Australia's Oil Reserve in America

A Country Running on Empty

For years, Australia has been embarrassingly non-compliant with its International Energy Agency (IEA) obligations. As an IEA member, Australia is required to hold emergency reserves equivalent to at least 90 days of net oil imports. Yet for well over a decade, the country has consumed more oil than it produces, and its emergency reserves have been consistently among the lowest of any IEA member country.

Australia's slide into non-compliance is less a story of stocks falling than of the denominator changing. For decades, Bass Strait production made Australia a meaningful oil producer, and the IEA obligation – set at 90 days of net imports – was manageable because net imports were relatively modest. As Bass Strait matured and output declined from the 1980s onwards, Australia shifted progressively from producer to importer. Net imports grew, the denominator in the IEA calculation expanded, and we fell under the 90-day threshold with it. Onshore physical stockholdings have changed relatively little across this period – it is not that Australia dramatically ran down its tanks, but that the goalposts moved as the country's energy trade position fundamentally changed.

Recent commercial stock cover estimates have generally put Australia in the range of several weeks, not months – well short of the 90-day target. These are not IEA compliance figures, which use a different methodology incorporating crude, products, and stocks held overseas, but they give a sense of the underlying physical position. Australia has for years been among the only IEA members to remain persistently and structurally below the 90-day requirement over an extended period. 

How the US Deal Came About

The arrangement that became Australia's answer – at least on paper – stemmed from discussions between President Donald Trump and Prime Minister Scott Morrison in Washington in September 2019. In March 2020, US Secretary of Energy Dan Brouillette and Australia's Energy Minister Angus Taylor signed a milestone deal laying the groundwork for Australia to lease space in the US Strategic Petroleum Reserve (SPR) to store and access Australian-owned oil. It was the first time the United States had leased excess capacity in the SPR to another country.

The Purchase and the Structure

Australia spent around $94 million to buy oil at the low global prices available in 2020 – deliberately timed to take advantage of the COVID-driven oil price crash. The lease framework ran for an initial period of 10 years, to 2030, covering storage capacity in the SPR's underground salt caverns carved into natural salt domes along the Gulf Coast of Texas and Louisiana. Australia did not fill the entire leased capacity.

The deal had a certain logic to it. IEA rules explicitly permit members to count offshore reserves towards their compliance obligations where a formal bilateral agreement is in place – this is not a loophole but an established provision of the framework. Oil prices in 2020 were historically cheap. And Australia simply lacked the domestic storage infrastructure to do anything more ambitious.

The "Accounting Trick" Critique

Critics were unconvinced from the start. The core problem was that the arrangement improved Australia's position under IEA accounting rules, but did little to strengthen its physical fuel security in a regional supply disruption. Storing oil in Texas ticks a compliance box; it does not put fuel in Australian tanks when it is needed.

The Maritime Union of Australia was bluntest about it, calling the arrangement nothing more than an accounting workaround that would do nothing to ensure the country's resilience to a global crisis disrupting fuel supplies – and pointing out that the government had provided no information on how it would actually transport those fuel supplies during a crisis.

The deeper issue was not whether the storage arrangement was legal under IEA rules – it was. The problem was practical accessibility. In any scenario serious enough to require emergency reserves, the question was never whether Australia technically owned oil in Louisiana. It was whether that oil could realistically reach Australian refineries in time, via routes that might themselves be under threat.

Energy Minister Taylor was also caught being misleading about the numbers. A fact-check found it misleading for him to claim Australia had 89 days of oil "here in Australia" when a significant portion was stored offshore or yet to arrive. His office argued the government "does not consider the current IEA methodology fair or representative of Australia's unique geography compared to interconnected European countries" – a defence that neatly sidestepped the question of whether the oil was actually accessible in a crisis.

