Australia’s fuel insecurity

Published on Tue 22 October 2019 4:36pm

We do hear in this parliament a lot about how the safety and the security of the Australian people must always be the government’s highest priority. If you were looking at that claim through the prism of liquid fuel security, you’d be astonished to see the circumstances that we are in on the one hand and the lack of government action on the other. We are in a category all of our own.

Mr Wilson (4:36pm) — I’m glad to make some comments on the tabling of Report 187, which covers six treaties. At the outset, I join the committee chair, the member for Wentworth, in recognising the work of the secretariat in supporting JSCOT through the process, and I thank the member for Wentworth for his comments about two of the treaties covered by the report, in particular the agreement that supports Australia’s work in seeking justice in relation to MH17.

I want to make some specific observations, however, about the agreement between Australia and Hungary in relation to oil stock contracts. It’s the second agreement of this kind; we concluded a similar agreement with the Netherlands last year. These treaties allow us to purchase oil tickets, which are, essentially, options on oil resources. A lot of people in the broader community would ask why we are doing that. We’re doing that because, as a member of the International Energy Agency, we’re supposed to maintain 90-days equivalent fuel consumption cover, both as a matter of self-sufficiency and as a matter of shared commitment to global oil security. Unfortunately, we are a long way out of compliance, and we have been for some considerable time. In December last year, we had 53 days of annual fuel imports, and our consumption cover at that stage was equivalent to only 18 days of petrol, 22 days of diesel and 23 days of jet fuel. Needless to say, that puts Australia in a position of significant risk, and we shouldn’t kid ourselves that our liquid fuel security is anything other than fragile and unusual. If there were an issue affecting oil production or supply in the Middle East, or an incident affecting shipping lanes in our region, we would be in trouble.

Australia is extraordinarily dependent on liquid fuels compared to other countries. Yet, we are in a far worse position—indeed, I think we can say a unique position—when it comes to liquid fuel security, compared to other countries. The government’s interim report on liquid fuel security, which was provided last April, six months ago, noted:

Australia is an outlier in the global community in the way we think about liquid fuel security. When we consider countries of similar economies, most see fuel security as part of their strategic capability and take steps to manage fuel security with that in mind.

Some other key points from the interim report include that, putting New Zealand aside, of all IEA members, we are the only net importer of oil that does not hold either industry mandated or government owned stocks. We’re the only country in that position. At the same time, growth in liquid fuel demand is much higher in Australia than in similar OECD countries. Our mining and agricultural sectors are 90 per cent reliant on diesel fuel. Our transport sector is 99 per cent reliant on liquid fuels. We’re behind other OECD countries when it comes to the uptake of vehicle fuel efficiencies and new vehicle technology. We have the third highest ownership of motor vehicles per capita in the OECD, but the market share of electric vehicles—which, of course, are not dependent on liquid fuels—in Australia is less than one-seventh of the share in Canada and the US. This is an important point: since 2018, there are no Australian flagged and registered fuel tankers. In fact, there are barely a dozen Australian flagged vessels of any kind, which is a serious sovereign capability issue in itself. That is a confronting list, and I don’t think that anyone would disagree that it needs a serious, and I would say relatively urgent, government response.

I was interested to hear today in question time that the minister for energy appears to be relatively sanguine about our liquid fuel situation. He gave no indication to the House that the government has any particular sense of urgency or any meaningful reform in mind at this stage. The only specific reference he made in answer to a question was that work was currently being done between the Australian government and the IEA to modernise the oil stockpile methodology. I’m not sure what that means, but it sounds like we’re hoping for an accounting trick to cover up the fact that we don’t have enough fuel to get us through a crisis, should one occur. The minister’s approach is in stark contrast to the expert view of retired air vice-marshall John Blackburn, who has said:

Energy security is a prerequisite for protecting our way of life and therefore I am of the view that markets cannot be held responsible for energy security which is a component of national security; Governments must take that responsibility.

Mr Blackburn’s summary of Australia’s current situation is as follows:

The bottom line is that, given the deteriorating security environment in the Asia Pacific region, we are in a strategic warning period for fuel security, we have a flawed NESA—national energy security assessment—that is out of date, there are no Government-owned strategic fuel reserves and no mandated industry fuel stocks. We’re a 100 per cent reliant on market forces and there is no Plan B … apart from the helpful advice for everyone to make the “necessary preparations.”

The final report of the Liquid Fuel Security Review is due by the end of this year—the minister for energy made that point today—and its findings are expected to shape the government’s response to our genuinely parlous and fraught circumstances when it comes to liquid fuel security.

Through the agreement with Hungary, which is the subject of the Joint Standing Committee on Treaties Report 187, we now have the opportunity to purchase further oil tickets. That only adds a few days of additional supply. In essence, this purchase of oil tickets or the opportunity to purchase oil tickets represents a gesture of good faith on Australia’s behalf as part of a commitment we’ve made to the IEA first to purchase these tickets and then to settle a full pathway to compliance by 2026. Needless to say, that second part of the equation, phase 2, is going to be the hard part. But it’s long past time that we took steps to address our considerable energy insecurity.

We do hear in this parliament a lot about how the safety and the security of the Australian people must always be the government’s highest priority. If you were looking at that claim through the prism of liquid fuel security, you’d be astonished to see the circumstances that we are in on the one hand and the lack of government action on the other. We are in a category all of our own. We are a continent nation a long way away from the rest of the world that is extraordinarily reliant on liquid fuels and that has very, very little liquid fuel that we can call on in a crisis. This is at a time when our demand for liquid fuels is growing and other measures that would militate against our current dependence, like the uptake of electric vehicles and other kinds of technology, are often scorned by members of the government rather than being seen as a necessity and an opportunity.

In the face of the circumstances in this country in relation to liquid fuel security, which can only be described, from a security point of view, as a market failure—as Mr Blackburn described—like climate change and like plastic pollution, the government is going to have to put aside its blind faith in the market and its blind hatred of so-called red tape and take action. But, based on what we’ve seen, I won’t be holding my breath

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