We’re here to talk about Australian oil imports, but we’ll start with a short detour; down naval history lane.
In the early 20th century, Britain was the undisputed master of the seas, with a navy that eclipsed the combined strength of their counterparts. When WWI broke out, Britain wasted little time in putting this navy to use, and blockaded Germany’s ports.
Suddenly, Germany found itself cut off from trade, isolated from the systems of interlocked dependency that economies around the globe had grown to depend on.
With a navy that was dwarfed by their rival’s, it seemed unimaginable that Germany would be able to retaliate, or place their own blockade on Britain. However, a combination of emerging technology and a disregard for international law, would allow Germany to strike back.
The slow and plodding submarines of the era were of limited use in targeting warships, but could be used to lethal effect against merchant ships.
So if Germany was to be denied access to the global trade network, then their enemies would be too. In February of 1915, Germany declared that the seas around Britain and France were war zones, and any ship travelling there would be in jeopardy.
International law at the time stipulated that merchant ships had to boarded, and their crew evacuated, before they could be sunk. The German submarine fleet, wary of the British navy, ignored these rules, and opened fire without warning.
The disruption caused by these attacks was immense. At the peak of this period of unrestricted submarine warfare, a quarter of the vessels headed for Britain were sunk.
While Britain endured the invisible blockade, and would later in the war find some effective counter-measures, the lesson was unmistakable. A single actor, with their back to the wall and modern technology at their fingertips, could seriously disrupt global trade.
Which brings us to Australia and the present day.
Australia produces an abundant supply of iron, coal, gas, and uranium. We are, however, growing increasingly reliant on imports for oil and liquid fuel products. Our production and refining capabilities have been in steady decline, with imported products filling the gap.
The Interim Report into Liquid Fuel Security, released this year, summarised “around 90 per cent of the fuel we use … is sourced from overseas. If all domestically produced oil was refined and used in Australia, this would meet about 25 per cent of today’s demand.”
The fall in production capability is being mirrored by an increased demand. The narrative of a transition towards less oil usage only holds true for petrol. Jet fuel consumption is increasing and there is a surge in diesel use, driven largely by mining and agriculture.
The role of diesel in Australian agriculture is particularly noteworthy. The mechanised nature of modern farming, along with the large distances involved in Australian logistics, results in diesel being a major input for Australian agriculture. Current estimates suggest that each and every Australian “eats” 4.1 litres of diesel each day, with NSW alone requiring 25000 weekly truck trips to keep the supply chain flowing.
Supply chains throughout Australia, including fuel, tend to operate on a ‘just-in-time’ basis. Stock arrives more or less in the same moment as it is needed, reducing inventory, storage and logistics costs. This efficiency comes at the cost of resilience. Disruptions, if not quickly corrected, can escalate into severe shortages.
Hence, as of December 2018, Australia holds 18, 22 and 23 days of consumption cover for petrol, diesel and jet fuel respectively.
The Australian government acknowledges in the Interim Report that these reserves are minimal by international standards; “Australia…has chosen to apply minimal regulation or government intervention in pursuit of an efficient market that delivers fuel to Australians as cheaply as possible.”
The effects of a diesel shortage on our food supply chain would be devastating. An NRMA commissioned report, Australia’s Liquid Fuel Security, estimates that we have 9 days’ supply of food available at points of sale. Combine this with 22 days’ supply of diesel to fuel the agriculture and transport industries, and a grim picture emerges of what would occur in the event of a complete fuel disruption.
The last full review into energy security was conducted in 2012. It concluded that this state of affairs was not problematic, as Australia could draw its supply from a diverse range of global sources, with large scale disruption considered unlikely. The review that is currently underway seems to be forming a similar view, stating with confidence that any disruption would be met with market forces stepping in to fill the gap. Air Vice-Marshal John Blackburn, writing in the NRMA report, characterised the government’s attitude as follows: “in essence, we have adopted a “she’ll be right” approach to fuel security, relying on the historical performance of global oil and fuel markets to provide in all cases.”
It does seem cavalier to repeat the same assessment seven years later. The planet is looking less, not more, stable than it did in 2012. While the tensions in the Strait of Hormuz are unlikely to result in a catastrophic crisis (shipments could be rerouted at a much higher cost), the attacks and the seizures of tankers acts as a window to a world of restricted shipping.
Similarly, the tensions in the South China Sea offer another glimpse towards a future of contested seas, while all data on the upcoming climate catastrophe points to some sort of large scale disruption.
It’s interesting to note that Australia has sent naval detachments to both the South China Sea and the Strait of Hormuz, with the publicly stated intention of defending the freedom of navigation. While our willingness to commit to these ventures when nearly all other countries have declined may be seen as an illustration of our sycophantic US relations, it also conveys an understanding of our dependence on global trade routes staying open.
Australia is deeply linked to the global economy, and has prospered as a result. However, this has come at the cost of an existential reliance on those links remaining open. Even a serious disruption of a few weeks would devastate our nation, and starve our population.
Over a century ago, the Germans proved that a mix of technology and desperation could threaten international shipping. Today, tankers are being seized in the Strait of Hormuz, while troops mass in Shenzen. Drone attacks of uncertain origin are being launched against Saudi oil production. Multiple militaries are bearing down on the South China Sea, as cities across Africa, India, and China start to run out of water.
This lends all the more weight to arguments for renewable energy, for reducing food imports, and for turning to agroecology and away from diesel-powered corporate agriculture. Our New Economy needs to be a resilient one.