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The Australian Government has spent $94 million on crude oil from the United States, but how much oil is now in storage is unclear.
Key points:
- Based off current figures, Australia has purchased roughly five days' worth of oil
- The country has between 55-80 days' worth in reserve, but the minimum requirement is 90 days
- Energy Minister Angus Taylor said the Government took advantage of historically low prices
The price of oil reached record lows this week, which rocked the stock market, with oil in the United States turning negative for the first time in history.
The Australian Government purchased the crude oil from the United States' Strategic Petroleum Reserve (SPR).
This reserve was established by the US government in 1975, and is the world's largest supply of emergency crude oil.
How much oil does Australia go through each day?
Federal Minister for Energy Angus Taylor told ABC News Breakfast on Thursday the country would go through about 1 million barrels — roughly 159 million litres — a day.
This figure has been consistent for at least the past five years according to the Australian Petroleum Statistics.
One of the major concerns however is our ability to process crude oil.
Australia has just four refineries in operation, with one of them about to close for an extended maintenance period.
The Caltex Refinery in Brisbane will close in May, with owners citing the financial stresses of coronavirus as a major reason for the decision.
The closure is hoped to be only temporary, but will mean by May Australia will have just three open, one in Western Australia and two in Victoria.
How many barrels has Australia purchased?
So far, Mr Taylor has not said exact figures about how much the taxpayer has just bought.
"It'll be many millions of barrels but what it will do is start to secure our position," he said.
What also makes the calculation hard is the difference in price around the world, says Dr Graeme Bethune, the CEO and founder of Energy Quest, an Australian energy advisory firm.
On Thursday, crude oil was trading at roughly $22 per barrel in Australia, which resulted in roughly 4.2 million barrels for a $94 million purchase.
So, Australia has purchased roughly four to five days' worth of crude oil from the United States.
Dr Bethune, who has spent the last four decades as a economic and financial analysis, told ABC News that five days' worth of oil reserves may seem minimal, but it is an important first step.
"Four or five days is significant, it is a push in the right direction," he said.
"You need to gradually step this up, so the Government is making steps in the right direction."
Is crude oil petrol?
No.
Crude oil is the raw material refineries use to make petrol, diesel, jet fuel and LPG.
The Australian Institute of Petroleum estimates about 45 per cent of all crude oil refined in Australia is used for petrol.
This means in one barrel, Australian refineries would produce roughly 71.5 litres of petrol.
Using these figures, the Government has stockpiled roughly 300,485,430L worth of petrol.
This could fill a family sedan 4.8 million times.
How much oil are we supposed to have?
Under international regulations, countries are expected to have a stockpile of 90 days' worth of net-oil imports.
Australia has failed to meet this target for many years, but we have been getting closer to the target recently.
Mr Taylor told News Breakfast Australia's oil reserves currently amount to between 55 and 80 days' worth.
The latest Australian Petroleum Statistics showed Australia had as much as 81 days' worth of oil reserves at the end of February.
So, while five days' worth of fuel sounds insignificant, it potentially puts Australia on the brink of reaching the 90-day threshold.
Why do you need a stockpile?
Australia has been a member of the International Energy Agency since 1979.
Countries who have signed up to the IEA are obliged to have a stockpile of 90 days' worth of crude oil.
The oil reserve is needed for emergency situations, for example if conflict disrupted our supply from importers.
Australia imports most of it's crude oil.
The Government is not obliged to have direct access to the supply, which is where the latest oil purchase is.
How quickly can we access the oil?
It will take about two or three weeks, according to Dr Bethune.
The oil the Government has purchased is currently stored in the United States.
The SPR is held in underground salt caverns at four sites along the US coastline in the Gulf of Mexico.
While the Government has stated its intentions to bring the oil closer to home, it will remain in the United States for the foreseeable future.
So, if Australia needed the oil straight away, we would have to wait.
"It takes a couple of weeks to get from the US Gulf Coast to here," Dr Bethune said.
This has been one of a major criticisms made by the Federal Opposition.
"It's an issue of national security — having something in the United States doesn't provide for our national interest to be protected in the way that it should," Opposition Leader Anthony Alabanese said.
"The United States isn't New Zealand. I mean, it's not next door."
Topics: government-and-politics, business-economics-and-finance, industry, oil-and-gas, australia, united-states