Fuel storage tanks aren’t “sexy” but it is high time the Federal government spent as much attention to them as, say, a nuclear submarine or an F-35. Australia is running low on gas. Rex Patrick explains.

Remember the pandemic when (unnecessary) panic buying meant you couldn’t get toilet paper? Now imagine a situation far, far worse; no fuel, no medicine, no food. Even a minor conflict in Asia could cause the latter, but the Federal government appears too busy buying $368B submarines to do much about it.

Australia used to be a net exporter of fuel; now 90% of what we need is imported. Most of it comes from Asia (Singapore, Korea, Malaysia, Japan and Taiwan). On average, two foreign flagged fuel tankers arrive in Australia each day to keep the country going.

We used to have eight oil refineries around Australia; now we have just two, both on government subsidised life support.

[Defence report on fuel] the sharpest point of concern for the Australian Government

Australian shipping has been more than decimated over the past two decades. We only have 11 Australian-flagged general licence ships of more than 2000 tonnes, and four aging LNG carriers; we have no Australian-flagged fuel tankers (other than two Royal Australian Navy oilers).

In all of these circumstances you might think we’d hold lots of fuel in storage tanks here in Australia. But we don’t.

On average Australia holds 26 days’ worth of jet fuel, 25 days of petrol and just 21 days of diesel.

The COVID Experience

Australia’s COVID fuel security experience is instructive. The Morrison Government was clearly alive to concerns about fuel security at the start of COVID. On 21 April 2020, 3 months into the pandemic, the Secretary of the Department of Industry, Science, Energy and Resources was summoned to National Cabinet to brief the Prime Minister and First Ministers of the situation.

By mid-April 2020 jet fuel demand in Australia had reduced by 90% and petrol demand was down by 60%. The shut-down of economies world-wide actually created an oversupply (the opposite of what would happen in time of international conflict).

Diesel fuel, which runs Australian logistic supply chains, was different. Because mining, agriculture, essential services and transport kept running throughout COVID, demand only reduced by 20%. Not enough diesel was getting into the country. On March 5, 2020, diesel stocks had fallen to just 17 days supply.

There were concerns. The National Oil Supply Emergency Committee started meeting weekly, the ACCC issued an authorisation for companies to communicate and collaborate on maintaining supply without breaching competition law and the Federal Government implemented weekly (in place of monthly) reporting of fuel stocks to the States and Territories.

The government also prepared for possible activation for fuel distribution control and rationing powers under Liquid Fuel Emergency Act. All these responses show the sensitivity of government to our fuel insecurity.

National Cabinet was also briefed on the localised disruption of bulk fuel supplies in Tasmania due to a quarantined ship arriving late, which demonstrated how fuel sensitive supply chains are to even a single ship not turning up on schedule.

Operation Pitch Black

In 2018 a major Air Force exercise “Pitch Black” reportedly shut down a day early due to a lack of available aviation fuel. Air Force testimony to the Senate denied this was the case but conceded reserves did run low, again due to a single ship departing Singapore late.

We’re simply not well positioned to deal with fuel import disruption. Indeed, we are extremely vulnerable.

No Fuel, No Food, No Medicine

In a recent paper from published by the Australian Strategic Policy Institute entitled ‘What If …? Economic consequences for Australia of a US-China conflict over Taiwan’ the think tank concluded that in a conflict with China “the disruption to the Australian economy would be significant. There would be widespread loss of employment, along with consumer and business goods shortages that would be likely to necessitate rationing”.

The report made the point that Australia is pretty self-sufficient in food, except that the bulk of our food packaging comes from China. The study also drew attention to the issue of fuel; describing it as “the sharpest point of concern for the Australian Government”.

But it wouldn’t take a conflict between China and Taiwan to cause massive and highly undesirable consequences in Australia. A much smaller conflict in Asia could do it. Even the threat of conflict can disrupt supply chains as insurance companies re-evaluate risk and shipping companies divert and delay.

In 2013 retired Air Vice Marshal John Blackburn AO produced a report into Australia’s Liquid Fuel Security for the NRMA and spelt out what would happen if freight in Australia to shut down due to lack of fuel.

Food will quickly run out. We have just over a week of dry good consumption available at our supermarkets and about a week for chilled and frozen foods.

Pharmacies will start running out of medicine in about a week.

And that’s if there isn’t panic buying … which COVID shows us would be highly likely. The thought of not having food in panties and fridges, or prescription medicines, would likely exercise people’s minds a lot more than not having toilet paper.

For hospitals, it’s even worse. Hospitals typically hold a three day reserve.

Local petrol stations would run out of fuel in three days. Putting food and medicine aside, this would cripple the country economically.

Localised fuel reserves (source: NRMA)

Heads In the Sand

On May 1, Defence Minister Richard Marles appeared on the ABC’s Insiders program to discuss the Government’s Defence Strategic Review. He talked about “the biggest conventional military build-up that the world has seen since the end of the second world war,” and about us being “much more reliant upon our economic connection with the world”.

He then went on to say that “the threat is not that we are about to be invaded, but our exposure to economic coercion and to coercion from an adversary is greater and the potential for that coercion going forwards is much more significant, and that’s where the threat lies, and that’s why we need to re-posture for that.”

He specifically referenced a fuel supply scenario – a fuel supply scenario that we’re just not ready for. And he knows it, but hasn’t paid any serious regard to it.

Under the Morrison Government’s ‘Boosting Australia’s Diesel Storage Program’ $260 million is being spent to supporting industry to construct addition storage infrastructure. It will increase onshore diesel reserves to about 32 days. Seven of nine projects have commenced.

Boosting Australia’s Diesel Storage Program (Source: Government)

But that’s largely it. The threat to fuel disruptions is real and present, yet the problem is being largely ignored.

Nothing thrilling here

Well, from a Defence Force command perspective, flying F-35s at high speed though valleys satisfies ‘the need for speed’, sneaking underneath foreign warships in a submarine to take photos of its underbelly is daring and racing across the desert in a 55 tonne gas turbine driven Main Battle Tank is excitement on stilts! Staring at a motionless fuel storage tank does nothing to raise adrenaline levels.

Fuels storage tanks just aren’t sexy. But fuel storage tanks may well be just as, if not more, important for our national security than some of these other capabilities.

Maybe we just can’t afford the fuel security solution we desperately need because all our money is being exported to improve US and UK’s shipyard capacities and capabilities, to build a bankrupting fleet of eight nuclear AUKUS submarines that won’t arrive in our waters any time in the next decade and well after a fuel disruption event.

Extracted in full from: Forget toilet paper — try no food, fuel or medicine. Why Canberra needs to act on fuel security – Michael West