Australia Negotiates with U.S. for Access to Oil Reserves

Without enough oil stockpiled to cover net imports for three months, the U.S. ally might run out of gas.

August 07, 2019

CANBERRA, Australia—Australia hasn’t put enough oil aside for a rainy day, leading the United States to consider providing some of its emergency oil reserves to its ally, the Wall Street Journal reports. After the 1973 oil price shock, countries, including the United States, created oil stockpiles to hedge against short-term supply disruptions. However, Australia has less than the usual three-month reserve.

The United States, which has been tussling with China about trade, would like Australia to step up into a bigger role in the Asia-Pacific arena. Last weekend, Australian and American officials talked about the possibility of an introduction of new ground-based, intermediate range weapons in Asia to balance China’s increased military might.

The Australian government appears to be negotiating with the United States on military assistance in exchange for oil reserve access. “We’re working as quickly as possible to get a deal done with the U.S.,” said Energy Minister Angus Taylor. “If there is disruption, if there are things that happen [that] are not helpful to the affordability and availability of oil, we have a solution available.”

Currently, America has more than 640 million barrels of oil stored in its Strategic Petroleum Reserve. Australia has had its oil production decline after several refineries closed, and legislators haven’t wanted to spend money to invest in storage infrastructure and fuel reserves.  “Australia is reliant on traffic through the Strait of Hormuz for a percentage of our oil supplies so we’re doing everything that we can to be a good government and be prudent to make sure that we get a continuity of supply,” Taylor said.

Australia is currently one of the U.S.’s closest allies in the East-Asian region. However, regardless of if an agreement is met or not, it could take up to a month for oil to arrive from the U.S.