Victorian taxpayers could be exposed to compensation claims totalling up to $80 billion under the state's decades-old fuel emergency legislation, after a government push to reform the laws failed to make it through parliament before the end of the sitting year. The unresolved liability now hangs over the state heading into a November election, with any legislative overhaul forced to wait until the next parliament.
The $80 Billion Compensation Risk Hidden in Victoria's Fuel Laws
The concern centres on Victoria's Fuel Emergency Act, legislation dating from the 1970s that allows the state government to declare a fuel emergency when any type of fuel is at risk of becoming unavailable. Once declared, a minister can control, direct, restrict or prohibit the production, supply, distribution, sale and consumption of fuel, as well as dictate when and where related services may operate.
Critically, the laws also entitle anyone who suffers financial loss as a result of complying with those ministerial directions to seek compensation. Those payments would come directly from Victoria's Consolidated Fund, the state's primary revenue account. A June draft government proposal identified potential legal exposure of up to $80 billion if the emergency powers were ever activated and triggered a wave of compensation claims.
The same document flagged the enormous cost and administrative burden of managing such claims and related lawsuits as a key driver for reform. The state government also concluded its laws were out of step with other Australian jurisdictions, where fuel emergency regimes typically include explicit legal immunities or place tighter limits on compensation eligibility.
Reforms Considered but Never Introduced
A rethink of the legislation began in June, a period marked by elevated fuel costs linked to the ongoing conflict in the Middle East and fresh volatility across global oil markets. The federal government had also extended temporary fuel excise relief during this time, underlining the sensitivity around fuel costs and their broader economic implications for Australian households and businesses.
Despite the government signalling its intention to update the Act, the proposed amendments were never formally introduced to parliament. With the sitting year now concluded and a state election scheduled for late November, any changes will have to be taken up by whichever government is formed in the next parliament.
A government spokesperson had previously indicated the Fuel Emergency Act would be updated to bring it into line with other jurisdictions, but no legislation materialised to back that commitment.
A Rarely Used but Consequential Power
Declaring a fuel emergency in Victoria is an extraordinary measure. Research from a 2020 parliamentary library paper found the most recent such declaration occurred in 2004, when a factory fire caused a shortage of briquettes. The government invoked its emergency powers at the time to secure remaining briquette supplies and keep hospital boilers operating. There has been no comparable crisis since.
At present, there is no immediate threat identified to Victoria's or Australia's liquid fuel supply. However, the backdrop of sustained conflict in the Middle East and questions about Australia's long-term energy security have renewed scrutiny of how governments at all levels would respond to a serious supply disruption. Federal, state and territory governments all hold the power to declare fuel emergencies under their respective legislative frameworks.
What Happens Next
With no changes legislated, Victoria enters its election campaign carrying a significant theoretical financial risk embedded in laws that have remained largely untouched since the 1970s. Should a future government choose to activate fuel emergency powers without first reforming the compensation provisions, it could expose the state budget to claims that dwarf even some of the largest economic shocks in recent memory.
The question of whether to modernise the laws, and how to balance emergency response powers against taxpayer protection, will fall to whichever party wins government after the November poll.
