Low fuel reserves ‘free ride’ draws international criticism

Australia is seen as a ‘free rider’ by other nations due to its low and internationally non-compliant fuel stockpiles.

Labor’s national security spokesman Mark Dreyfus says the government ‘has allowed Australia’s fuel reserves to drop to dangerously low levels’. Picture: AAP

The federal government’s Energy Department has warned that Australia is seen as a “free rider” by other nations because of its low and internationally non-compliant fuel stockpiles.

And it could be forced to compensate other International ­Energy Agency members in the event of a global fuel crisis.

The Department of Environment and Energy said the state of Australia’s fuel stockpiles had damaged the country’s reputation among IEA member ­nations.

“Australia could be obliged by an international tribunal to make reparations (through restitution and compensation measures) to International Energy Agency members if economic damage was attributable to Australia’s non-compliance,” the department said in a statement to a parliamentary inquiry.

All IEA members are required to collectively release fuel on to the market to prevent major economic consequences if there is a disruption to supply caused by conflict or natural disasters. Australia was unable to play its part in an IEA “collective action” called in the wake of hurricanes Katrina and Rita as the country did not hold sufficient stocks.

While the IEA mandates that countries hold a stock in reserve “equivalent to 90 days of net imports”, Australia is the only country that does not meet the standard and has just 56 days of import coverage, with just 22 days of petrol and 17 days of ­diesel in the event of a crisis.

The Australian reported on Wednesday that the federal government was criticised by its own MPs after it attempted to boost its coverage with oil held abroad and delayed a study on how to ensure the nation’s compliance.

In a statement to parliament’s joint standing committee on treaties, the Department of Environment and Energy said while there were no immediate penalties for non-compliance, some IEA countries doubted Australia’s commitment.

“A likely consequence from continued non-compliance with the IEA 90-day oil stockholding obligation is further international reputational damage,’’ it said.

“Several IEA members perceive Australia to be free-riding on the IEA’s oil security mechanism and that Australia is not a committed IEA member. This has been mitigated to an extent by progress on Australia’s plan to return to compliance.”

The department said Australia could be forced out of the international energy treaty because of its low stockpiles.

“Other IEA members could suspend or terminate Australia’s participation in the Agreement on an International Energy Program due to non-compliance.”

Yesterday, Labor’s national security spokesman, Mark Dreyfus, called for the review to be ­finalised, saying the government “has allowed Australia’s fuel reserves to drop to dangerously low levels”.

Labor MP Josh Wilson, a member of the committee that examined the issue, said Australia should consider holding its own fuel reserves.

Australia is the only developed oil-importing country that has no government-controlled stocks of crude oil or refined ­petroleum product