Australia's experiment with storing emergency oil reserves in Texas and Louisiana has raised awkward questions about where critical fuel supplies should sit during global crises. The arrangement, which ran from 2020 to 2022, offers lessons for how nations should approach fuel security in an increasingly unstable world.
When the former Coalition government signed the deal in March 2020, it purchased 1.7 million barrels of crude oil stored in the US Strategic Petroleum Reserve. The purchase cost approximately $94 million Australian dollars, though Australia missed opportunities to buy at the cheapest prices, acquiring the oil at an approximate average of $US40 a barrel instead.
The original reasoning seemed sound: Australia is required under International Energy Agency obligations to hold 90 days of oil reserves and can count reserves held overseas where a bilateral arrangement is in place. For a country importing roughly 90 per cent of its refined fuel, the US facility offered a way to meet international commitments using existing infrastructure.
Yet the arrangement faced criticism almost immediately. Critics questioned how oil stockpiled on the other side of the world would actually assist Australia in a genuine crisis, how long it would take to bring supplies to Australia, or how it would be transported when there are no Australian-owned oil tankers. Energy experts noted that even if the oil were still in the US, it would take a month or more to transport and refine into usable fuel.
The oil never actually resolved Australia's fuel security challenge. At 1.7 million barrels, the reserve represented less than two days of Australia's supply. This meant the agreement was more of an accounting mechanism than practical emergency preparedness.
The situation changed in 2022. The oil was sold as part of a coordinated response to Russia's invasion of Ukraine, when the International Energy Agency called on member countries to release reserves to stabilise global markets. None has been purchased to replace it.
The Albanese government has increased diesel storage capacity to over 3.7 billion litres across more than 90 terminals since taking office. Current policy mandates that importers and refiners maintain baseline fuel stocks: 24 days of petrol and jet fuel for refiners, 27 days for importers, 20 days of diesel for refiners, and 32 days for importers, with these stocks held by private companies including Mobil, BP, Ampol, and Shell supplying about 85 per cent of Australia's liquid fuels.
The shift reflects a hard lesson: national fuel security depends on practical accessibility during emergencies. As Energy Minister Chris Bowen argued, Australia now keeps fuel stockpiles on hand in Australia, not in Texas or Louisiana. The question whether this domestic approach provides adequate resilience during prolonged supply disruptions remains contested among energy policy specialists, but it at least removes the complication of waiting for oil to travel across the Pacific during a crisis.