For the first time in history, the United States has leased Strategic Petroleum Reserve space to another country. President Trump met with Australian Prime Minister Scott Morrison back in September 2019, well before the fallout of COVID-19 and the Saudi/Russia crude oil price war. The meeting’s intent was to find a way of strengthening international energy stability and resiliency. In hindsight, that meeting feels almost like foreshadowing.
A virtual agreement
The Agreement was originally supposed to be finalized at the beginning of March, but for obvious reasons it had to be postponed. Finally, on June 3 a virtual signing ceremony took place between U.S. Secretary of Energy Dan Brouillette and Australia’s Minister of Energy and Emissions Reduction Angus Taylor. It builds on an earlier arrangement allowing any Australian stocks of oil held in the Strategic Petroleum Reserve to be counted as compliance with International Energy Agency (IEA) reserve obligations.
U.S. Strategic Petroleum Reserve Fills Obligations
Every IEA country, in accordance with the Agreement on an International Energy Programme, has an obligation to hold a stockpile of oil equivalent to at least 90 days of net imports. In the case of national emergency or severe oil supply disruption, IEA members can decide to release these stocks to the market. According to IEA records, Australia has been unable to hold its obligatory 90 day supply. In April, Minister Taylor told an Australian television morning program that Australia at that time had between 55-80 days worth of stockpiled supply. Although the IEA does not require the supply to be held in the same country, Opposition leader Anthony Alabanese said, “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. The United States isn’t New Zealand. I mean, it’s not next door.” In the event of an emergency, it could take two weeks for Australia’s stockpile within the U.S. Strategic Petroleum Reserve to reach them.
Lesson learned: Always be prepared
While the Opposition leader has a point – maintaining a stockpile within easy reach is the ideal, we also have to acknowledge that COVID-19 has taught us more than a few lessons. One of those being that it is best to be prepared in the best way possible, than to hope to be better prepared later. As stated by the U.S. Department of Energy:
Both Ministers acknowledged the change in the energy landscape over the past few months, and how the COVID-19 pandemic has reiterated the importance of energy security and the strong U.S.-Australia relationship.
Today’s Agreement will deepen that relationship, advance the strategic interests of both nations, and strengthen global energy stability. It will also allow Australia to make progress on their sovereign energy goals and benefit from current low oil prices.
Secretary Brouillette and Minister Taylor stated this Agreement is a lasting sign of the U.S.-Australia partnership in energy security through both times of crises and times of prosperity, and look forward to bolstering this cooperation for years to come.