Australia backs new diesel, jet fuel purchases
Sydney (24 May)
The Australian Government has underwritten 50 million litres of diesel and 50 million litres of jet fuel purchases to lift reserves in Western Australia (WA) and along the East Coast, respectively.
Importers will send the diesel to Kwinana – a multi-commodity export hub in WA – and the jet fuel to Port Botany, near the Sydney Airport, Energy Minister Chris Bowen told reporters on 23 May.
The Australian Government has underwritten 800 million litres of fuel purchases and secured fuel supply assurances from multiple governments in Asia since the US-Israeli war in Iran began on 28 February.
Australia has more fuel in storage than it did in late February and an increasingly large fuel buffer, Bowen said. The newly underwritten diesel and jet fuel shipments will add to Australia’s fuel buffer, Bowen added.
Australia had 43 days’ worth of petrol, 38 days’ worth of diesel, and 31 days’ worth of jet fuel on 23 May, according to Bowen. The country’s petrol and jet fuel reserves fell over the week to 23 May, but its diesel reserve rose.
Australian consumers and businesses could face increased fuel costs from July, despite the country’s elevated jet fuel, diesel, and petrol reserves. Fuel prices fell in early April because the Government cut Australia’s fuel excise rate from A$0.53/litre to A$0.21/litre until July.
But the Government is unlikely to further extend the cut, Bowen indicated. “The excise [cut] is … a temporary measure, and we envisage it being a temporary measure,” he said.
Brent crude oil futures traded at $103.94/barrel (A$145.59/barrel) on 22 May, down slightly from $109.03/barrel on 2 April, when the Government expanded its excise cut. But futures prices are up from $72.87/barrel before the Iran war began.
Fuel price increases could lead to broader price increases. The Reserve Bank of Australia’s May inflation forecasts assume that businesses facing elevated fuel costs will raise prices relatively quickly, Assistant Governor Sarah Hunter said on 19 May.
“Some construction firms – who have been relatively highly exposed to transport and oil-derived raw materials cost increases – are reviewing prices for new contracts,” Hunter said in a speech at Bloomberg’s Forum for Investment Managers.
By Avinash Govind