Our suicidal foreign fuel dependence

The neglect of manufacturing competitiveness that successive Australian governments have allowed to develop is now a critical national security issue. It’s one thing to let your car factories close down and lose the expertise to build engines and other industrial componentry essential to equipping an armed force, but it’s quite another to allow a huge dependence upon foreign-sourced fuel to develop.

A new report from the NRMA describes just how bad this has become:

Our Government seems to have made a decision to leave market forces and global supply chains to provide for us in supply emergency. Whether this has been a well informed and holistic decision is the subject of debate. Our oil and fuel stockholdings are below the levels we are obliged to maintain as a member country of the IEA. We do not have stockholding policies or requirements that specify minimum levels of private stockholdings, as is the case in other countries, and we do not have any public stockholdings.

The Government has responded to recently announced reductions in Australia’s oil refining capability in a blasé fashion and has not defined any minimum level of refining capacity for Australia. While the probability of supply interruptions may be low, the consequences of such interruptions are severe enough to warrant contingency preparations.

However, such contingency measures do not appear to have been developed and fuel emergency management processes under the National Oil Supplies Emergency Committee system are somewhat opaque.

Our Government appears unlikely to act on the loss of Australian oil refining capacity and is content to rely on market forces to assure our fuel security. This situation will only change if we, the Australian public, say that this approach is not acceptable. If we are to improve the fuel security and national resilience for ourselves and future generations of Australians, we need to invest in building a greater level of energy resilience in this country.

In essence, we have adopted a “she’ll be right” approach to fuel security, relying on the historical performance of global oil and fuel.

This report provides a broad overview of our oil dependence and the associated fuel supply chain. We are critically dependent on an uninterrupted supply of liquid fuels in order for our society to function; however, our ability to deal with a broad range of potential supply chain interruptions does not appear to have been analysed in sufficient depth.

While the probability of supply interruptions may be low, the consequences of such interruptions are severe enough to warrant contingency preparations.

The current round of refinery closures is forcing a huge lift in foreign supplied fuels:

svad

How quickly would we run out if supply was blocked? Quicker than anyone else, that’s for sure:

vcsdvc

But the 71 days in the chart is an over-estimate:

The 71 days of industry stockholdings shown in Figure 6 is not 71 days of actual consumption in Australia. It is based on a “net imports” calculation.15 The 71 days that we report as Australia’s stockholdings to the IEA is roughly equivalent to 23 days of actual consumption of liquid fuels.

The Australian Institute of Petroleum 2008 Report “Maintaining Supply Reliability in Australia”16 supports this rough estimate.

It estimates there are about 10 days of crude oil stocks at refineries, 10 days of petroleum products in the distribution chain and perhaps three days in the hands of consumers, as illustrated in Figure 7.

The 14 days of estimated stocks at sea are not included in IEA estimates as they are not yet delivered to Australian territory.

So, 23 days of fuel. Except there are also “life of fuel” issues because the octane levels in petrol drop out quickly. The real figure is two weeks.

How easy would it be to disrupt the supply? Laughably so at shipping choke points:

sdfvsd

In short, if someone decided to blockade Australia we would be faced with critical fuel shortages within two weeks. Either the military or the economy would grind to a  halt. We could be starved out without firing a shot.

The neglect of manufacturing has become an act of suicidal optimism.

Comments

  1. Let’s hope our luck holds. A country that has had every opportunity to be self-reliant is now totally at the mercy of global forces. If one were a conspiracy theorist……

  2. Goodness so much energy wasted on a non issue.

    Today we dont need petrol. LNG is a better cleaner fuel, its sourced locally and requires practically no processing, just compress the stuff and its good to go. If you’ve ever had the hair raising experience of a trip in a Shanghai taxi then you’ll know that LNG can and does work as an automotive fuel.

    Its time to just end this oil foreign dependency completely and choose fuels that are locally available. End the FUD, LNG works, there are more than enough LNG cars on the road today to prove there is statistically no increased risk associated with this fuel. Just get on with the change-over, especially since now it wont be a problem for our local car manufactures.

    • Agreed, having previously worked in the Aussie gas export sector and seen the scale available for usage – I cannot believe that the two (foreign) made cars in my garage are not at least using Australian gas.

