The Albanese government has announced a $10.7 billion Australian Fuel Security and Resilience package, with full detail to land in next week’s federal budget. The headline change is structural rather than operational. Australia is moving from a system where private importers and refiners hold all of the country’s emergency fuel stocks to one where the federal government will own around a billion litres of reserve fuel directly.
For an industry that has spent the past three months absorbing the practical effects of a thinly stocked supply chain, the package is the first serious attempt to fix the underlying position.
The four elements
The package has four components.
$7.5 billion goes to a new Fuel and Fertiliser Security Facility. The facility provides loans, equity, guarantees, insurance, and price support for fuel and fertiliser supply and storage. The mechanism is broad on purpose. It gives the government the option to underwrite specific projects (new storage, expanded import infrastructure, fertiliser supply continuity) rather than committing to a single program design upfront.
$3.2 billion establishes a permanent government-owned Australian Fuel Security Reserve of around a billion litres. The reserve focuses on diesel and aviation fuel, the two grades where domestic refining capacity is now most exposed. Stated purpose is regional stockouts and supply constraints for essential users during a future supply crisis.
The Minimum Stockholding Obligation lifts by around 10 days for every fuel type, taking onshore reserves to at least 50 days of supply. The MSO is the obligation that sits on importers and refiners, the same one that was temporarily reduced by 20 per cent during the current crisis to release 762 million litres into the market. Lifting it permanently means private sector reserves rise alongside the new government-owned reserve.
$10 million is allocated for feasibility studies into new or expanded refining capacity, co-funded with state and territory governments. The Prime Minister has indicated at least one serious proposal already has support from a state government and the federal government, suggesting the studies are scoping known projects rather than purely exploratory.
A further $34.7 million over four years funds ongoing fuel security management and industry engagement on the increased holdings.
The position the package is responding to
The numbers tell the structural story.
As at 28 April, Australia held 43 days of petrol and 33 days of diesel under the MSO. The International Energy Agency requires its member countries to hold the equivalent of 90 days of net oil imports. Australia is the only one of the 32 IEA members that hasn’t met the 90-day requirement since 2012. Japan, by comparison, holds around 250 days.
Domestic refining has shrunk to two refineries: Ampol’s Lytton in Brisbane and Viva Energy’s Geelong. Geelong has been operating at 60 to 80 per cent of capacity since the 15 April fire, with full restoration expected during June. Ampol has deferred its Lytton major maintenance from June to August, releasing an additional 300 million litres into the market over that period.
The combination of two refineries, low private sector reserves, no government-owned reserve, and complete dependence on imports through the Strait of Hormuz and broader Asian supply chains has been the structural picture for years. The package is the first material attempt to change it.
What lifts on the supply side
The most immediate practical change is the MSO increase. Lifting the obligation by around 10 days for every fuel type means importers and refiners will need to hold meaningfully more stock onshore. That has implications for wholesale terminal capacity, working capital tied up in fuel inventory, and the timing of import scheduling.
The government-owned reserve will take longer to stand up. The $3.2 billion allocation is significant but a billion litres of fuel needs storage capacity that doesn’t currently exist at the scale required, and the legislation, procurement, and storage build will run over years rather than months. The reserve’s stated focus on regional stockouts and essential users suggests the eventual operational design will lean toward distributed regional storage rather than a single central stockpile.
The Fuel and Fertiliser Security Facility is the most flexible component. With $7.5 billion available across loans, equity, guarantees, insurance, and price support, the facility could underwrite anything from new import terminal capacity to refinery upgrades to fertiliser plant continuity. Specific projects will become clearer once the budget papers are released.
The refining feasibility studies are the longest-horizon element. Even if a state-federal proposal proceeds, a new refinery is at least five years from operational, and an expansion of existing capacity is two to three. Either way, refining capacity expansion is a structural shift rather than a near-term supply boost.
Industry response
The Australian Industry Group’s Innes Willox called the package a solid step but warned it’s a long way from a complete solution, and pushed for clarity on whether the temporary 32 cent fuel excise cut becomes permanent. The current excise reduction expires 30 June. With prices forecast to remain elevated well into 2026 and possibly into 2027, the question of what happens to the excise cut after June is the immediate operational issue most operators care about.
The National Farmers’ Federation welcomed the package and asked for explicit recognition of farmers and rural transport as essential users under the reserve drawdown rules. The Australian Livestock and Rural Transporters Association made a similar call, arguing rural transport must be designated essential under any drawdown arrangement. The Coalition has called the package too little, too late, with Angus Taylor noting the Coalition had previously committed to a 60 day reserve.
What’s still to be confirmed
The budget papers next Tuesday, 13 May, will set out the implementation timeline, the mechanism for the MSO lift (immediate or phased), the procurement pathway for the government-owned reserve, the criteria for accessing the Fuel and Fertiliser Security Facility, and crucially, whether the temporary excise cut and other crisis measures (heavy vehicle road user charge removal, fuel quality standard adjustments) extend beyond 30 June.
The structural intent of the package is clear. The operational detail will determine how quickly any of it actually changes the supply picture for fuel retailers, transport operators, and the broader industry.
The longer view
The package marks the end of the period where Australian governments treated fuel security as a private sector responsibility. The MSO lift, the government-owned reserve, and the refining feasibility studies all reflect a shift toward direct government participation in fuel infrastructure that the country hasn’t seen in decades.
For service station operators, the immediate read is that the supply system will be carrying more stock domestically over time, which over a multi-year horizon should reduce the volatility seen during the current crisis. The shorter-term reality is that the package does little to change the next twelve months. Reserves will remain tight while the build happens. Imports will continue to do the heavy lifting. The Geelong restart, the Lytton maintenance window, and the trajectory of the Strait of Hormuz situation will determine the supply picture through the rest of 2026.
The budget papers will tell the next part of the story. Most of what changes for the industry will be visible in the detail rather than the headline.