Martin Ferguson (Batman, Australian Labor Party, Shadow Minister for Transport, Roads and Tourism) Share this | Hansard source

I welcome the opportunity to say a few things about the Liquid Fuel Emergency Amendment Bill 2007. As the member for Fraser has said on behalf of the opposition, this bill is clearly supported by the opposition, but I seek to use this debate to raise a few issues related to fuel and the question of security of supply. As I have noted many times before in the House, it is disappointing that yet again it has taken the government three years to bring this bill to the House after the original act was reviewed in 2004. I suggest to the committee that this reflects the arrogance and the laziness of the Howard government when it comes to turning its mind to challenging issues which are of vital importance to the future of Australia’s economic prosperity. The fact that this bill was so far down the legislative program reflects the government’s contempt for the due process of parliament and the need to modernise Australia’s legislative framework to keep pace with a rapidly changing world.

As has been noted by the member for Fraser, the review of the Liquid Fuel Emergency Act 1984 was carried out by ACIL Tasman and included 31 recommendations to encourage parties in the liquid fuel market to carry out their own contingency planning for liquid fuel emergencies. The Liquid Fuel Emergency Act and its guidelines allow ministers to direct industry, and appropriately so, to establish and maintain strategic levels of petroleum reserves—and that is exceptionally important given the uncertainty of the world in which we operate at the moment, not only in terms of the challenges of the Middle East but also with respect to problems of the weather and sudden reductions in the production of petroleum as a result of cyclones throughout the world. Such a need obviously arises if global supplies are interrupted by war or terrorist activity or issues of climate.

Indeed, as we have noted in recent years, natural disasters can have a very significant effect on world oil and refined product markets as we have seen with Hurricane Katrina in the United States a couple of years ago. Oil production then was unfortunately shut down for an extended period in the Gulf of Mexico, as were numerous Gulf Coast refineries. Oil, petrol and diesel were diverted from markets right across the world to meet the shortfall in the United States as a result, with a huge consequent impact on the price of oil and petrol. As I have acknowledged, as a result of these cyclones the prices skyrocketed around the world as the booming economies of Asia tried to compete for supplies. The Liquid Fuel Emergency Act is very important to ensure that Australia can maintain its fuel supplies in emergency situations. But what is lacking from the debate at the moment—the opposition has been calling for this debate for some considerable years—is a long-term plan for national fuel security. This is where the debate should be in the lead-up to the next election—not just about the importance of the bill before the House, the Liquid Fuel Emergency Amendment Bill, but also about energy security for Australia. Unfortunately we do not hear the government addressing this huge potential challenge to Australia. I regard this as a huge failure because the issue is actually about addressing where Australia might be in 10, 20 or 30 years time.

The opposition suggests that the best way for Australia to protect itself in an emergency situation is to have its own home-grown fuel supply industries, and Australia is well placed in the world to embrace this challenge. This would mean not only maintaining a robust refining industry but also encouraging exploration for oil in frontier areas as production declines in established basins; utilising other resources like LPG, gas and coal; and encouraging the use of biofuels. Unless we find new oilfields soon, domestic oil production could represent less than 20 per cent of our consumption by 2015 and Australia will, potentially, be in real difficulties. We are, more than ever, a net importer of oil. At the same time, we have hundreds of years supply of coal and natural gas, which means that we are required to embrace new industries. Technology to convert coal and natural gas to clean diesel is well-established and growing in significance around the world, but Australia is not moving fast enough to establish these industries which will be vitally important to industry and to Australia’s future.

When it comes to biofuels, I think it is fair to say that more has been done; but in this case we have to be careful not to overplay our hand. There is a growing ethical debate about food versus fuel, with ethanol in Australia produced from starch, grain or sugar. In the US and South America in recent months, the diversion of land from food to biofuels production is already driving up the price of food. Mexican corn prices have doubled in the last year, forcing the government to put a ceiling on tortilla prices, and sugar prices have also doubled. This shows the complex nature of the biofuels debate that is emerging worldwide today, and Australia will also be confronted with huge challenges on the issue of water in the foreseeable future.

Countries all around the world are now considering biofuels production from various crop sources. These will be grown on land that was previously used for food crops or on newly-cleared forest land. Again, this is a complex debate, given that timber and forests are carbon sinks. Interestingly, 80 per cent of Brazil’s greenhouse gas emissions have arisen because of deforestation of the Amazon basin—mainly to grow sugar cane for ethanol. This dilemma comes at a time when climate change is also perceived as a threat to world food supplies and when drought in Australia is a great concern to all of us. In fact, when members of the Australian community are asked about climate change, they often identify the issue of water as being what climate change is about. That fits into the current complex world debate which goes to whether or not we should turn food-growing areas into areas to produce crops for ethanol. That debate is going to get more and more complex and difficult in the foreseeable future.

