Australia is grappling with a diesel surplus that has left millions of dollars of taxpayer-funded fuel stranded offshore, costing the country between $30,000 and $90,000 a day.
Dozens of fuel tankers are anchored off Australia's coastline due to a lack of storage space for their cargo, with experts warning the backlog could push prices even higher.
Government intervention and oversupply
The oversupply follows a government move to subsidise additional fuel imports after the conflict in Iran began disrupting shipping through the Strait of Hormuz. Energy finance analyst Kevin Morrison told Sunrise the intervention was designed to protect Australia's fuel security.
“The government wanted to intervene … securing those supplies was very, very important because we were worried that there would be shortages,” Morrison said.
Australia imported 10 per cent more fuel than usual during April, May and June, while the country's storage infrastructure has struggled to keep up. The result is dozens of vessels sitting idle off the coast with millions of litres of diesel onboard, while daily waiting costs continue to climb.
Costs to be passed on to consumers
Morrison warned those costs will not be absorbed by fuel companies. “That's the cost that's going to be incurred by the fuel importer. So, the retailer will eventually have to incur that price and then they will pass it on to the consumer,” he explained.
The irony comes as motorists are already grappling with rising fuel prices, with diesel making up 52 per cent of Australia's daily fuel consumption. Australia imports about 90 per cent of its liquid fuel needs, including about 85 per cent of its diesel, leaving the country heavily reliant on overseas supply.
Potential price hike
Combined with the end of the fuel excise cut earlier this week, Morrison warned motorists could soon see diesel prices climb to about $2.50 a litre. Fuel companies are working to increase Australia's storage capacity, but Morrison said expanding infrastructure will take time.
