THE attack on a crucial Saudi oil facility last month shows again the fragility of Australia’s reliance on market forces and international shipping for its supply of liquid fuel.
Thankfully, this time at least, the price of petrol and everyday products freighted to Tasmania, including food in our supermarkets, has remained relatively stable. And rationing of Australia’s paltry three weeks’ reserve of fuel did not eventuate.
However there are limits to the robustness of the global oil supply system and next time we might not be so lucky.
When it comes to liquid fuel security in Australia, the Federal Government has been asleep at the wheel. Unlike other comparative countries including the US, Japan, South Korea and European countries, Australia does not hold public stocks of liquid fuel or monitor supplies in real time. Instead we take a light touch approach and trust the market to keep up Australia’s supply of crude oil and refined products including petrol, diesel and jet fuel. The Federal Government is so relaxed that for years Australia hasn’t met its International Energy Agency obligation to maintain stocks equivalent to 90 days of our annual net imports. At last count we only had 18 days of petrol, 22 days of diesel and 23 days of jet fuel.
Not only does this put Australia in breach of our international obligations, it leaves us vulnerable to shocks and disturbances in the energy market like we just saw in the Middle East. And tensions are only increasing between the US and Iran, and in the Strait of Hormuz and the South China Sea. Australia’s dangerous complacency on energy has been exposed. Fuels and lubricants are essential for our economy and for our society and a major supply disruption could bring both to a standstill.
Liquid fuel runs Australia. We spend more on this energy source than electricity and gas. We use three times more liquid fuel than electricity. It powers our cars, planes, trains and trucks, transports food to our supermarkets and medicine to our hospitals. It’s used in manufacturing, mining and agriculture, to generate power in remote areas and is often an emergency back-up during electricity blackouts for essential services including hospitals and the supply of drinking water. Defence needs a reliable access to fuel to conduct operations. It is the backbone of our daily lives.
Australia is a net importer of liquid fuel. The vast majority — 90 per cent — of what we use comes from oil imported from the Middle East via refineries in Asia. Our domestic oil production is in decline and only four ageing refineries remain open. We cannot meet our own increasing demand. This puts us at great risk if supply chains are disrupted. We have less than three weeks supply and panic buying would accelerate the depletion of stocks. The Morrison Government’s deal to access the US oil reserves in an emergency is not a solution to this shortfall, not least because the oil is stored in the US. In an emergency, the stocks would take more than three weeks to get to Australia, and only then if the US honoured the deal and if foreign flagged vessels could be found to transport it. In terms of price at the bowser, a supply disruption could be disastrous. Remember the average price of petrol in Australia doubled during the oil crisis and Iran-Iraq War in the late 1970s and early 1980s.
There has not been a major disruption to Australia’s liquid fuel supplies for 40 years but that does not guarantee there won’t be in the future. All it would take is a terror attack, war, natural disaster, accident or commercial failure to disrupt our shipping lanes or trade routes. Australia can’t continue its blind faith in market forces and global supply chains to maintain fuel security in an emergency. No other comparative country does. The Government must act and act urgently, starting with an immediate and detailed assessment of our reserves, the decreasing storage capacity along the domestic supply chain, and domestic production capabilities. The Government must review and implement the recommendations of the Parliamentary Joint Committee of Intelligence and Security to ensure we have a continuous supply of fuels and lubricants to match our national security priorities and the Government must also meet our international obligation to hold at least 90 days of fuel in reserve.
Australia also needs to fast-track the widespread uptake of other forms of transport to reduce our dependency on liquid fuels. This is another area where Australia lags the world. Demand for liquid fuel is growing faster here than in the US and Canada. It’s time to develop other transport energy sources including biofuels, electricity and hydrogen. This would also cut carbon emissions, a major cause of climate change.
The Government has committed to return to compliance with the International Energy Agency obligation of 90 days reserve by 2026 and introduce new reporting requirements for liquid fuels but in my view this deadline is too far away. To continue as we are for the next eight years would be shortsighted, dangerous and reckless in the extreme. Our fuel security is too vital to be left to chance on a half-empty tank.
Extracted from The Mercury