AI will tell you Australia’s fuel reserve is in the US. But is that even true?

The government has said it will release some of Australian’s strategic fuel reserve amid disruption caused by the Middle East war. Photograph: William West/AFP/Getty Images

If you Google where Australia’s emergency fuel reserves are held, the search engine’s AI overview will tell you that a “significant portion” of it is stored overseas in the US.

Even though that is not true, other popular AI tools – Claude, Gemini and ChatGPT – all say we keep fuel in the US.

Last week, the president of the Victorian Farmers Federation, Brett Hosking, said Australia’s “strategic fuel reserve” was stored in the US. And he is not the only one.

Where is our fuel reserve? The government has said it is releasing some of it on to the market – when is this going to happen and how will it work?

What happened to our fuel reserve in the US? Did we have one?

For less than two years, a relatively small amount of Australian-owned oil was stored in the US’s Strategic Petroleum Reserve. This is the world’s largest emergency stockpile of crude oil, stored in underground tanks in Louisiana and Texas.

The arrangement was orchestrated by the former Coalition government. In March 2020, the then energy minister, Angus Taylor, announced Australia would lease space in the US Strategic Petroleum Reserve to store and access Australian-owned oil during a global emergency.

The Morrison government bought the oil in the first year of the pandemic, when it was dirt cheap. It did not disclose how much Australian-owned oil would be held in the US. At the time, Taylor told the ABC that a million barrels was about a day’s worth of supply for Australia.

In 2022, Taylor announced Australia would sell the oil on the international market as part of a coordinated global response to Russia’s invasion of Ukraine. He said Australia had stored about 1.7m barrels of oil in the US – less than two days’ supply, according to his earlier calculation.

Additionally, Dr Lurion De Mello, an energy market expert and senior lecturer at Macquarie University, says the oil would have taken a month or longer to access, even in an emergency, because it would need to be brought to Australia and refined into fuel.

So, even if we did still store oil in the US, we would not have much of it, it would have been time-consuming to access, and it would not have been our own “strategic fuel reserve” because it was still in its crude form.

Where is our strategic fuel reserve?

We don’t actually have a “strategic fuel reserve”, according to De Mello, who says the term means a stockpile which is government-backed and funded by taxpayers.

When the energy minister, Chris Bowen, talks about a “domestic fuel reserve” or a “strategic reserve”, he is referring to Australia’s “minimum stockholding obligation” (MSO).

Since 2023, the federal government has required importers and refiners to maintain a baseline level of fuel stocks across petrol, diesel and jet fuel as part of Australia’s long-term fuel security.

The government says the MSO captures entities representing 98% of all diesel and 100% of petrol and jet fuel supplied in Australia by fuel importers and refiners.

The entities are not publicly named but the government says they include importers, refiners and wholesalers in the Australian market.

Mobil, BP, Ampol and Shell, which is run by Viva Energy in Australia, supply about 85% of the nation’s liquid fuels.

De Mello says oil companies are “probably happy to sell whatever they have in their tanks” because there have not been any problems with supply to Australia – yet. He says he is worried about supply after May, if the war in the Middle East continues.

This minimum stockholding obligation is set out in law: petrol and jet fuel refiners need to maintain reserves of at least equivalent to 24 days of usual demand and 27 days for importers. The minimum for refiners of diesel is 20 days’ worth of supply and 32 days’ worth for importers.

The fuel is held by the companies, not the government.

How is fuel released from Australia’s stockpile?

The government can reduce the amount of fuel companies are required to keep as a buffer under the MSO, meaning it can sold to customers.

Earlier this month, in response to the Middle East conflict, which has resulted in the closure of the critical shipping route through the strait of Hormuz, the energy minister cut fuel companies’ minimum stock obligations to about 700m litres of petrol and 2.2bn litres of diesel respectively.

Under the Fuel Security (Temporary Reduction – Securing Regional Supply) Instrument 2026, up to 213m additional litres of petrol and up to 548m additional litres of diesel can be released on to the market.

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That works out to be about five days’ worth of petrol and six days of diesel stockholding.

The government has another lever it could pull, although it is very unlikely.

In the event of an actual or likely fuel shortage with national implications, the governor general may declare a national emergency, giving the energy minister special powers to control industry-held stocks of crude oil and liquid fuels, production by Australian refineries and fuel sales across Australia.

The emergency trigger has never been used.

Where is the extra fuel going?

Chris Bowen has promised additional fuel will be prioritised for regional Australia, where a reliance on independent distributors and retailers, as well as a surge in demand for diesel for farms, have resulted in much more acute shortages than in the cities.

Fuel importers and refineries will only have their minimum stockholding obligation reduced – that is, be permitted to sell more of their product – if they provide a written plan to the government explaining how they are prioritising supply to regional customers experiencing supply shortages and supplying additional product to independent regional distributors.

Industry, government and departments discussed the plans over the weekend. Typically, MSO entities are required to report their stockholdings to the government weekly, with the compliance date falling every Tuesday.

This means that refineries and importers that provide plans to the government on Monday could begin releasing additional fuel into the market as early as Tuesday.

Where is the fuel stockpile held?

The energy minister has said the additional supply will predominately flow from Brisbane and Geelong, which are home to Australia’s two remaining fuel refineries. The Brisbane refinery belongs to Ampol and the Geelong plant to Viva – Shell’s Australian operator.

There were six refineries at the start of the Coalition’s most recent decade in power, and two by the time Labor was elected in May 2022, as both parties have chosen not to intervene when locally refined products were replaced by much cheaper imported fuels.

The two remaining refineries have been propped up by the government. The Albanese government announced last week it would extend their subsidy scheme to help them keep operating beyond 2030.

Could we store more fuel in Australia?

Australia has an obligation to hold fuel stocks equivalent to 90 days of imports under an agreement with the International Energy Agency – which it has never met.

Dave Simmons, who runs engineering solutions company and strategy advisory Simmons Global, says fuel companies are not interested in keeping inventory due to the cost.

Simmons says he pitched a plan for a commercially funded fuel storage network across regional Australia to the federal government in 2021, which was rejected but which he believes would have prevented the current crisis.

“It essentially was a significant holding of fuel in a number of locations across the country … designed to give us an additional 45 days of fuel holding,” he says.

The acute fuel shortages in parts of regional Australia have prompted some rural MPs and farmers to call for additional diesel storage. Last week, the Albanese government said it had increased diesel storage capacity across the country since being elected to over 3.7bn litres held in more than 90 terminals.

Dr Michelle Zeibots, a transport planning expert at the University of Technology Sydney, says the benefits of greater fuel storage are limited if disruption lasts longer than a few months.

Plus, Zeibots points out, oil is a finite resource that won’t last for ever.

“As we move forward in time the options for addressing shortfalls will become more restricted as global reserves and production diminish,” she says.

“In the long term, the only way of addressing this problem is to electrify transport networks both globally and here in Australia.”