Australia is obliged to hold 90 days of imports as stocks, either as crude oil or refined products, under the International Energy Agency treaty. Of the 29 countries that are signatory to that treaty, Australia is the only one that is delinquent.
We are currently delinquent to the extent of about 40 days and this is increasing as our domestic oil production declines. The IEA requirement is the minimum that we should hold under that treaty. Several Asian countries hold hundreds of days of stocks by comparison. If Australia were to build and to hold 50 days of refined product stocks at the current oil price of $50 per barrel and A$/US$0.80 exchange rate, the total cost including tankage at $50 per barrel of storage would be of the order of $18 billion.
Australia’s annual consumption by state is:
Stockholdings by state for 50 days of consumption would be:
This totals 6.4 billion litres or 40 million barrels. At US$50 per barrel and an A$/US0.80 exchange rate, that would cost $2,500 million. Adding refining and transport costs of $20 per barrel adds $800 million to the cost for a total fuel acquisition cost of $3.3 billion.
According to an IEA report of 2013 entitled Focus on Energy Security, tank construction costs for above ground storage range from US$29 to US$37 per barrel, not including jetty construction costs. That report notes an Australian premium for construction costs of 20%. Storing low flash point products such as petrol also adds a construction cost premium.
Assuming a construction cost of $60 per barrel, that amounts to $2,400 million for our 40 million barrels of refined product. The total cost becomes $5,700 million. At US$100 per barrel, the cost increases to $8,200 million.
If it was found more appropriate, after analysis, for Australia to hold 150 days of stocks instead of just 50 days, the cost at $100 per barrel would be $24,600 million.
As others have noted, mandated stocks are a palliative and not a solution to transport fuel security. There won’t be enough time, while the stocks run down, to make other arrangements. The only viable solution to Australia’s transport fuel security problem is CTL.