      Anecdotally, all the people I know who have either straight or mixed gas cars have sworn by it. The problem is you are generally stuck with a big Aussie number that is not suitable for everyone.

      • yes, and have you seen the latest LPG prices?!

        I have LPG in my car – and as the price stands right now – it is no longer efficient to use it

    • Er, and how exactly are we going to switch our (increasingly diesel-engined) fleet over to LNG in a few short years?

      • And as fewlish said, most of the LNG-powered models available are (were?) locally made, and we don’t do that car-making thing anymore.

    • darklydrawlMEMBER

      Well, for domestic use LPG could be a useful substitute, but the article is mainly about maintaining a viable defense capability – and for that you need gobs of diesel and Jet A1. Gas ain’t going to cut it for those tasks.

      I think they have a good point and we should weight up the pure economic angle vs self reliance in darker days.

      Australia is isolated from much of world’s supply chains. All imports have to come via air or water, both routes are vulnerable in times of conflict.

      Worth considering. History would suggest this peace we have today won’t last forever.

      • LNG and LPG are substantially different fuels.
        My LPG car cannot run on LNG.
        LPG is primarily propane, LNG is primarily methane.
        We produce some propane, but are a net importer of LPG.
        It is possible to use methane for transport, but it is called compressed natural gas (CNG). There are some buses and trucks in Australia that use it now, and a very small number of cars (I have seen just one).
        It would be sensible to move as much transport to CNG as makes sense, but whether it is a defense issue is more open to imnterpretation.
        Australia produces around 1/3 million barrels of oil per day, and we import about 2/3rds of a million.
        It would certainly be feasible to power our defence requirements from local oil, but the rest of the economy would be crippled.
        Draw your own conclusion as to how much oil the economy needs to run on a war footing. I would suggest if we heavily rationed private fuel it would be possible to keep essential services running.

    • +1 China Bob, u my dawg yo! – the paid bloggers (geez how many multinats do these c*&ts work for?) are all over this one – usual suspects. Look how they bait & switch the debate – classic.

  3. In Ukraine they are searching for Viktor Yanukovych; we have the addresses of all our leaders past and present.

  4. WOW. I knew it was bad, but not THAT BAD.

    Seriously, market forces are good for a lot, but at some point we have to accept that there are some things we need to do ourselves and that will cost a small amount more but it’s worth the insurance it provides.

  5. Predators on Cocos Is. will keep the spice flowing through the East Indies at least. We are as susceptible to running out of foreign energy as the US war machine is to complete collapse.

    We do also have fairly significant LNG and uranium resources in this fair land. If we can’t import oil, I expect we will struggle to continue exporting all our LNG.

    • dumb_non_economist

      Merk,

      I hope you have something else in mind other than Predators. Hellfires are an anti-armour missle with a range of around 10kms and it carries 2 of them.

      I doubt they would have too much of an impact on anything other than a patrol boat, plus the fact that the only likely blockader is China and I think a much larger response would be needed! Hopefully the US would already be involved.

      Getting exports out of the east coast shouldn’t be an issue; east of PNG.

      • It’s speculative, but I’m confident the US defense spend going into the Cocos will entail more than Predators, especially if geopolitical needs dictate.

        The idea that China could just waltz in and blockade Persian Gulf – Timor Sea seems a little far-fetched to me. If any one nation has the capacity to blockade the SE Asian straits, I dare say it would actually be the US in order to contain China.

    • dumb_non_economist

      Merck,

      The Chinese don’t have to blockade the Persian Gulf _ Timor Sea, just the indonesian archipelago and while I’d agree that at present they’re no match to the US when it comes to blue water ops I doubt that a blockade would be beyond them. Though, I can’t see that happening as a singular event and therefor my comment that hopefully the US would already be involved.

      I’d say that basing the US military on Cocos after DG closes is likely to piss the Chinese off a hell of a lot more than basing a few thousand Marines in Darwin.

      • It would seem to me that oil tankers could bypass Singapore and the Straits, if the price was right.

        I’m with China on feeling aggrieved by ramped up US military containment. I’m personally pissed off that we are putting (more) foreign military installations on our territory but, hey, being a mineral-rich vassal state is what it is.

