TOM ELLIOTT:  Is now the right time for Australia to buy up big on the world's oil markets? Our next guest is the Federal Energy Minister. Angus Taylor, good afternoon.

ANGUS TAYLOR: Good afternoon Tom. Thanks for having me.

TOM ELLIOTT: Now, we spoke about this a few weeks ago - have you decided to develop a thing like the Strategic Petroleum Reserve that America has, but here in Australia now that oil prices are super cheap?

ANGUS TAYLOR: Yes. So this is a historic opportunity. We're seeing oil prices even go negative yesterday, which is extraordinary. We've never seen that before. There is a lack of storage around the world - that's the challenge - but it is an extraordinary time to be starting to build a strategic petroleum reserve, and we're doing exactly that. So we've allocated an initial $94 million. We've begun discussions with local refiners about sites for local storage. We won't be able to store it locally initially, but we do want to be able to do that. And what it means is if you're a truckie, or a farmer, or a miner, or a commuter, or a tradie who relies on fuel to run your business to get around and live your life, you can be confident that despite disruptions that happen from time to time around the world, there will be enough fuel available. We've done very, very well on this over the years, but it's time we think to start building a strategic petroleum reserve, particularly as our upstream production of oil has fallen away in Australia in recent years.

TOM ELLIOTT: Okay. Well, firstly, to the storage issues so, I mean, I remember those massive circular tanks you used to see around the place and the sort of lattice work around them - would you store them in things like that, or do we have caves like the Americans have? Where are we going to stick it all?

ANGUS TAYLOR: Yes. Look, there are lots of options. We're obviously in discussions, and they're commercially sensitive, with local players or refiners about where those best locations might be. The Americans hold them underground for the most part and that's certainly the Strategic Petroleum Reserve they do. And that is an option if you've got the right geology obviously. But the important point is you want to have access to them. I mean look, holding them in America in the short term is a very viable option for a couple of reasons. It's one of the few storages that exist in the world at the moment because there's just a surplus of fuel everywhere so there's very little storage capacity. And the second is they are a very strong strategic partner to Australia and we have fought together many, many times of course over recent history, since Australian Federation and we do look after each other so this is an important part of the story. 

TOM ELLIOTT: Sorry to interrupt though, but isn't that a bit of a problem? I mean, isn't what we really need is to make sure that this petroleum reserve or this fuel reserve is located here? Just in case, I don't know, a war breaks out.

ANGUS TAYLOR: Tom, the vast majority of scenarios, you're never going to have a problem with accessing the fuel from a close partner, which is not far away, by the way. Much closer than, say, the Netherlands, where a lot of the oil comes from, like the US. So the vast majority of cases- 

TOM ELLIOTT:  Vast majority of-

ANGUS TAYLOR: However, there are cases, there are very extreme scenarios where that's not the case, and that's why it does make sense to start building local reserves. But right now, we've got prices of oil close to zero. So, my perspective and the Government's perspective on this is this is the time to build a strategic petroleum reserve, regardless. Over time, we can shift that oil to more local locations, locations within Australia and that's absolutely achievable. 

TOM ELLIOTT: Okay. 

ANGUS TAYLOR: But the time to get moving on this is now. Commercially, economically, this is the sensible time to do it because it is very, very cheap.

TOM ELLIOTT: Right. So, what are you saying? So, buy the oil now when it's super cheap and build the local storage facilities, the extra ones, down the track when we can?

ANGUS TAYLOR: Correct. 

TOM ELLIOTT: Right, okay. 

ANGUS TAYLOR: Look, and the truth is you may choose to hold some of those reserves in the United States for a whole variety of reasons but - and in fact, there's some risk diversification in doing that - but the important point is you do want to have enough local storage. That's very, very important and it is something we are discussions about. 

TOM ELLIOTT: Now, how much should we store? I mean, ideally, what would you have - six months' worth?

ANGUS TAYLOR: Well, the IEA requires, globally, each country who is a party to this international agreement to hold 90 days' worth. That's not just in country, that's in your total supply chain. We hold between 50 and 80 days depending on how, what you're including in that definition. So, we already have a significant amount in the supply chain. Far more than the number sometimes people quote. But we'd like to have the 90 days. And whilst at the end of the day, the worst possible scenario is you'd need an endless amount of fuel, and of course that's just not a sustainable proposition. But what you can do is you can resist the vast majority of disruptions by having a sensible supply chain of fuel with appropriate strategic fuel reserves, and that's exactly what we're doing here. But we're doing it in a way which is value for taxpayers' money - doing it at a time when fuel is very cheap.

TOM ELLIOTT: Now, just quickly, what about gas? I mean, a lot of people get upset at the fact that we export a ton of gas while we face - that's usually from Queensland and Western Australia - but at the same time, we face or we had faced gas shortages here in Victoria. Could we buy back some of those export contracts? Would that work?

ANGUS TAYLOR: Well, the good news here is we don't need to. So we've seen the price of gas drop. It got as high as $20 a gigajoule at one point. It's been closer to $10 in recent times. But in the lead up to COVID-19, even before it began, we were seeing prices down around $6 or $7 and they're now down at $4 or $5. Now, there's structural changes in that market, which means we've got more supply coming out in Australia. We've got lower prices and that is a great opportunity. We need to make the most of that. There's many manufacturing businesses that rely on affordable gas. We've got to get those wholesale price reductions passed through to customers. And then we've got to look at how those lower gas prices that we're seeing - and they look to be sustained - how we can take advantage of those in our manufacturing sector. There's no need for draconian kind of government intervention here. We're seeing the supply increases, we're seeing the price reductions, and now we've got to make sure they get through to customers and customers are in a position then to make investments and grow the jobs in those energy-intensive industries we want to see, which have been really enormously important in the history of Victorian manufacturing.

TOM ELLIOTT: Angus Taylor, thank you for your time. 

ENDS