Australian fuel: Global spot market leaves Australia’s suppliers with mere hours to buy shipments

Anthony Albanese has secured a promise of continued fuel in exchange for Australia keeping up its gas exports after travelling to Singapore, as concerns grow over potential Iranian tolls on ships using the Strait of Hormuz.

The Prime Minister and his Singaporean counterpart, Lawrence Wong, pledged their countries would keep shipping each other LNG and refined liquid fuels, respectively, and will soon make that commitment legally binding.

But the promise of secure fuel shipments to Australia came with a caveat: Singapore has to be able to get the crude oil supplies first.

“In a more fractured and volatile world, we choose to stay open, to stay connected and to stand together,” Mr Wong said.

Singapore is Australia’s largest supplier of oil products, including almost half of all automotive fuel and more than a quarter of the diesel and aviation fuel.

Australia supplies a third of Singapore’s gas, which Mr Wong said was vital for his country’s power generation.

The leaders signed a joint statement pledging to protect their countries’ mutual energy security, although it didn’t offer concrete guarantees on quantities.

They have asked their ministers to conclude a legally binding addition to the existing Singapore-Australia free trade agreement to lock in cooperation on essential supplies, such as fuels.

Australian ministers have said fuel shipments are now secured well into May.

However, there have been concerns raised that our main southeast Asian suppliers of refined fuels could struggle if they can’t get the crude oil shipments because of Iran’s tightened control over the Strait of Hormuz.

Mr Wong said his country would hold up its end of the bargain.

“We will keep these flows going as long as upstream supplies continue,” he pledged.

Asked if the agreement meant Australia would be prioritised if Singapore had to start restricting exports, Mr Wong declared that it wouldn’t come to that.

“We do not plan to restrict exports. We didn’t have to do so even in the darkest days of COVID and we will not do so during this energy crisis,” he said confidently.

Mr Albanese said his counterpart had been “just as confident in private as he is in public” on the topic.

Ahead of the talks in Singapore, the Australian PM visited the tiny island that is home to the country’s three main refineries and an LNG import terminal.

He suggested there was potential for Australia to increase its LNG exports to Singapore, saying that “additional fields are going to come online and we will continue to provide support for Singapore”.

The Australian Government has been emphasising Australia’s reputation as a gas supplier in its talks with Asian countries about securing fuel stocks, and the talks in Singapore on Friday were no different.

“Australia has been a very reliable supplier of LNG and we will remain so. Contracts are fulfilled,” Mr Albanese said.

“The conflict in the Middle East is a long way from our region, but every nation in our region is being affected by it. By building regional cooperation on energy security and economic resilience, we strengthen our own fuel security and our own economy.”

Iran appears to be setting up a tolling system for the narrow waterway, with reports via shipping analysts at Lloyd’s List and Reuters that it is charging as much as US$2 million a ship and demanding payment in cryptocurrency or Chinese yuan.

Mr Trump posted on social media that this was “not the agreement we have”.

“They better not be (charging fees) and, if they are, they better stop now!” he wrote.

“Iran is doing a very poor job, dishonorable some would say, of allowing Oil to go through the Strait of Hormuz.”

Acting Prime Minister Richard Marles wouldn’t say whether Australia would be concerned if the countries it purchased refined fuel from had paid Iran’s Islamic Revolutionary Guard Corps (which is listed as a terrorist organisation in Australia) for passage of their crude supplies.

He said only that Australia supported the global rules-based order, which included freedom of navigation in international waters like the Strait of Hormuz — comments later repeated by Mr Albanese.

Australia’s fuel distributors have been in a global scramble to secure shipments, sometimes having mere hours to decide whether to spend the millions of dollars needed to lock in a delivery.

Energy Minister Chris Bowen revealed that with movement through the Strait of Hormuz still highly restricted, Australian suppliers are having to turn to the spot market.

It tends to have higher prices, which is why the Government is using Export Finance Australia to underwrite purchases.

“Those spot cargoes come up at very short notice … a ship becomes available for sale, maybe in Korea or Malaysia, and companies have two or three hours to decide whether to buy it,” Mr Bowen told reporters in Sydney on Friday.

“We want them to have the flexibility to go and get that fuel for Australia and for Australians.

“I think the events of the last 24 hours have shown that this arrangement is even more important, because the oil price is moving around so much.”

Crude oil prices leapt above US$114 a barrel this week, then plummeted to $94 after US President Donald Trump announced a two-week ceasefire, but have risen again once it became clear the Strait of Hormuz hadn’t yet reopened.

Opposition Leader Angus Taylor said there still wasn’t enough transparency around fuel supply or prices.

“We’ve seen in the last couple of days a sharp reduction in the price of fuel coming out of Asia. The terminal gate price in Singapore sets the … wholesale price here in Australia. It’s come down over $100 a barrel, but it hasn’t come down at the bowser here in Australia,” he said.

The Opposition is calling for a “national dashboard’ where people can check fuel prices and shortages.

Each of the States already has its own website that shows fuel prices and availability.

There were 192 service stations with no diesel on Friday, out of 7940 stations nationally.

The price of diesel has remained high and on Thursday surpassed the level it was before the Federal Government halved the fuel excise on April 1.