PM's Begging Tour Exposes Fuel Security Ignorance

There is a path to fuel security. Australia is not on it.

The on-again, off-again reopening of the Straits 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.

As PM, I reluctantly accepted the official advice that efficient global markets meant that maintaining 90 days supply of liquid fuels onshore was no longer necessary. But 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.

Source: Australian Institute of Petrol

Iran’s denial of freedom of navigation through the Straits 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% 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 (like Singapore, Brunei and Malaysia) could not be sure of their own stock and unfriendly ones (like 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.