Trade Minister Don Farrell says the federal government will permanently maintain its power to subsidise the purchase of imported fuel as an insurance policy against future energy emergencies and an increasingly volatile global trade environment.
The government has underwritten almost a billion litres of fuel supply across 19 ships since new federal powers were activated at the height of the Iran War-induced oil crisis in April, including 800 million litres of diesel and 150 million litres of jet fuel.
Farrell told The Australian Financial Review the mechanism was originally intended to be an emergency measure in response to the fuel shock, but would now be an ongoing backstop against a global economic system in a “permanent state of change”.
“The world has become very unpredictable. Every time you think that things are starting to get back to normal, something else comes along,” Farrell said. “The country could have ground to a halt depending on our ability to get this fuel.
“We now have to accept a proposition that we’re in a permanent state of change. You’ve got to be prepared to adapt very quickly to the changed circumstances.
“We’re about to go five months into [the global oil crisis], and things are still going up and down. I think you can say that [the underwriting of fuel cargoes] will be a permanent facility into the future.”
The laws announced in late March allow government agency Export Finance Australia to strike complex deals with fuel importers that limit their exposure to big price swings and encourage them to purchase additional cargoes, even at uneconomic prices.
The legislation introduced in April had been under development before the crisis as part of a plan to shore up Australia’s supply of critical minerals, with the fuel element only added at the last minute in response to the global emergency.
Powers ‘give Australia an advantage’
Trade security has become a top ticket political issue since US President Donald Trump began hitting allies with threats of steep tariffs last year. Canadian Prime Minister Mark Carney on Saturday announced a set of retaliatory tariffs against the United States.
In an interview alongside EFA boss John Hopkins, Farrell said the underwriting mechanism was designed to help Australia absorb sudden shocks in this increasingly unpredictable trade environment.
“A facility like this gives Australia a very important advantage,” Farrell said. “I think we can expect it’s going to be a while before things settle down, and we have to be ready to act quickly.
“Just look at tariffs with the United States. You might be sending a shipment to the United States on one set of tariff regimes, only to find by the time the ship arrives you’ve got another, different, higher tariff regime.”
The fuel cargoes can be underwritten only if independent government reviewers deem them to be additional to normal supply.
Hopkins said the government had had to pay very high premiums to secure cargoes in the early stages of the crisis, but those had since dropped “considerably” as countries locked in their supplies.
“We didn’t necessarily accept the pricing that the companies gave us. We independently checked that,” he said.
Farrell said the cost of fuel remained the key issue, and while refusing to reveal the overall cost of the policy, he maintained it was significantly less than the billions of dollars that had been speculated in the early days of the crisis.
“We, by and large, have solved the supply issue. The cost issue still is going to be an issue into the future unless this all gets resolved quickly,” Farrell said.
“[But] it’s very fair to say that the [overall] figure will ultimately be much lower than we had originally anticipated when the war began.”
Energy Minister Chris Bowen on Sunday said Australia had 3.5 billion litres of fuel locked in for delivery over the next four weeks, and supplies of petrol, diesel and jet fuel all remained above pre-crisis levels.
“While this international situation remains ongoing, which we would prefer not to be the case, we’ll remain focused on providing Australians with the security they need to get the fuel they need,” he said.
Bowen and Transport Minister Catherine King this week said the government would consider mandating the partial use of low-carbon fuels in cars as part of a plan to decrease Australia’s dependence on foreign fuel.
Extracted in full from: https://www.afr.com/policy/energy-and-climate/unpredictable-world-labor-makes-fuel-subsidies-permanent-20260823-p60qnw
