As prime minister, I reluctantly accepted the official advice that efficient global markets meant that maintaining 90 days’ supply of liquid fuels onshore was no longer necessary. The global scramble for masks, surgical gowns and vaccines during the pandemic made it obvious that, in an emergency, it would be every country for itself.
In its wake, the Morrison government asked the Productivity Commission to consider our supply chain vulnerability but – remarkably – its report hardly mentioned fuel security, even though no country on Earth is as dependent on fuel imports.
The Prime Minister’s begging tour around Asia, shows just how exposed we are to any disruption in global fuel supply. The month’s supply of petrol, diesel, avgas and jet fuel that we supposedly had at the start of the Iran war included only about three weeks’ worth that was actually onshore. The rest was cargoes at sea that, in extremis, could be sunk, or possibly diverted to other destinations in the event of a major threat to shipping.
Iran’s denial of freedom of navigation through the Strait did not interfere with the actual delivery of refined products to Australia so much as the delivery of crude oil to the Asian refineries we buy from. Even so, the pump price of diesel in Australia almost doubled, about 10 per cent of our servos ran out of some or all stock due to panic buying, airlines started to cancel flights, and ports, mines and farms suddenly had to reconsider their operations.
While the Albanese government gave assurances that supplies were guaranteed until May, there could be no assurances beyond that because friendly countries (such as Singapore, Brunei and Malaysia) could not be sure of their own stock, and unfriendly ones (such as China) had already suspended deliveries.
The Prime Minister’s “fuel diplomacy coup” in securing two extra deliveries, each of 100 million litres, sounded impressive but actually constituted less than two days’ total Australian consumption. What’s more, it bordered on deranged for the government to insist that further electrification was the long-term solution to the fuel crisis, even while the PM was pleading for extra petrol and diesel.
Here’s the key point: a conflict in East Asia – such as Beijing attempting to coerce Taiwan – would not just close down deliveries of crude oil; it would close down the deliveries of refined products too.
There would be no question of being able to trade security of gas supplies from Australia for security of fuel supplies from Southeast Asia because the moment hostilities in East Asia were imminent, the shipping lanes carrying 50 per cent of the world’s trade would shut down.
It would take months for protected convoys to be arranged, even if the tankers and container ships could be procured to sail in them; and that’s assuming Australia and its allies had the requisite naval strength.
It’s worth noting that the US did not even try to counter the closure of the Strait of Hormuz either by landing troops at key choke points or by escorting ships through. It was the US’s counter-blockade of Iran’s ports, doing to Iran what it was doing to others’ shipping, that might have created a breakthrough.
Countries such as Britain and France, that might once have considered forcing the Strait, were adamant they could only secure the passage of shipping once hostilities had ceased. In other words, the task of protecting shipping seems to have become much harder in the era of smart mines and drone swarms. Which makes it more important than ever not to be dependent on just-in-time deliveries for the essentials of daily life.
It’s crystal clear what Australia now needs to do to avoid massive domestic upheaval when the next supply crisis comes, as it almost inevitably will.
First, we need to build the 90 days of fuel reserves onshore that the International Energy Agency mandates. Much of this could be done by assisting large fuel users to expand their private storages.
Second, we need to resume exploration, extraction and refining of crude oil here. The development of new fields, such as Queensland’s Taroom Trough, needs to become an urgent national priority rather than being bogged down endlessly, as would normally now be the case, in environmental assessments and activist lawfare.
Third, we need to expand our capacity to defend and maintain sea lanes via a more capable navy, a recreated Australian National Line, and detailed contingency planning with our military partners.
While it’s quite likely that the US made no formal request for Australian military assistance, given the last-minute nature of its decision-making, once it became clear that hostilities were likely, Australia should have volunteered to help. There’s no doubt the RAAF could have made a significant contribution to the US and Israeli air campaign to destroy the Iranian war machine, had the Albanese government been able to overcome its visceral antipathy to President Donald Trump, tilt against Israel, attachment to the fantasy of “international law”, and fondness for military announcements that make no appreciable difference to our near-term military capability.
Resuming our strategic intimacy with America and accepting that our ongoing need for fossil fuels should trump climate concerns will almost certainly be too much for the ideologues in the current government. Immediate crisis averted, the PM will insist nothing really needs to change – even though almost everything does.
Extracted in full from: https://www.theaustralian.com.au/commentary/pms-begging-tour-exposes-fuel-security-ignorance/news-story/3fe4383334c3f4b4621803b6ada222af
The on-again, off-again reopening of the Strait of Hormuz doesn’t mean that Australia can take fuel security for granted. This is actually our second wake-up call about over-reliance on global supply chains and we can’t afford to go back to sleep once more, as we did after the first.