  6. Supply Officers in the RAN are taught that we have 9 days effective supply of fuel in Australia at anyone time. It is our greatest strategic risk. Forget overland assaults or sea bombardments, all they have to do to defeat us is stop the oil. I suspect that is what the Japanese probably wanted to do in WWII however my history surrounding that doesn’t go that deep.

    So the Pussers know that they can’t do anything about it, so it has become an in joke, said at dinner tables with rolled eyes and greeted with nervous chuckles.

    However this is really serious and H n’ H you are right. It would be rather easy to blockade our sea routes from the north (no need to blockade ports, easier done in the South China Sea or via Indonesian sea routes where they come from), we don’t have the capability to be able to withstand it, plus it would only have to run for 12 days max before we would have to capitulate and start negotiating.

  7. It’s been an issue around for a while but the government believes it all good

    http://theconversation.com/australias-growing-oil-imports-are-an-energy-security-issue-7749

    “In its 2011 National Energy Security Assessment, the government claimed that Australia enjoys a high level of liquid fuel security and that this position is not expected to change in the coming years.”

    ” Australia is the only member of the International Energy Agency (IEA) that does not stockpile the equivalent of 90 days net imports of oil. These reserves are designed for use in an oil-supply disruption, to cushion the economic impact of any crisis. Moreover, strategic fuel stocks held by the Australian Defence Force (ADF) are believed to be minimal.pdf).

    • What would be the plan for storage the stockpiles? Many different locations to minimise risk I would imagine.

  8. Can’t make cars, can’t refine fuel, can’t grow fruit, can’t maintain planes, can’t make chocolate, can’t compete in retail, can’t smelt aluminium.

    Can dig dirt.

    The banana republic is almost here.

  9. You couldn’t make this up even if you wanted to. Australia is a case-study in ruling class greed and working class stupidity.

  10. boomengineeringMEMBER

    China Bob,
    Don’t get LNG confused with LPG.
    I worked on the Wallambilla to Moomba LNG pipeline about a year ago,the pumping stations use conventional motors with LNG as fuel. It may be cleaner but only about 30% of the power of diesel or petrol.

    • Confused the calorific value of LNG is about 50MJ/kg which is about 10% higher than either LPG or standard petrol putting it in the same range as diesel. Reality is its easier to get a 100% burn for LNG (no particulates etc ) so the energy derived per Kg of fuel burned is higher. The volumetric energy density is however about 60% of Diesel.

      Maybe your thinking of CNG (compressed Natural gas) which has a volumetric energy density of about 40% of LNG and therefore about 25% of the volumetric density of Diesel.

      • Of course you are right about the calorific values, China-Bob. However, LNG requires pressures and temperatures that make it unlikely to ever be viable as a fuel for any vehicle much smaller than an LNG tanker. CNG is what is actually used in vehicles. This in turn means that only large vehicles (trucks, buses, trains) can get reasonable range out of CNG. For smaller vehicles, range is restricted by the practical limits on the size of tank. Not that this is necessarily a huge problem, given most small vehicle transport is urban or suburban these days.

        CNG is now very popular in the US in the trucking industry and there are also CNG cars available. It may well be the preferred transport fuel in the future. Energy density issues can be taken care of with turbocharging.

  11. Has a country ever gone backwards so fast? The last twenty years has seen a complete reversal of what the country use to be. Before we use to celebrate being Australian, but somewhere along the line we morphed into a society that denegrates being Australian: economically, culturally and socially.

    Globalisation, Big Australia and vested interests have completely ripped out the heart of our nation and gifted it to foreigners. Australia has lost direction. We should be at the forefront of self-sufficiency, instead we find ourselves at the tail-end of dependency.

    • I’m reading The Fourth Turning atm (see http://en.wikipedia.org/wiki/Strauss%E2%80%93Howe_generational_theory).

      Stories like this one seem to continually give anecdotal validation to their theories.

      I have to say, I’ve been becoming more and more depressed about the state and direction of our economic, political and social situation. If nothing else, the book is giving me hope that, following the now-due/current crisis that we we can pull our fingers out/heads in as a society and actually become more of what we could, should and need to be like.

      • Watching QandA last night reinforced my opinion that the goverment has no vision other than to make australian labour as cheap as chinese workers are and leave governing to business. Sadly only Clive Palmer had any idea where to go from here.

