This week, we have heard that oil prices have plunged below zero. This means that, theoretically at least, oil producers are paying people to get rid of oil because they’re pumping out way too much for the current global usage as people are staying at home, rather than burning oil driving and flying.
The Australian government says it’s buying up now while oil is cheap, addressing our national shortfall in oil reserves. But there are major questions about whether this is of value and why the government is not working toward the real long term solution – eliminating our dependency on oil and other fossil fuels.
So let’s unpack the deal we have been told has been struck by the government to purchase and store fuel in the US, in order to, theoretically at least, improve Australia emergency fuel supplies. Energy Minister Angus Taylor has told us that we are spending $94 million as a ‘downpayment on a stronger and more secure fuel supply’. This fuel will be stored in the US Strategic Petroleum Reserve and will be able to be accessed for the next decade.
It’s a good deal, we are told, because oil is currently so cheap. But this raises quite a few issues.
Firstly, can we trust the US? Can we trust that if there was a global shortage of oil (which is when we would presumably need this supply), that the US would actually give it to us? President Trump’s current actions of reportedly intercepting medical supplies that his own US state governments have ordered doesn’t give me confidence that this oil would be ours if and when we needed it.
Secondly there are the issues in transporting the oil to Australia at the crucial time. It could well be that oil is in short supply because of global conflict, which could make getting it through international waters quite tricky.
But what I want to focus on is what exactly are we paying for. It’s pretty clear that it’s not actually the oil, given that producers are currently giving it away. What we are paying for is storage. That’s the expensive bit. The current price of oil is less relevant. It’s the prohibitive cost of storage which matters.
A government report in 2013 estimated that to pay for the storage and the oil to meet the internationally recommended 90 days of stocks would cost $6.8 billion. All that Energy Minister Angus Taylor has said about that is ‘the government would work with industry to expand local storage capacity in the longer term’.
The $94 million ‘downpayment’ seems to be $94 million we have just sprayed into the wind, and with no clear plan to get the oil to Australia and make it available, and with the main beneficiaries seeming to be the oil industry.
There is another way to deal with fuel security — that’s to reduce our reliance on foreign oil.
It also has the huge benefit of driving down pollution from burning that oil. After this summer’s bushfires, the government should be seizing any opportunity it can to reduce emissions which are fuelling bigger, hotter fires.
The government is currently sitting on a report into fuel security. The Department of Industry, Science, Energy and Resources handed it to government in December, after an interim report was released in March last year. It’s interesting that Minister Taylor hasn’t released the final report as part of justifying spending $94 million on US storage. Maybe it doesn’t actually support what he has just done.
Interestingly the interim report focussed quite a bit on reducing oil demand. It didn’t propose that Australia increase storage, and in fact the Department headlined their ‘future outlook’ by noting that we had an abundance of resources that could provide opportunities for alternative transport energy. It observed that Australia may be left behind as the world moves away from oil-based fuels and risks being left with ageing infrastructure.
In other words, Minister Taylor, don’t go and do the equivalent of spending up big on horse feed and stables just as Model T Fords were going into production.
A report prepared by PWC for the Electric Vehicle Council in 2018 estimated that we could reduce our imports of oil by 16 million barrels per year by 2030 if we pursued an accelerated uptake of electric vehicles. What’s more, doing this would Increase real GDP by $2.9 billion and create 13,400 jobs.
While we are at it, we could also provide excellent public transport across the country and build world-class cycling and walking infrastructure to give people the choice of getting out of their cars. We could invest in fast and efficient freight rail systems to get trucks off our major highways. And high speed electric rail between Melbourne-Canberra-Sydney-Brisbane would replace over half of the flights between these major centres.
This is the direction we need to be heading post covid-19. Rebuilding our economy in a way that is forward-looking, is jobs rich and shifts us to a future powered by 100% renewable energy, tackling our climate crisis as we come out of this health crisis.
The government is responding to unprecedented challenges right now. We should be insisting that their response paves the way for a better future, looking forwards, not backwards. Their responses to the many challenges and opportunities should benefit us all, the people of Australia, and set us up for a healthy, low pollution future rather than giving handouts to multinational oil companies.
Janet Rice is a senator for Victoria, and is the Australian Greens spokesperson for Transport and Infrastructure.