I note a ScienceAlert report this week that indicated that industrial production of biofuels threatens to create conflict over food for humans, feed for animals and feedstock for liquid transport fuels. In Australia in recent years, with the debate about ethanol, there has been an intense lobby from the feedlot industry with respect to the production of animals about whether or not it is appropriate to take feed from that industry for the production of ethanol. So there has already been a debate in recent years, and we have all received correspondence and lobbying efforts from the feedlot industry.

I therefore believe that we must be very careful as a nation when it comes to the mandating proposed by some state governments at this time. I raise these issues because I think we have to think our way through this complex debate. Firstly, there is no guarantee that, while we are relying on grain or sugar production for Australia’s ethanol, supplies could be maintained to meet a mandate. State governments might create a hurdle which just could not be met, given the complex debate and requirements with respect to the production of grain and sugar. We all know what that potentially means for consumers if this debate goes wrong—an increase in prices. We will see how rigorous politicians are with mandating if the debate turns that way; they will run for cover as usual because they are looking for short-term fixes rather than long-term solutions to potentially complex issues.

Prices would go up for foods that rely on grain and sugar for their production. That potentially is a real issue because of our commitment to food manufacturing and our desire to increase production. For example, when the sugar levy was brought in, the manufacturing industry in Australia was screaming because of the increase in the cost of production. So now, if we have an increase in the cost of these products as a result of mandating the use of ethanol, we will have manufacturing industry screaming yet again because of the potential loss of jobs, and some of those serious job losses could be in regional communities that more than ever are doing it tough either because of the drought or because of difficulties with recent bushfires. Then we have the issue of potential increases in price for our livestock feed, which could send meat prices through the roof. Again consumers will be screaming. Also, if we get this debate wrong, the price of petrol could go up—and we all know how sensitive an issue that is to Australian consumers. If we have to meet mandated volumes and there is a shortage, we will soon see that reflected in prices.

I raise these issues in the context of the debate about the Liquid Fuel Emergency Amendment Bill and, in doing so, say there is obviously a case to encourage the biofuels industry. But I think the market is actually working. There has been a huge growth in ethanol sales amongst service stations around Australia. But I suggest caution in going down the mandating route because you might create more difficulties than were first envisaged. As I have indicated today, there could be a huge impact, not only on consumers, but also on potential choices between the production of food, including grain and meat, and the production of ethanol. Also, the impact on the price of fuel could become a huge public issue. So I say—and I caution some of my state colleagues—that in my mind commerce is the best and most efficient way of enabling consumers to choose which fuel they desire. There are clearly buyers out there now willing to purchase fuel, including ethanol, and ethanol sales are increasing dramatically as a result of encouragement by all tiers of government in Australia.

So on the basis of the complex debate that is emerging internationally and in Australia, there is no need to proceed down the mandating path at this point, and I urge strong caution. There is obviously a desire to decrease greenhouse emissions, but with respect to some of these biofuel suggestions we also need to consider whether there will be a real impact on greenhouse emissions. Obviously there is a small greenhouse benefit of about five per cent from the greenfield plants that have been constructed, but in a lot of ways this merely touches the margins.

There is a more complex debate about the issue of diesel. The conversion of coal and gas to liquids could potentially have more long-term benefits for Australia. There is also a complex debate not only about being more conscious of the greenhouse emission challenge but also about being more focused on our requirement to lock in energy security for Australia in an unstable world, both politically and from a climate change point of view with respect to recent events—for example, cyclones in the Gulf of Mexico.

I welcome the opportunity to speak on what I regard as an important bill. It is a requirement of government to make sure that we have some security in case of emergencies, but the debate extends beyond the legislative requirement to encourage the development of new industries to ensure our energy security. In doing so, we must be cautious about encouraging ethanol by mandating. Mandating could go wrong for Australia if consumers are impacted upon in respect of both the supply and price of food, including grain and meat, and fuel. I indicate our support for the bill, but caution politicians of all political persuasions not to get carried away by emotion and to think about this debate scientifically, in respect of what is best for Australia—unlike the white shoe brigade, who will potentially gain huge personal short-term windfalls. I commend the bill to the House.

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