Australia's fuel security in crisis as biofuels exported overseas

Australia is exporting tens of millions of litres of biofuels that could instead add at least three days of supply to the nation's petrol and diesel stocks. The country's fuel security vulnerabilities have been exposed, with petrol prices rising again to an average $2.42 per litre as the war in Iran drags on longer than anticipated.

Australia currently holds 41 days of petrol supply and 33 days of diesel, more than when the Iran war began due to emergency measures imposed earlier in the year, but still well below the international requirement to hold 90 days of supply. The government is looking at whether to force petroleum companies to buy Australian-made fuels that are being sold overseas to help buffer the country from price and supply shocks.

Australian fuel being sold overseas instead

A new alliance of Australian biofuel producers has formed to encourage the federal government to require the major petroleum importers and refiners to buy Australian biofuels, made from the waste by-products of wheat, sugarcane, cooking oils and other farming feedstock. The Biofuel Producers Alliance, made up of Manildra Group, Wilmar Sugar and three biodiesel companies, already has about 470 megalitres of ethanol and biodiesel capacity, which amounts to about three days' extra supply.

However, in the first six months of the year, when Australia was scrounging for additional fuel, more than 60 megalitres produced in Australia was sent overseas because there is little demand from petroleum importers and refiners to buy Australian biofuels. "When we were sitting in March and April, and all of this was unfolding, E10 was one of the first fuels to drop out in service stations, and at the same time we shipped out 24 million litres of ethanol to South-East Asia, Korea and other places for them to use with their cars," Biofuel Producers Alliance chief executive Matt Hobbs said.

"At a time of a fuel crisis, we ignored fuel that we made here and instead sent it to other countries."

Government consultation on biofuel mandate

The federal government is consulting on whether to make fuel companies purchase low carbon liquid fuels, including biofuels, which it acknowledges may be the only pathway to reducing CO2 emissions for some current fuel uses, including in aviation. The government's consultation paper proposes introducing a "volumetric mandate" that would begin in 2029, requiring certain amounts of alternative fuels to be supplied or acquired in order to create demand and support domestic fuel production.

Mr Hobbs said if the federal government introduced a national biofuel blending requirement from 2027, it could shore up stocks and ease the pain at the bowser by several cents a litre during price shocks. "It's good for consumers because you have got good supply, it doesn't go on a boat. Fuel made in Australia should be used in Australia, and not shipped overseas."

The Australian Chamber of Commerce and Industry (ACCI) said Australia's current project pipeline could potentially support 2 billion litres of domestic low-carbon fuel production, and as much as a fifth of the country's fuel imports could be replaced with domestic production by 2040 with further investment in fuel refining.

However, the ACCI said the government should not impose demand-side measures to develop the sector, but rather give temporary assistance.