        The most Jamie Briggs could offer was an example of a nameless manufacturing company that grew from 1 to 100 over 6 years, inspiring to say the least

  12. Days of fuel supply and Australian refining capability don’t actually have much to do with each other.

    Even with the ability to meet 100% of our fuel demand with internal refineries you still need to bring in the crude oil on ships.

    Stop the crude ships and you stop the refineries.

      • Our local refineries are getting crude from as far as West Africa at the moment.
        It’s not going to take much of an upset to stop that.

        Loss of local manufacturing / engineering capability is still an issue, but if we’re worried about defensive reserves, then we need to find a truly local fuel source.

    • dumb_non_economist

      Nexus,

      I gather the argument is how long it takes to hold us to ransom. Using the book figures 71 days here Vs 268 for the UK.

      Germany attempted to blockade GB, if they’d had our level of fuel supply how much more effective would the U Boat campaign been?

      • I’m not saying that our reliance on shipped imports for fuel is a good thing, or that we shouldn’t care, just that the recent refinery closures don’t make a material difference to the situation.

        Whether the supply chain for diesel and jet is:
        Crude Field -> Ship -> Local Refinery -> Terminal
        or
        Overseas Refinery -> Ship -> Terminal
        We’re still dependant on the ships getting in.

        The only way to get more days supply is to build more tanks to store diesel and jet somewhere. Not total infeasible, but given the “shelf life” is around 12 months you can’t just bury a reserve somewhere and not use it in the general course of business.

    • dumb_non_economist

      Nexus,

      In that regard I gather countries that hold a longer supply in reserve would cycle it, as new supply comes in the older supply would enter the consumer chain. You know, rotation of stock, older milk to the front of the refrigerator, newer stuff to the back.

      I would have thought the consideration is how long do you think in reasonable circumstances you need to be able to hold out, and the reserve then needs to meet that requirement. It could be a regional conflict, but then you’d think it’s just the inconvenience of rerouting shipping + the additional cost of transit time. If we were to consider something much bigger we would be in the shit almost from the start with the navy and airforce stuck in port and on the ground pretty quickly. What if the Singapore refinery wasn’t taken out, could we get adequate supplies elsewhere, if we have inadequate refining capabilities what would we do?

      A much larger conflict may be unlikely, but if it eventuated the consequences could be huge without adequate preparation.

  13. I’m glad this was picked up. It doesn’t even need to be a war against Australia. Any kind of war in the SE Asia region can cause disruption. It will also disrupt the ability for Australia to feed itself, because without oil, we can’t bring the food from the country side to the cities. At the very least, Australia MUST maintain the ability to refine diesel.

    • arescarti42MEMBER

      You also can’t even get the food out of the ground without oil.

      At the very least you’d be looking at a massive increase in the price of food as petroleum becomes scarce.

    • I don’t think it even has to be a war. Just a natural disaster in the wrong place could leave us exposed.

      At the very least it sounds like we should be looking at a strategic stockpile of decent size.

      Am I alone in thinking that we are becoming increasingly like a very specialised organism in nature. Something that does very well in it’s favoured environment, but one that can go extinct very quickly if there is a change, as it is unable to adapt to the new circumstances.

      • The idea is the opposite – that we’re quickly adaptable because we don’t carry the legacy around, always moving onto the newest, greatest way of doing things.

        The issue is that it’s a successful strategy as long as things go well – fair weather evolution.

      • Not alone Hamish. Our specialisation is harnessing energy. Take away the fuel source and our next best quality is an opposable thumb or two.

  14. boomengineeringMEMBER

    China Bob,
    Sorry, true, I was talking CNG.
    The motors are Caterpillar diesels and part of my job was to identify and rectify design faults to the compressor stations.
    I should have known not to question a man of your calibre

    • Actually my bad I checked and the Shanghai taxis are actually CNG. So the volumetric power is about 25% to 30% that of Diesel.

  15. Oil production has been on a downtrend in Australia for some time. 2010 production was only about 2/3 of 2001 production.

    http://www.ga.gov.au/products-services/publications/oil-gas-resources-australia/2010/production/table-2.html

    Security can only come from powering vehicles and production equipment (tractors, headers, trucks, mining equipment) from a local source.

    Imported refined fuel vs oil is much less an issue re security of supply because both are so easily disruptable.

    We ought be getting half our fleets onto CNG.