Problem being addressed
Australia is heavily reliant on commercial stocks of crude oil and refined products to maintain fuel supplies. Historically, fuel stock levels have been managed within commercial supply chains at the company level and national fuel stock levels have not been regulated. The use of commercial stocks provides an effective buffer in the case of minor disruptions, however fuel companies do not hold sufficient stocks to cover moderate to severe disruption events. Further, the recent closure of two Australian refineries will increase our reliance on imported fuel under both normal conditions and during a liquid fuel emergency. With diminishing sovereign refining capability, domestic fuel stocks are the buffer for supply chain disruptions. Under increased import dependence, greater certainty of stocks in Australia provides improved risk mitigation practices by Government and fuel users.
Proposal
Introduction of measures to improve Australia’s fuel security:
- A Minimum Stockholding Obligation (MSO) on industry to put a floor under stocks of primary transport fuels held in Australia, providing greater security of supply in the event of a significant disruption to local fuel supplies.
- A Fuel Security Services Payment (FSSP) to maintain a sovereign refining capability for primary transport fuels, in recognition of the security it provides to Australia.
- Support for refiners to undertake the infrastructure investment required to comply with improved fuel quality standards
Notes
The RIS commits to additional consultation on implementation arrangements for the FSSP and MSO as legislation is developed. The OBPR assessment notes the addendum for each rule will need to comprehensively set out the impacts on industry and consumers, and be tested through consultation with the public and affected industry stakeholders.
A RIS addendum has been developed for the FSSP Rule and Petroleum and Other Fuels Reporting (POFR) Amendment FSSP Rule. The addendum addresses the estimated regulatory costs and benefits associated with the FSSP to affected entities.
RIS outcome
Adequate – additional material to be prepared and attached ahead of rule making
Announcement date
26 May 2021
Announcement