Liberal senator Bill Heffernan has warned Australia's security is being put at risk because of its dwindling fuel supplies and is urging the Government to address the problem.

According to an International Energy Agency agreement, Australia is obliged to have at least 90 days of fuel in storage, but its reserves have fallen below 50 days in recent years following a wave of refinery closures.

The issue was recently investigated by a Senate Committee which noted Australia had become a major importer of transport fuels, leaving it vulnerable to disruptions in supply.

Senator Heffernan was on that committee and said he had recently had further discussions with senior Defence Force officials who have described it as the "greatest military threat" facing the nation.

"It's been identified as a serious problem not only for fuel supply for general operations but when the military tells you it's our greatest military threat, it's time to get off our backsides and do something about it," he said.

"If you think like the enemy, all you would have to do is interfere with a couple of major tank loads coming from Singapore and we'd be in all sorts of trouble."

When the Government released its Energy White Paper in April, it promised a decision on how to deal with the oil reserve issue by the end of the year.

At the time, the then industry minister Ian Macfarlane said he was considering two options; building bigger tanks or buying supply contracts from other countries.

"Either option is extraordinarily expensive; we're talking billions and billions and billions of dollars," he told the ABC.

He said that cost would likely be passed on at the bowser, increasing petrol prices by up to 2 cents a litre.