Fuelling vulnerabilities
OF ALL the inane actions by successive Australian governments, allowing the nation’s domestic oil refineries to close must rank highly.
While Australia is rich in coal, uranium and natural gas it has by some estimates just 0.3 per cent of the known world oil, that is about 3.9 billion barrels.
Most of those resources are condensate and natural gas.
Australia is a net importer of petroleum products, most notably from Singapore which draws its crude supplies from the Middle East.
We also purchase refined oil products from China, Korea and Japan.
While our reserves and needs are modest by some standards we need and will continue to need reliable petroleum supply, despite the determination of the Greens and others to wean us off them.
Australia’s consumption hovers around a million barrels per day ( MBPD).
By comparison India’s Ja- mnagar refinery 1.34MBPD.
In rational economic terms, we operate on a minuscule scale and cannot realistically compete with international refiners whose scale and costs make Australian production uncompetitive.
All of us motorists experience, if not understand, the regular price fluctuations at retail fuel outlets.
Multiply this by the scale of our petroleum imports and it demonstrates why major oil producers find it uneconomic to refine crude oil here.
However, economy produces and need are different concepts, particularly when it comes to strategic need.
Australia’s large air- sea gap with the rest of the world is a strategic asset.
Simultaneously it is an economic and strategic liability for those materials which we rely on the rest of the world to provide.
Given historic and current instability in the Middle East, there is no guarantee of consistent crude oil supplies to Singapore.
Political instability or conflict in the Middle East and along the supply routes to Singapore, including the Straits of Hormuz, will have a knock- on effect in Australia.
Should those net exporting Middle East nations have difficulties transporting their crude to Singapore or worse, choose to withhold them for any reason, then there will be no product available for re- export.
Product from China, Japan and Korea has to transit the South China Sea where recent tensions threaten its future viability as a secure trade route.
There is any number of scenarios where supplies of either crude oil from the Middle East or refined product from Asia could be interrupted. Russia has threatened retribution for last week’s combined US, British and French missile attacks on Syria.
We are yet to discover what form that retribution might take, though in reality it may not need to do anything to create international problems.
As tensions escalate, wary insurers might simply withdraw cover from ships transiting the regions, threatening deliveries to Asia.
Australia would then be in dire straits, which is where Senator Jim Molan believes we are already, but for other reasons.
Molan claims Australia currently holds 43 days worth of petroleum supply when the International Energy Agency mandates 90 days reserves.
Any further reduction would seriously impact civil, but more worryingly military, usage.
Our domestic refine petroleum us dearly. inability to could cost