The serious stand-off in the Gulf between the US and Iran should remind Australians of our short- to medium-term dependence on both imported refined product (petrol, diesel and jet fuel), which is used immediately, and crude oil, which is fed into our domestic refineries.
Every aspect of our daily life and our prosperity is dependent on liquid fuels.
Not only that, but our exports go to countries who are themselves heavily dependent on Gulf oil, mainly China, which, if bad things happen in the Gulf, may limit Australian imports.
At any one time there are 45 tankers on the high seas bringing crude and product to our refineries and bowsers. Ninety tankers call at Australian ports each month.
Sixty per cent of our daily liquid fuel consumption comes as directly imported refined product, and 40 per cent comes from our four remaining domestic refineries. However, 80 per cent of the crude feedstock that goes into our refineries is also imported.
Ninety per cent of imported crude comes from only 10 countries — the biggest being Malaysia, the UAE and then Indonesia.
Ninety per cent of our imported refined product comes from six countries in Asia (South Korea, Singapore, Japan, Malaysia, China and India), and five of those six are net importers of crude themselves, largely from the Middle East.
Overall, 90 per cent of our liquid fuel is imported.
The bottom line is that Australia, at any one time, has only a maximum of 23 days at normal consumption rates of liquid fuel in this country. Even if it was 40 or 50 days if would still be of concern.
Because of this, Australia is the most exposed of 25 Asian countries in terms of fuel resilience as assessed by a recent Australian Strategic Policy Institute study.
Ironically Australia exports most of its own local crude. But even if we swung that into our four refineries, it would only meet 24 per cent of demand because our refineries are running at 90 per cent capacity.
It is prudent to assume that our access to imported crude and product could be interrupted.
The interruption might be small and local and handled commercially, or it might be severe and need to be managed by government.
Given the growing uncertainty of our strategic environment, not just in the Gulf but in our region as well, a total disruption must be one of the scenarios planned for.
Depending on the severity of the interruption, the impact on the nation would be far worse than any terrorist attack or small war.
We pay governments to take risks, but the risk we are taking on liquid fuels must be fully understood. The incipient war in the Gulf, along with the assertiveness of China, should be a not-so-gentle reminder that liquid fuel resilience is a pressing issue.
Being physically distant from the particular nastiness in the Gulf, why should Australians care? But we should care and we should care strongly, and not just care but act.
A number of government politicians and others have been emphasising our vulnerability now for several years.
Josh Frydenberg as energy minister commissioned a report to understand the magnitude of the problem and to identify solutions. Under current Energy Minister Angus Taylor, work has continued. The report was delayed from the second half of last year to the second half of this year but an interim report is available.
Australia should immediately do several things, and not just because of the Gulf.
The interim review should be rapidly completed. It should identify the magnitude of the problem and the probability of occurrence and costed options for government to build resilience.
Government should immediately consider this report and understand what level of risk we are prepared to accept at each cost level.
The rationing system should immediately be brought into the 21st century and government should “war game” such nationwide rationing in the same way that governments “war game” counterterrorist activity.
Australia should be involved in US actions in the Gulf to ensure that the tankers keep moving, because we have far more at stake than does the US, which is approaching self-sufficiency in oil.
Despite the good work conducted by the Coalition government in Defence over the last six years, our lack of resilience in liquid fuels is a symptom of a larger national security problem that extends to food, water, energy, transportation, defence, extreme emergency management and our alliances.
Australia’s strategic circumstances have been changing at a rate not seen since the 1930s, and Australia must adapt to emphasise our national self-reliance and resilience.
We must embark on a comprehensive National Security Strategy.
This is not a Defence-only need or responsibility. It is a nationwide need and one that can only be carried out by government.
Senator Jim Molan AO, DSC is a retired major general who ran the war in Iraq in 2004-05, part of which was protection of Iraq’s oil production exported out of the North Arabian Gulf.
Extracted from Daily Telegraph