It is worth being clear about what the IEA obligation actually is – and isn't. The 90-day requirement was never designed to ensure that individual member countries had fuel stockpiled for their own use in a national emergency. It was designed to give the IEA a collective pool of supply it could release to stabilise global oil markets during a disruption. The clue is in the rules: stocks held for IEA compliance must be accessible to global markets, not necessarily to the country that nominally holds them. Australia meeting its 90-day obligation would not, of itself, guarantee fuel supply to Australian motorists, farmers, or defence assets in a regional crisis. It would simply mean Australia was contributing its share to a global buffer. These are related goals, but they are not the same goal – and conflating them has allowed successive governments to claim progress on fuel security while the underlying physical vulnerability remained largely unaddressed.

How Long Would It Actually Take to Ship to Australia?

This is where the practical critique bites hardest. The crude oil held underground in the SPR across Texas and Louisiana would need to be shipped through the Panama Canal and across the Pacific to Australia – more than twice the distance from some of the Asian mega-refineries that currently supply the country. Even if the crude arrived in a time of crisis, it would still need to be refined – a capability Australia has steadily wound down over the years.

The route from the Gulf Coast through the Panama Canal to eastern Australia covers roughly 20,000 to 22,000 kilometres depending on routing. Transit time on a laden tanker runs to roughly three to five weeks – before factoring in scheduling, loading time, and the refining step at the other end. In a genuine supply emergency involving conflict in the Indo-Pacific, that timeline would be deeply problematic. And the route itself might well be compromised at the very moment the oil was needed most – as the Imperial Japanese Navy demonstrated in World War II, cutting Australia off from US replenishment was a strategic priority, not an afterthought.

Access Risk: Could the US Have Blocked It?

This question was raised directly by the Australian Strategic Policy Institute's Peter Jennings: if in an emergency the US decided it needed the oil more than Australia did, would the agreement hold?

The lease agreement contained protections, but the US was legally required to ensure that leasing space to Australia did not impair America's own ability to withdraw oil in an energy emergency. In practice, that meant Australian access would be contingent on US domestic emergency requirements being met first. The SPR is also technically complex, vulnerable to hurricanes, and subject to numerous congressional mandates – making it unclear how Australia's particular needs, the right grade of crude, tanker scheduling, and loading logistics, would be accommodated as a foreign government during a fast-moving crisis.

It was not quite a veto in the formal sense. But it was a significant and unresolved dependency at the heart of an arrangement sold as a fuel security solution.

Was the Oil Ever Actually Used?

Yes – in 2022 – when the IEA coordinated a collective release in response to Russia's invasion of Ukraine, the Morrison government contributed by offering for sale all of the government-owned crude oil it held in the US SPR (which generated approximately US$186 million in revenue). The oil was released into global markets – not shipped to Australia. Australia's contribution was to the global IEA collective action to stabilise oil markets, which was a response to the Ukraine invasion rather than direct financial aid to Ukraine itself.

Where Things Stand Now

As of the latest available public information, Australia's SPR holdings in the US are empty following the 2022 sale, though the lease framework technically remains in place to 2030 and Australia has periodically considered re-purchasing. The focus since 2022 has shifted toward building domestic reserves – the government introduced a Minimum Stockholding Obligation requiring fuel importers and refiners to hold baseline stock levels, and provided around $227 million in grants for new storage facilities around the country.

But the underlying problem has not gone away. Australia imports around 90 per cent of its refined fuel, has only two refineries remaining, at Geelong and Lytton, both receiving government support – and remains the most persistently non-compliant oil-importing IEA member. The US SPR arrangement papered over that reality for a few years. It did not solve it.

What Australia Actually Needs

As critics, defence analysts, and energy researchers have long argued – and as events have repeatedly underlined – what Australia needs is its own strategic petroleum reserve, with oil on Australian soil, accessible to Australian refineries, without the need to sail it halfway around the world through waters that might not be safe precisely when the oil is needed most. 

In the meantime, Australia remains one of the developed world's most exposed fuel importers – a position that is less a policy choice than a consequence of decades of decisions, non-decisions, and accounting arrangements that looked better on paper than they ever did on a map.