Why the G7's 100 Million Barrel Fuel Release Won't Fix Our Diesel Bill

Fill a diesel ute this week and you're paying around 40 cents a litre more than the driver at the next bowser topping up a petrol hatchback. So when the world's richest economies said last Friday they were opening their emergency reserves, diesel was the fuel they had in their sights. The catch? Australia is mostly watching from the sidelines, and the reason goes back half a century.

A hundred million barrels, aimed squarely at diesel

On Friday 2 October, G7 leaders agreed on a video call convened by French President Emmanuel Macron to release 100 million barrels of diesel and crude oil from emergency stocks over four months, coordinated through the International Energy Agency. According to the ABC, a substantial slice of the diesel is due to hit the market within the first 20 days.

The deal also defused a stoush. Washington had threatened to ban US diesel exports, with Treasury Secretary Scott Bessent saying "American farmers, truckers, and businesses should not be left carrying the burden of a global diesel shortage." Under the agreement, G7 members pledged not to restrict energy exports to one another.

Then this week, IEA members backed speeding up the release and putting diesel first. Members have already released 325 million barrels since March and still hold about 1.1 billion barrels in emergency stocks, according to The National. "The IEA stands ready to release more of these stocks to the market if and when required," Executive Director Fatih Birol said.

Energy Minister Chris Bowen's response was polite but realistic. "I do welcome the actions of G7, particularly the confirmation by the United States that they are not intending to put any restrictions on diesel supply," he said, as reported by AAP. He also pointed out that the US supplies only about 2 per cent of our fuel, and he declined to put a number on any relief at the pump.

The 90 day promise Australia hasn't kept since 2012

Here's the backstory. The IEA was set up in 1974, after the Arab oil embargo sent prices soaring and left motorists in some countries queuing for fuel. Members signed up to hold oil stocks equal to 90 days of the previous year's net imports, so they could release them together if supply was ever cut again.

Australia has fallen short of that 90 day mark since 2012, and as SBS reported in March, it's the only member that doesn't meet it. Over the same stretch the refinery closures piled up: Clyde in 2012, Kurnell in 2014, Bulwer Island in 2015, then Altona and BP's Kwinana plant at Kwinana Beach in 2021. Only two remain, Viva Energy's refinery at Geelong and Ampol's at Lytton in Brisbane, and around 80 per cent of the fuel we use is imported.

Collective releases are rare. Before this year the IEA had pulled the trigger for the 1991 Gulf War, Hurricane Katrina in 2005, Libya in 2011, and twice in 2022 after Russia invaded Ukraine. Those two 2022 releases totalled 182.7 million barrels, the record until 11 March this year, when members agreed to 400 million.

Australia's part in March looked different. Instead of shipping oil anywhere, Canberra cut the minimum stockholding obligation by 20 per cent, freeing up to 762 million litres of petrol and diesel (roughly 5 million barrels) to stay in the domestic market. On 21 September that relief was extended to 31 January 2027 to cover the grain harvest and the summer holidays.

Our reserve lives in company tanks

What most people don't realise is that Australia has no government stockpile sitting in salt caverns, the way the United States does. The minimum stockholding obligation requires fuel importers and refiners to keep a set volume in their own tanks. That is the reserve.

As at 29 September, the National Fuel Security Plan figures showed 41 days of petrol, 32 days of diesel and 28 days of jet fuel onshore at normal consumption rates. In raw terms, that's 1,757 million litres of petrol, 2,998 million litres of diesel and 765 million litres of jet fuel. On 2 October there were six crude tankers (about 13 days' supply) and 44 refined product tankers (about 15 days) on their way here.

Those "days of cover" measure consumption, which is a different yardstick from the IEA's 90 days of net imports. Same fuel, different ruler.

So what happens at the bowser?

Here's what's really going on with diesel. Petrolmate's figures from the official state and territory price schemes over the past 48 hours show diesel averaging 284.9 cents a litre in NSW against 242.7 for unleaded. In Victoria it's 283.2 against 243.0, and in Queensland 281.6 against 241.2. The Northern Territory is dearest at 317.6 for diesel. Across the states the diesel premium runs from about 34 cents in Western Australia and Tasmania to about 45 cents in South Australia.

Australian wholesale prices follow the Singapore benchmarks that Asian refiners sell into, usually with a lag of a week or two. If the G7 diesel cools the global market, that's the path any relief takes: Singapore first, then terminal gate prices, then your local servo.

To put this in perspective, 100 million barrels over four months works out to roughly 830,000 barrels a day, in a world that burns through around 100 million barrels of oil every day. Helpful, yes. A game changer, no. The more valuable part for us may be Washington's promise not to ban diesel exports, because a ban would have pulled supply out of the same global pool our Asian suppliers compete in.

The ACCC's latest weekly monitoring update, published 2 October, found average petrol and diesel prices slightly decreased in the capitals over the week and were broadly similar in regional areas, with international benchmarks still relatively high. That's the shape to expect for a while yet: small moves, not a sudden plunge.

Bigger tanks are coming, slowly

Canberra is trying to build the buffer it hasn't had. The May budget set aside more than $10 billion for fuel security, including plans to lift the stockholding obligation to 37 days for petrol and 50 days for diesel and jet fuel, plus $3.2 billion for a government owned reserve of one billion litres of emergency diesel and aviation fuel. In July the federal and Western Australian governments agreed to jointly fund a $4 million feasibility study with Perdaman into what would be the country's first new refinery in more than 60 years.

A billion litres has limits, though. Based on the latest stock figures, Australia gets through roughly 94 million litres of diesel a day, so even if that whole reserve were diesel it would cover about ten days. And energy researchers quoted by the ABC in July pointed out that a new refinery would still largely run on imported crude.

What to keep in mind

The fuel industry rarely makes headlines until prices spike, and this year it has barely left the front page. Knowing where our fuel actually sits, in company tanks and on ships at sea, puts you ahead of the curve. Keep an eye on this space.