Australia to establish government-owned fuel reserve under A$10 bil package

Australia will establish a permanent, government-owned fuel reserve of around 1 billion liters and lift the minimum stockholding obligation by about 10 days for each fuel type under an Australian Fuel Security and Resilience package, the federal government said May 6.

Both the permanent fuel reserve and an uplift of the stockholding obligations will increase Australia's critical fuel reserves to 50 days, the government said.

The package, to be included in next week's federal budget, will provide more than A$10 billion ($7.25 billion) to bolster near-term fuel and fertilizer security, expand onshore fuel holdings to at least 50 days of supply, and improve storage of diesel and aviation fuel, the government said in a joint release by Prime Minister Anthony Albanese and ministers Don Farrell, Chris Bowen, Catherine King and Julie Collins.

The measures include A$7.5 billion to establish a Fuel and Fertilizer Security Facility, which provides financial support such as loans, equity, guarantees, insurance, and price support to increase supply and storage.

About A$3.2 billion will be allocated to create a government-owned Australian Fuel Security Reserve of around 1 billion liters, "to increase long term diesel and aviation fuel supply and storage."

"Our Australia Fuel Security Reserve will focus on regional stockouts and supply constraints for essential users in the event of another supply crisis," the statement said.

Under the budget, some A$34.7 million will be provided over four years to support the 10-day uplift in the MSO, "with changes to be phased in over time and backed by investment in new or refurbished storage," the government said.

The package also includes A$10 million for co-funded feasibility studies with states and territories into new or expanded refining capabilities.

At a May 6 press conference in Sydney, after the National Cabinet met on fuel security, Bowen noted that the budget package would mark a "big change" in Australia's approach, noting Australia is among a minority of International Energy Agency countries without a government-owned fuel reserve.

"We will now have a government-owned fuel reserve of around a billion liters to add to those minimum stocks that the private sector must hold, particularly focused on diesel and jet fuel, where we do need to ensure greater domestic capacity and supply in the worst of circumstances," Bowen added.

Albanese said Australia remains at level two of the National Fuel Security Plan but warned that the longer the Strait of Hormuz remains effectively shut, "the greater the impact will be." He said more ships arrived in April than in preceding months, reflecting efforts to secure supply from both traditional partners and a wider set of sources.

Nonetheless, Bowen highlighted that Australia received 92 shiploads of fuel in April, the highest monthly total this year. "That means we have more fuel in Australia today than we did when the bombing of Iran began," he said.

Minimum stockholding position

Australia's petroleum industry held 3.08 billion liters of gasoil, 795 million liters of kerosene and 1.84 billion liters of gasoline under its MSO as on April 28, according to the latest data from the Department of Climate Change, Energy, the Environment and Water. This equated to 33 days of cover for diesel, 28 days for kerosene, and 43 days for gasoline, the department said.

In March, Australia introduced a temporary 20% reduction of its MSO for gasoil and gasoline in response to supply disruptions linked to the Middle East war. The MSO requirement for diesel was reduced to 2.197 billion liters from 2.742 billion liters, while the gasoline MSO was lowered to 855 million liters from 1.067 billion liters, DCCEEW data showed.

Australia introduced the MSO framework in 2023, requiring refiners and importers to maintain minimum inventories of key fuels within the country to strengthen domestic fuel security. MSO fuel importers and refiners in 2025-26 are required to hold baseline level stocks of gasoline (24 days for refiners, 27 days for importers), kerosene (24 days for refiners, 27 days for importers), and diesel (20 days for refiners, 32 days for importers).

Bowen said the planned government-owned reserve would complement private-sector holdings and be targeted at addressing regional constraints, citing early stages of the crisis when the government had to direct companies to send fuel to shortage areas. A government reserve would allow stocks to be dispatched more directly, he said, noting that the government will work with the private sector to assess where the reserves can best be held.

More details of the package will be released in the federal budget next week, the government said.