The Australian Government is in negotiations with the Trump Administration to secure access to American oil stockpiles in an emergency, a deal that would both leave Australia vulnerable to global oil supply disruptions, and ignores the opportunities that exist to shift Australian oil use to cleaner alternatives, including by supporting electric vehicle uptake.
As reported in the Sydney Morning Herald, the Morrison government is in negotiations with the United States to secure an agreement for Australia to access the American strategic oil reserves to bolster Australia’s own reserves.
Australia imports around 90 per cent of its fuel consumption from overseas suppliers, and according to the Federal Government, Australia’s energy security lays with hoping that global energy markets and oil supply chains remain functioning, leaving Australia vulnerable to supply disruptions.
The Federal Government is currently undertaking a Liquid Fuel Security Review, which has been prompted by calls for Australia to boost its oil stockpiles.
Australia has faced criticism for its lack of oil reserves. There is a standing commitment under the International Energy Agency, of which Australia is a member, for countries to hold a minimum of 90 days of supply worth of oil reserves.
The point of such reserves is to provide a buffer in global oil supplies, providing countries time to arrange alternative oil supplies or measures, if a significant interruption to global supplies were to occur.
For the strategic reserves to be effective, all countries within the International Energy Agency need to be able to demonstrate they have sufficient stockpiles within their own countries, as well as collectively amongst all members.
Notably, the membership of the International Energy Agency represents mostly Western oil-consuming nations, including Australia, the United States, and most of Europe. Large oil-producing nations in the Middle East are not members of the International Energy Agency and are instead members of the rival OPEC organisation.
In recent years, Australia’s onshore strategic stockpiles have amounted to as little as three weeks worth of supply. This would leave Australia particularly vulnerable if there were to be some form of international incident or supply disruption that left Australia unable to access international oil supplies.
The Department of the Environment and Energy confirmed in its interim report on the Liquid Fuel Security Review that “as of December 2018, Australia holds 18, 22 and 23 days of consumption cover for petrol, diesel and jet fuel respectively.”
The building up of reserves in Australia would likely have flow-on costs for consumers. To reach the 90-day target, months worth of oil purchases would need to be stockpiled and set aside for use in emergency situations. Consumers would be slugged for the cost of oil through higher petrol prices, that would effectively not be used.
“The Government is in the early stages of very constructive discussions with the United States about the potential to access their strategic petroleum reserve, which would greatly boost our own stocks and also the flexibility of supply,” Defence minister Marise Payne said.
Energy minister Angus Taylor has sought to resolve this issue by seeking agreement to tap into the stockpiles of the United States, that has accumulated around two years worth of oil supplies, including vast underground reserves in Louisiana that can store more than 700 million barrels of oil.
“The point is to minimise costs. What we don’t want to do is establish a physical reserve at very high cost in Australia and pass on that cost to Australians at the bowser,” Taylor said.
However, the deal would ignore the crucial opportunities that exist for Australia to reduce its dependence on oil supplies.
This was a conclusion of research by The Australia Institute that found that Australia’s lack of action on its oil stockpiles represented a risk to both national security and climate change mitigation efforts, and has called out Taylor’s plan for its lack of any actual contribution to Australian energy security.
Buying oil sitting in the US will do nearly nothing to help with Australia's insecurity from oil.
Transport security, & so national security, means getting serious about using less oil: efficiency & electrification.
— Tom Swann (@Tom_Swann) August 5, 2019
“Last year Australia had access to only 20 days-worth of liquid fuel, but the emergency powers to ration fuel stocks take up to 3 weeks to be implemented. This means that by the time the rationing powers come into force, there may not be any fuel left to ration,” the Australia Institute’s climate and energy program director Richie Merzian said, following the think tank’s submission to the liquid fuel review.
“Addressing Australia’s fuel security risks requires a reduction in oil use. This involves increasing fuel efficiency and transitioning to non-oil energy sources through electric vehicle targets and fuel efficiency standards. Australia is an international laggard when it comes to fuel efficiency.”
“Weak fuel standards and an absence of a national electric vehicle policy leave Australia among the least fuel-efficient fleets in the OECD, and far behind the rest of the world in electric vehicle uptake.”
Rather than negotiating with the Trump administration to secure access to oil supplies located across the world, the Federal Government is ignoring the opportunities that exist to reduce Australian oil demand by adopting stricture energy efficiency and fuel efficiency standards, and crucially, supporting the emergence of electric vehicles into the Australian market.
Australia is already lagging the rest of the world when it comes to electric vehicle adoption, which is reflective of both the lack of government support for their adoption, and the roll-out, of enabling infrastructure. At times, the Australian Government has been openly hostile to electric vehicle adoption, latching on to myths and misconceptions.
As it currently stands, the National Electric Vehicle Strategy amounts to a single page document, with no real substance.
Angus Taylor was caught out in the weeks leading up to the Federal Election for spreading misinformation about the costs and performance of electric vehicles, as well as misrepresenting the policies of the Australian Labor Party that took a package of policies to support electric vehicle use to the election.