Fuel security: how long would we have?

Fuel security: how long would we have?

A potential crisis caused by the nation’s lack of strategic fuel reserves and over-reliance on foreign petroleum supplies could be addressed by restoring a fleet of Australian-owned tankers, according to a new report.

Written by maritime consultant John Francis, former director of the Maritime Transport Policy Centre at the Australian Maritime College, Australia’s Fuel Security: Running on Empty examines solutions to the risk of the nation grinding to a halt if fuel supplies are impacted by a global economic shock or conflict along major trade routes.

Commissioned by the Maritime Union of Australia, the report provides a detailed estimate of the number of tankers required to maintain supplies, along with the cost, per litre, of using Australian-owned and crewed tankers.

The report warns that Australia’s reliance on foreign flagged tankers “removes any opportunity for the Commonwealth to be able to requisition national flag tankers if necessary to secure minimum import or coastal distribution requirements following major economic or geopolitical disruptions to oil markets… ”

“The cost of addressing this risk is comparatively low: even carrying Australia’s entire import volume on a fleet of Australian tankers would cost less than one extra cent per litre.”

The report outlines major industry and policy shifts that have seen Australia go from producing and refining most of its fuel needs at the turn of the century, to an overwhelming reliance on foreign imports. Last financial year, 91 per cent of Australia’s refined petroleum was imported or produced from imported oil, while more than half involved ‘just-in-time shipments’ on vessels carrying finished petrol, diesel, jet fuel and other products. Of the 677 tankers that visited Australia in 2017, not one was owned, managed or crewed by Australians.

It also highlights the fact that Australia is the only International Energy Agency member country that fails to meet its 90-day fuel stockholding obligation, which has been the case since early 2012, with government statistics showing fuel reserves are generally less than three weeks.

Mr Francis produced detailed costings, per litre of cargo, for a range of scenarios involving the use of tankers owned, managed and crewed by Australians, finding this additional cost could be spread across the entire import volume to provide a “very modest cost per litre.

“The cost of five Australian ships spread across the projected import volume … in 2018-19 results in a cost of less than one-tenth of a cent per litre.

“Even if the whole future import volume covered by 60 ships, the cost is less than 1 cent per litre,” he found.

With more than 90 per cent of petroleum products shipped to Australia on foreign tankers — much of it through potential conflict zones — MUA deputy national secretary Will Tracey said Australia was sleepwalking into a major fuel security crisis.

“The government’s own statistics show that across Australia we have less than three weeks of fuel reserves,” Mr Tracey said.

“In the worst case scenario, a major economic crisis or a conflict that disrupts the supply chain — such as in the South China Sea — could cut fuel supplies, leaving us with just three weeks in reserve before transport systems collapse, food supplies are impacted, and essential services cut.

“At the turn of the century, there were 12 Australian-owned tankers supplying our fuel needs, but this entire fleet has been lost, replaced with an almost-total reliance on foreign imports of crude and refined petroleum products.

“In May, the Turnbull government finally announced a National Energy Security Assessment would be undertaken to examine declining domestic production, diminishing refining capacity, and the risks posed by potential flashpoints in the Middle East and South China Sea.

“To be comprehensive, this risk assessment must also examine the risk of relying entirely on foreign-flagged vessels, rather than having tankers owned, managed and crewed by Australians.

“This report, by a leading maritime expert, shows that this is an extremely cost-effective option that would improve fuel security while having an imperceptible impact on prices.”

A copy of “Australia’s fuel security: It’s running on empty” is available here.


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