Theme 01 — Fuel Supply and Security

Source: https://budget.gov.au/content/01-fuel-supply-and-security.htm

The Middle East oil shock is the defining macro event of the 2026–27 Budget. Theme 01 funds the immediate supply response, builds longer-term fuel reserves, supports refinery capacity, and accelerates the transition to lower-carbon transport fuels.

Hierarchy

01 Fuel Supply and Security
├── 1.1  Immediate supply response
│   ├── 1.1.1  Minimum Stockholding Obligation relaxation
│   └── 1.1.2  $7.5B Fuel and Fertiliser Security Facility
├── 1.2  Reserve expansion
│   ├── 1.2.1  $3.2B Australian Fuel Security Reserve
│   └── 1.2.2  MSO expansion (+10 days)
├── 1.3  Refinery support
│   ├── 1.3.1  Fuel Security Services Payment (2 refineries)
│   └── 1.3.2  $34.7M Fuel Security Framework Management
├── 1.4  Business relief
│   ├── 1.4.1  $1B National Reconstruction Fund Economic Resilience
│   ├── 1.4.2  Fuel excise & RUC cut (3 months)
│   └── 1.4.3  $55M Transport Resilience and Capacity Kickstart
├── 1.5  Long-term energy transition
│   ├── 1.5.1  $1.1B Cleaner Fuels Program
│   ├── 1.5.2  $1B Hydrogen Headstart Round 2
│   ├── 1.5.3  $40.5M Australia Post fleet electrification
│   └── 1.5.4  $40M EV charger installation
├── 1.6  Domestic gas reservation (20% from 1 July 2027)
└── 1.7  EV FBT incentives (see Theme 04, 4.5.1)

1.1 Immediate supply response

1.1.1 Minimum Stockholding Obligation (MSO) relaxation

Temporary relaxation secured >1 billion extra litres of fuel for the March–June 2026 period.

1.1.2 Fuel and Fertiliser Security Facility — $7.5 billion (≈US$5B)

• Administered by Export Finance Australia.
• Already secured: >450 ML additional diesel and >100 ML additional jet fuel.
• Covers fertiliser inputs critical for the 2026 cropping season.

1.2 Reserve expansion

1.2.1 Australian Fuel Security Reserve — $3.2 billion

• Government-controlled storage of ~1 billion litres of diesel and jet fuel.
• Combined effect: lifts national reserves to ~50 days of diesel and jet fuel cover.

1.2.2 MSO expansion — +10 days

Permanent uplift of statutory minimum stockholding for diesel, jet fuel and petrol.

1.3 Refinery support

• Fuel Security Services Payment maintained — protects both remaining Australian refineries.
• $10 million for refinery-expansion feasibility studies.
• $34.7 million to run the Fuel Security Framework (administer payments and MSO compliance).

1.4 Business relief

1.4.1 National Reconstruction Fund Economic Resilience Program — $1 billion

Interest-free loans for manufacturers and logistics operators absorbing fuel-cost shocks.

1.4.2 Fuel excise & heavy vehicle road-user charge — 3 months from 1 April 2026

• Petrol/diesel excise: 52.6 → 20.6 c/L (cut by more than half).
• Heavy vehicle RUC: reduced to zero.
• Total cost: $2.9 billion.
• ACCC directed to weekly fuel price reporting; max competition-breach penalties raised to $100 million.

1.4.3 Transport Resilience and Capacity Kickstart — $55 million

Rail and shipping freight incentives to shift demand away from road during the diesel squeeze.

1.5 Long-term energy transition

1.6 Domestic Gas Reservation Scheme

• 20% reservation of LNG export volumes for the domestic market.
• Effective 1 July 2027.
• Legislation consultation June–July 2026.

1.7 EV FBT incentives

See Theme 04 — Tax Reform §4.5.1 for the FBT taper schedule.