THE federal Government is reviewing its powers to protect people from a major disruption to oil imports, as crude prices soar towards $US50 a barrel.

With Australia an importer of 40 per cent of its oil supply, the Government is preparing a new energy security plan that may include the creation of crude oil or refined petroleum stockpiles.

The review comes as international crude oil hit a record $US48.88 a barrel in New York yesterday, leading to predictions that average unleaded petrol prices in most Australian capitals will reach $1.10 a litre next week.

Oil was expected to break through the $US50 a barrel benchmark in New York trade overnight and there are fears it will continue to surge towards $US60 a barrel as fighting in Iraq intensifies.

Federal Industry and Resources Minister Ian Macfarlane has ordered a review into the Liquid Fuel Emergency Act to ensure Australia is well prepared to handle any possible disruption to supplies of crude oil and petroleum from the Middle East and Asia.

“We need to look at energy security in Australia, and the legislation has been dormant and untested since it was introduced in 1994,” he said.

“We need to anticipate every possible scenario that might interrupt crude oil supplies and have a concrete set of responses that minimise disruption.”

Australia holds about a 10-day supply of crude oil and refined products, after state governments over the past two decades abandoned official reserve stockpiles.

Oil companies are opposed to refined petroleum stockpiles because they are costly to maintain, but have also expressed concern to the federal Government that the supply chain from the Middle East and Asia is vulnerable because it passes through the Malacca Straits, between Indonesia and Malaysia, which is notorious for piracy.

Australia is particularly vulnerable to an interruption in supply because of its declining self-sufficiency in oil – we import 40 per cent of our oil needs – and because it has no strategic oil stockpiles.

Oil stockpiles became a focus for the Government earlier this year when the US Government began replenishing its 666.5 million barrel Strategic Petroleum Reserve, held in underground salt caverns along the coast of the Gulf of Mexico.

The price of crude oil has risen 57 per cent in the past 12 months. The most recent surge was fuelled by terror attacks in Saudi Arabia, the world’s top producer; the battle by Russian oil giant Yukos against bankruptcy; and the rising intensity of clashes in southern Iraq between the army of radical Shi’ite cleric Moqtada al-Sadr and US forces.

Exports of crude from Iraq’s southern oil terminals have been halved, to about 40,000 barrels an hour, because of threats to infrastructure from Shi’ite Muslim militia, according to Southern Oil Company officials.

London’s main oil contract, Brent Crude, reached a new high last night of $US44.59 in early trading as security was increased around key oil facilities in Iraq following a bomb attack on an oil pipeline linking Iraq’s northern oilfields to the Baiji refinery.

High fuel prices have already forced Qantas to increase its fuel surcharge to $7 a ticket for international sectors and $4 for domestic sectors. Virgin is expected to follow this weekend.

John Howard said yesterday that he was acutely aware of the impact of higher petrol prices on the community but that the federal Government could nothing to reduce them.

“I do understand this. I have children who buy a lot of petrol and everybody’s talking to me about it, and I am acutely aware of how painful this is,” the Prime Minister said.

Labor energy spokesman Joel Fitzgibbon said the Coalition had no plan to address Australia’s import dependency.