Australia Secures Fuel Supply Commitments from Asian Partners

Japanese Prime Minister Sanae Takaichi visited Canberra this week and joined in a joint statement on energy security with her Australian counterpart. The statement followed similar declarations with South Korea, Singapore, Malaysia and Brunei. These agreements have helped reassure consumers and companies that regional partners will continue fuel shipments rather than restrict them to meet domestic needs.

While Australia exports large volumes of liquefied natural gas and coal, the country relies on imports of refined oil products from Asian refineries that process crude oil from the Middle East. The foreign minister flew to China last week to seek resumption of jet fuel sales to Australian businesses.

Beijing had imposed curbs on exports of oil products after the United States and Israel launched their war on Iran. Officials told their Chinese counterparts that reliable fuel supplies to Australia support continued exports of Australian liquefied natural gas and coal to Asian markets.

The diplomatic efforts have calmed concerns that led to panic buying at petrol stations in March and April. At that time, the government issued daily updates on fuel availability after some stations ran dry.

The chief executive of airline Qantas, which has cut some routes because of jet fuel costs, said this week she was increasingly confident about supplies after the government's diplomatic efforts. The executive told investors at a conference organised by the financial group Macquarie that engagement with Beijing would soon bring increased supplies from China to supplement shipments from the United States and Mexico.

The chief executive of fuel supplier and refinery Ampol said fuel stocks in some regions had quickly evaporated after the war started because local retailers relied on the spot market.

The near-halting of oil shipments through the Strait of Hormuz drew attention to Australia's limited fuel reserves. Diesel stocks fell below the minimum level equivalent to 30 days of demand in March. A fire at one of the country's two remaining refineries in April added to concerns.

The government says it has secured an additional 450 million litres of diesel and 100 million litres of jet fuel. A fleet of seven vessels carrying diesel cargo sailed from the United States to Australia last month. Energy officials stated this week that Australia now holds 33 days' worth of diesel, 43 days of petrol and 28 days of jet fuel.

On Wednesday the government said it would spend A$10 billion to boost petrol and fertiliser stocks. It will also establish a government-owned fuel reserve of one billion litres in Australia, reversing the previous policy of storing the emergency reserve in Texas.

The government has also cut fuel excise until the end of June to limit rises in petrol prices. An analyst at the Institute for Energy Economics and Financial Analysis said the equivalent of one million barrels of oil a day on average had landed in Australia in the past week, roughly matching daily consumption.

The analyst noted that global oil stocks are at a near eight-year low and some Asian refineries are operating at 70 per cent capacity. A senior lecturer in finance at Macquarie University said Australia had leveraged its importance as a supplier of liquefied natural gas and coal in negotiations with Asian fuel suppliers.