A market-based system will also be designed in consultation with industry for a refinery production payment, ensuring a minimum value of 1.15 cents per litre to refineries. To receive support refineries will be required to commit to stay in Australia.
Major fuel refiner Viva Energy has warned the company may be forced to close its Geelong oil refinery after COVID-19 and its related restrictions on both international and local travel wiped out demand.
Industry sources are also concerned about the Lytton and Caltex refineries in Brisbane and the BP refinery at Kwinana, south of Perth.
Prime Minister Scott Morrison said fuel security was essential and Australia had been fortunate to not have experienced a significant fuel supply shock in over 40 years.
He said the changes to the market would ensure families and businesses can access the fuel they need, when they need it, for “the lowest possible price”.
“Fuel security underpins our entire economy,” Mr Morrison said. “Not only does it keep Australia moving, the industry supports thousands of people … and this plan is also about helping keep them in work.”
He said the events of 2020 had reminded everyone that the country could not be complacent.
“We need a sovereign fuel supply to shield us from potential shocks in the future,” he said.
The announcement coincides with a report from BIS Oxford, commissioned by the Australasian Refineries Operatives Committee and supported by the Australian Workers Union, warning the nation was exposed to the dangers of serious fuel shortages, particularly if imports were disrupted by a shipping crisis or an armed conflict.
It found liquid fuel security had worsened with the closure of three domestic refineries since 2012 and Australia has just over 50 days of stocks relative to net imports – well below the International Energy Agency’s minimum 90-day rule.
Energy and Emissions Reduction Minister Angus Taylor said the government recognised refineries were under significant financial pressure and is committed to working with the sector to ensure it has a future.
He said the construction of diesel storage would not only secure supplies but would support up to 950 jobs, along with 75 ongoing jobs, many in regional areas.
He said he would work with industry on the legislative and regulatory design of the package.
Refineries play a critical role in fuel security and putting downward pressure on fuel prices for motorists, with modelling showing that a domestic refinery capability is worth around $4.9 billion in value to consumers in the form of price suppression over a decade.
The BIS Oxford report found shutdown of the local fuel refining sector would see a direct contraction of $6.7 billion or 0.36 per cent of overall GDP as well as a potential drop in employment of over 5000 people.
Mr Taylor said the government recognised the future refining sector would not look like the past.
“However, this framework will protect Australian families and businesses from higher prices and will secure jobs in the fuel sector and in fuel-dependent industries, such as our farmers, truckers, miners and tradies,” he said.
The AWU will on Monday call for the construction of the storage facilities to be underwritten by the government and the cost recouped through a tax on all petroleum production consumption to cover the projected total cost of construction of $2.7 billion.
AWU national secretary Daniel Walton said a global crisis disrupting shipping routes was easily foreseeable in any number of scenarios.
“If this happened now, Australia would run out of oil in just over three weeks. Our trucks would run dry and food supply chains would come crashing to a halt. It wouldn’t be just toilet rolls running out in our supermarkets and we would see pandemonium on the streets,” he said.
“A genuine fuel supply crisis would make COVID-19 look like a blip. Everyone one of us should be worried about how precarious our energy supply has become.”
Federal Labor accused the government of ignoring fuel security for seven years at the weekend, with opposition energy spokesman Mark Butler accusing it of engaging in “baseless scare campaigns” against policies which would improve fuel security.
“The Coalition government has sat idly by while Australia’s refining capacity has decreased by 40 per cent over the last eight years and Australia has failed to comply with International Energy Agency fuel security requirements,” Mr Butler said.
Rob Harris is the National Affairs Editor for The Sydney Morning Herald and The Age, based at Parliament House in Canberra