Fuel reserve released as farmers warn of food price hit

Farmers have warned Australians will face higher food prices even after the federal government began releasing 760 million litres of petrol and diesel from its domestic reserves to boost regional supplies.

As Australia heads into the third week of skyrocketing petrol prices from the war in the Middle East and state governments held emergency meetings, Energy Minister Chris Bowen authorised fuel companies to start drawing up to six days’ worth of supply from national reserves.

After an urgent roundtable on Monday that followed Queensland and Victorian meetings, the NSW government threatened to use emergency powers to direct supply if the fuel industry does not prioritise areas that are running short, and it told petrol stations to declare online if they exhaust their tanks.

The moves come against a backdrop of rising inflation in part due to petrol prices that the Reserve Bank will consider when it decides whether to raise interest rates at its monthly meeting on Tuesday.

National Farmers Federation president Hamish McIntyre said the ongoing squeeze on petrol, diesel and fertiliser prices could mean consumers would pay more at the checkout as higher costs were passed along the supply chain, putting farmers under pressure to make difficult decisions.

“Farmers are price takers, which means rising fuel costs are largely absorbed on farm and cut into already tight margins,” said McIntyre.

“If things don’t turn around quickly and farmers are forced to cut production or scale back plantings, it is reasonable to expect that it could lead to pressure on food prices.”

The fluctuating price of Brent Crude Oil, a global key benchmark, was hovering around $US100 ($142) a barrel on Monday. Australian bowser prices hit more than $2.20 per litre for unleaded petrol and over $2.60 for diesel.

The federal government’s move to release 20 per cent of Australia’s reserves, announced last week, unlocks 213 million litres of petrol and 548 million litres of diesel, the latter of which is what powers almost all trucks. But the fuel will flow only once companies tell the government how they will give priority to regional areas.

Farmers are already grappling with the closure of the Strait of Hormuz, which has cut into the two thirds of Australia’s fertiliser that typically comes from Gulf states.

NSW Farmers Association economist Samuel Miller said growers would be making decisions about whether to plant crops such as wheat with an eye on the price of fuel and fertiliser.

“I’d expect the price shocks to arrive fairly soon in the retail sector, and then it’s a case of wait and see whether these high prices and limited fuel supplies impact how much food is grown, which could further impact prices for consumers,” Miller said.

Fresh produce association Freshmark chief executive Meegan George said Australia’s food ecosystem was resilient because it commonly faced natural disasters. She said some domestic food prices could actually decline because some overseas markets were inaccessible.

“If produce that was destined for export markets can’t move offshore, it often ends up in the domestic market, which can temporarily increase supply and soften prices,” said George.

Alex Osipovich, owner of northern Sydney petrol station Bobbin Head Garage, said business had been mostly smooth sailing over the past seven years, but that recent geopolitical crises had left him feeling like “it is all crumbling”.

Osipovich said the independent petrol station had been paying wholesale fuel prices up to 50 cents a litre higher than major retailers for weeks.

“The big giants are not giving us a good go. I can’t compete with them,” said Osipovich.

“If I continue doing this, not only do I have to sell fuel below the cost, which means I’m losing money instead of making a profit, on top of that, I have to pay wages too for my nine staff members.

“I might have to shut the place and put the sign up, rather than continue working backwards.“.

A communique from Monday’s NSW roundtable told fuel retailers to use the state’s FuelCheck app to notify when fuel is unavailable, allowing motorists to identify nearby service stations with supply.

The state’s watchdog agency Fair Trading will also increase its monitoring of any pricing discrepancies between what petrol stations advertise online and what they offer in person.

Premier Chris Minns said it was crucial the state planned “for every contingency”.

“While global fuel supply challenges are beyond our control, there are practical things we can do here in NSW to ensure fuel is being distributed where it’s needed most, particularly in regional communities,” Minns said.

Victoria introduced a rule forcing petrol stations to set a maximum daily price after its own roundtable last week. NSW has not adopted that measure.

At a federal level, former Nationals leader Barnaby Joyce said the Coalition made an error when, with Angus Taylor as energy minister in 2020, it paid $95 million to create an Australian reserve of fuel in the US.

Taylor rejected the criticism on Monday, telling reporters: “We made sure that the remaining refineries stayed in this country and we want to see Australian fuel working for Australians. Barnaby Joyce should be saying that. He hasn’t.”

With Elias Visontay

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