Why petrol stations are ‘running on empty’ despite Australia’s reserves

With the war in the Middle East continuing to disrupt oil supplies, petrol prices have been steadily rising across the globe. Australia, like many other countries, has measures in place to deal with global oil shortages. So why are petrol stations across the country reportedly now running out of fuel? And where is our emergency supply held?

HAS AUSTRALIA RUN OUT OF FUEL?
There have been several reports of petrol stations across the country running out of fuel.

More than 38 petrol stations across NSW alone have been reported as being out of petrol according to the latest FuelCheck data, with some retailers in Sydney’s western suburbs reportedly closed until their next delivery.

The reports have been at odds with recent assurances made by Energy Minister Chris Bowen that Australia still has plenty of petrol, diesel and jet fuel left. So, what is going on?

The fuel industry has said that the shortages have actually come from distribution* issues rather than a lack of on-land fuel.

Australasian Convenience and Petroleum Marketers Association (ACAPMA) chief executive Rowan Lee explained that the way petrol stations purchased their fuel could be impacting the availability to consumers.

He said petrol retailers who did not purchase wholesale* petrol on rolling contracts in order to get the cheapest price were most at risk of running dry.

Retailers who bought petrol on a permanent contract had not been running low, but budget retailers who purchased on the “spot market*” had been impacted the most, Mr Lee said.

“What that means is that (a retailer) will buy off Ampol this week because they’re the cheapest, and then will buy off BP in two weeks’ time because they’re cheapest,” he said. “But what they’re risking is guaranteed supply, because they then, at times like this, have been shuffled to the back of the queue because of increased demand.”

PANIC AT THE PETROL PUMP
Seeing closed petrol stations has prompted more panic buying from motorists who have become worried that Australia might run out of petrol altogether. However, the panic buying has made matters worse, draining available fuel supplies even more, Mr Lee said.

Prime Minister Anthony Albanese has described the panic buying behaviour as “not the Australian way” and has asked Australians not to use more fuel than they need.

“There has been, in some places, a doubling of demand that shouldn’t occur,” he said. “We do have fuel security here in this nation, but we need to be sensible about these issues, and that’s my message.”

AUSTRALIA’S PETROL RESERVE
The government said last week that Australia has 36 days’ supply of petrol, 29 days’ worth of jet fuel and 32 days’ worth of diesel.

The country’s reserve was set up as a buffer against supply shocks. Australia has had an obligation to hold 90 days’ worth of net imports* since signing a treaty with global energy watchdog the International Energy Agency (IEA) in the 1970s. The IEA was set up to ensure energy security across the globe, following the 1973-1974 oil crisis*.

However, Australia reportedly hasn’t met this requirement since 2012.

Following the Ukraine war, the Minimum Stockholding Obligation (MSO) was set up, which required importers and refiners to hold minimum amounts of petrol, diesel, and jet fuel within Australia.

Last week, the Albanese Government announced it would release 20 per cent of Australia’s reserves for domestic use, equating to 760 million litres of petrol and diesel, to help counter rising fuel prices.

Australia used to have eight oil refineries of its own, but with the closure of six in the space of the last two decades, the country has come to rely mostly on international imports for its fuel supply.

Our emergency supply is stored at facilities run by fuel companies in different places across the country, including at our two remaining refineries, which are at Geelong and Brisbane.

OTHER MEASURES
The Government has also relaxed fuel standards to allow the return of “dirty fuel” for 60 days. Dirty fuel usually refers to fuel with a higher concentration of sulphur*, which is considered to be of a poorer quality.

Fuel rationing* has been raised as a possibility if Australia’s supply struggles to keep up with demand.

But AMP chief economist Shane Oliver said the Middle East crisis would have to continue for “more than another month” before that became a realistic concern.

ECONOMIC IMPACT
Mr Oliver said elevated petrol prices and mortgage repayments could see homeowners paying an extra $300 per month in living costs.

The increase in living expenses could lead to reduced economic activity and an actual shortage in fuel could even trigger “a lockdown-type scenario, where certain economic activity doesn’t occur,” he added.

“There would be less people going to work in that environment … (for) white collar* jobs, more people working at home,” he said. “And then you’ve got uncertainty … if there is a fuel shortage, how it might be rationed, to some degree.

“So it’s a difficult time, I think, for businesses.”

Petrol prices have increased 35 per cent from their average in February, which if sustained would lead to a 1.2 per cent boost to inflation*, or the cost of living.

Homeowners were dealt higher mortgage costs after the Reserve Bank of Australia (RBA) increased interest rates for the second month in a row on Tuesday, to try and bring inflation down.

In a pre-budget speech in Melbourne on Thursday, Treasurer Jim Chalmers revealed Treasury modelling showed the war in Iran could force inflation above 5 per cent – well above the RBA’s preferred rate of 2-3 per cent.

POLL

GLOSSARY

• distribution: the sale of petrol to petrol stations across the country
• wholesale: sold in large amounts at low prices, usually to then be resold by a shop, or, in this case, a petrol station
• spot market: an on-the-spot trading platform where large amounts of physical fuel is bought and sold for immediate delivery straight from the pipeline, refinery or terminal
• net imports: the amount that a country’s total oil imports exceeds its total oil exports over the year
• oil crisis: the Arab Oil Embargo created a global oil shock in 1973 and 1974 that drove up fuel prices and created an energy crisis. Arab countries temporarily stopped shipping oil to the US, the Netherlands, Portugal, Rhodesia, and South Africa in retaliation for support for Israel in the Yom Kippur War
• sulphur: a nonmetallic chemical element found in petroleum
• rationing: allowing only a certain amount per person
• white collar: office jobs
• inflation: when money loses value, causing the cost of goods and services to increase

EXTRA READING
Why petrol prices are soaring
All aboard RBA runaway rate train
Power price pledge unplugged

QUICK QUIZ
1. Why have some petrol stations been running out of fuel while others haven’t?
2. How has panic buying led to petrol shortages?
3. How many days petrol does Australia have left, based on Government figures?
4. What is the IEA?
5. What effect could rising petrol have on household costs?

LISTEN TO THIS STORY

CLASSROOM ACTIVITIES
1. What is really happening?
Design an infographic that will help other kids understand what is really causing the petrol shortages at the moment. Use information from the story to help you.

Time: Spend at least 30 minutes on this activity
Curriculum Links: English, Commerce

2. Extension
How does raising interest rates bring inflation down? Use your research skills to find out. Use the information that you have found to create a storyboard for a short video that will help adults who are worried about rising interest rates understand this.

Time: Spend at least 60 minutes on this activity
Curriculum Links: English, Commerce

VCOP ACTIVITY
I spy nouns
Nouns are places, names (of people and objects), and time (months or days of the week).

How many nouns can you find in the article?

Can you sort them into places, names and time?

Pick three nouns and add an adjective (describing word) to the nouns.