proposal states, as well as the inordinate amount of time and money it would take to manage claims and potential lawsuits.
The state government believed the current laws were out of step with other jurisdictions, where some fuel emergency regimes provide explicit immunity from certain legal claims, while compensation may be unavailable or subject to tighter thresholds.
A Victorian government spokesperson had previously told SBS News the Fuel Emergency Act would be updated to align it with other states and territories, ensuring a “consistent, modern approach” to managing fuel supply disruptions.
Asked last week why the government had not gone ahead with the amendments and whether it still believed the laws would expose it to substantial financial liability in the event of a state-declared fuel emergency, a spokesperson did not answer directly.
“The review of Victoria’s Fuel Emergency Act was part of national contingency planning in response to global fuel supply risks,” the spokesperson said.
“Victoria is now better prepared to respond to any fuel emergency, with stronger national coordination, better visibility of fuel supplies and clear arrangements to manage disruptions.”
The spokesperson said the state’s fuel supply “remains strong” and that the government was working with the federal government and industry to “prepare for any potential disruption”.
The spokesperson did not address how the potential liability of up to $80 billion was calculated.
Earlier this year, Australia was gripped by concerns over fuel supply sparked by global oil shortages due to the effective closure of the Strait of Hormuz — the vital waterway through which about a fifth of the world’s oil supply flows.
The head of the International Energy Agency warned the global economy was facing a “major threat” to supply, describing the situation as worse than the two oil crises of the 1970s combined, as well as the crisis caused by Russia’s full-scale invasion of Ukraine.
Political figures such as One Nation MP Barnaby Joyce had called for federal fuel rationing measures in the cities to mitigate the impact of shortages in the regions, calling on the federal government to enact a state of emergency over the situation.
The federal government had reportedly crisis-planned in the event of a national shortage, with measures including fuel rationing and limits on fuel purchase per vehicle, according to a report by Guardian Australia in May.
Extracted in full from: https://www.sbs.com.au/news/article/victorian-taxpayers-80bn-fuel-crisis-bill/xtqdy7kz1
