The plunge in the global oil price is a hot topic. Between June 2014 and January 2015, the price of crude has dropped by 57%. Most of the attention has been on the boon for consumers, with a litre of petrol in some parts of Australia now counted in cents, not dollars.

But while Australia is consuming more oil we are producing less at home, and we are also storing less of it. Australia is the only member of the International Energy Agency (IEA) to be in breach of its treaty obligation to hold a 90-day 'strategic petroleum reserve'.

The IEA was established in 1974 by the world’s largest oil consumers (the US, Europe and Japan) as a counterbalance to the world’s largest oil producers (OPEC) following the oil shocks of the 1970s. One of its main functions is to supply oil to the energy market in the event of a significant disruption, as it did in 2005 following Hurricane Katrina in the Gulf of Mexico.

Accordingly, all members of the IEA are required to hold oil stocks equivalent to 90 days of imports, which can be drawn on in the event of such a disruption. Yet as of October 2014, Australia’s stockpiles stood at just 49 days of imports.

There are conflicting views about what this means for our energy security. While for many years the Federal Government has claimed this is not a problem because we remain a net energy exporter, this may now be changing. The recent Energy Green Paper, released in September 2014, says the Government is considering whether to increase Australia's oil stocks.

Of course, in the long term, we need to reduce our dependence on oil, whether it is produced at home or aboard. The plunge in the oil price provides an opportunity to do just that. As the Economist argued last month, politicians should take advantage of this once in a generation opportunity to cut billions of dollars in fossil fuels subsidies. A move towards renewable energy would not only improve our energy security, it would help address climate change as well.

What does the breach of our IEA treaty obligations mean for our diplomacy?

At the G20 Summit in Brisbane, leaders for the first time discussed reforming the rules that govern the global energy system. These possible reforms include the role of the IEA, whose membership does not include some of the largest energy consumers in the world, such as China, India and Brazil. As host, Australia was critical in these negotiations. In fact, Australia helped forge agreement on a set of principles that may eventually lead the IEA to expand its membership to include these countries. This is to Australia’s credit.  

However, our capacity to credibly pursue this issue in future years and turn principles into action will be undermined if we continue to fall short of our treaty obligations. How can we ask potential new IEA members to increase their oil stocks when we won't do the same?

These issues will need to be carefully considered in the Federal Government's Energy White Paper, due for release this year. After all, any decision will have important implications both for our energy security and diplomatic credibility, especially if we are to lead future reform of the global energy architecture.

Photo courtesy of Flickr user spello.