Tony Zappia (Makin, Australian Labor Party) Share this | Hansard source

I speak in support of the amendment moved by Labor to the second reading of the Fuel Security Bill 2021. Liquid fuel is essential to the Australian economy. According to the Department of the Environment and Energy's April 2019 interim report on liquid fuel security, Australia spends $57 billion a year on liquid fuels, $38 billion on electricity and $37 billion on gas. Admittedly, that was a couple of years ago, but I suspect those figures would be reasonably accurate even today.

Liquid fuel is the energy source we most rely on and will continue to rely on for years to come. It makes up 52 per cent of Australia's total energy consumption. Yet Australia is overwhelmingly reliant on overseas crude and refined fuel, with 90 per cent of our total fuels coming from overseas either as crude oil or refined petrol. Australia imports crude oil from around 40 countries and refined fuel from 66 countries, and it's imported on a just-in-time, free-market basis. So we have placed control of an essential commodity entirely in the hands of the private sector and, to a large extent, overseas based operators and multinationals.

Even if all of Australia's produced crude oil were refined and used here in Australia, it would only account for and supply about 25 per cent of Australia's average annual needs. The fact is that much of our crude oil is actually sent overseas, because it's of a different standard to what is imported. Just as concerning is that Australian crude oil reserves account for 0.3 per cent of global oil production, and they are diminishing. That's all of our own reserves. So, if we had to rely on our own reserves at any point in time, not only are they not enough; they are actually diminishing, not to mention that we now don't have the refineries to process all of that oil.

Australia is also a member of the International Energy Agency, which requires Australia to hold 90 days of liquid fuel based on annual consumption. Yet, according to the interim report on liquid fuel security, on average Australia has on hand around three weeks of consumption cover. According to the Liquid Fuel Security Review, consumption cover is the preferred measure of domestic fuel security as it counts stocks based on how many days they will last under normal demand. That three-week supply has been the case for about the last decade. Even if we count all that is on ocean tankers and at overseas ports and refineries, Australia still does not meet its 90-day fuel supply requirements. Australia hasn't done so for years. So the Morrison government has now belatedly caved in to public pressure and announced some measures to improve Australian liquid fuel security. It's done so by promoting limited assistance to the two remaining oil refineries—the one in Lytton, Queensland, operated by Ampol, and the one in Geelong, Victoria, operated by Viva Energy. It's also going to provide some financial assistance for the storage of fuels in this country.

At it's peak, Australia had 10 major oil refineries and there were some small operators as well. We're now down to the last two and they are only operating on the basis that they will get government support if they are not profitable. It shows how much we have allowed this critical industry sector to diminish. And as they have diminished, as other speakers have quite rightly pointed out in this debate, not only has our reliance on overseas fuel increased but tens of thousands of jobs have been lost along the way.

I remember the Port Stanvac oil refinery in my own state of South Australia. It's all gone. I can remember that, when it was built, it was considered to be a major asset for the state. It was promoted as something that was going to secure petrol supplies in South Australia for years and years to come. But not only is the refinery gone; so are all the oil tanks that held the fuel in the years it was in operation.

That not only leaves Australia vulnerable and more dependent on overseas liquid fuels; it doesn't give me and the people I speak to much confidence that, in an emergency situation, we'll have the fuels that we need. And perhaps even more concerning is that unlike some of our counterparts—the USA, Japan and Korea—the Australian government does not maintain any oil reserves itself or even mandate that minimum reserves be held by the private oil companies here in Australia. I know that there has been some noise about doing that as part of this legislation but, right here and now, we have neither government reserves nor private-sector reserves mandated in this country.

Even Australia's defence sector, which relies heavily on all of these fuels and which does have some capacity, only maintains its reserves at around 50 per cent capacity. You would have to wonder why, if we have the capacity to store more fuel—petrol, diesel or aviation fuel—we are not utilising those facilities at 100 per cent. I suspect it's all to do with money—the fact that storing fuel here comes at a cost.

One argument for not maintaining a 90-day reserve is that we don't have a fuel shortage problem in this country and we haven't had one for 40 years, so why should we worry. The fact that things have been going well for 40 years doesn't secure the future at all. I think we should be thankful that we haven't had a petrol problem for the last 40 years. I can remember the fuel crisis in this country 40 years ago—for weeks on end, there was fuel rationing going on—and the problems that all caused. Having said that, I'm grateful that we haven't had to go through that again in the last four decades.

Another argument is that storing fuel in this country would come at a significant cost. It is estimated by some that it would cost in the order of $6 billion to $7 billion to build storage facilities. If we can afford $270 billion in defence spending for national security purposes, why can't we afford to have storage facilities for our fuel, which is just as critical? Even for our defence services themselves, there is not much point in having all this defence equipment if they don't have the fuel to drive it.

Another argument is that having a just-in-time free-market approach means we can minimise the costs to consumers and that the cost of creating additional reserves would inevitably be passed on to consumers. I expect that that would be the case but, at the very least, it would ensure that we have a much more reliable fuel supply in this country in the event of a crisis.

The other aspect of all of this is that I recall some months ago the government stating that it was going to buy $94 million of fuel and then have it stored in the USA. It begs the question—indeed I recall at the time people literally laughing at that proposition as a joke. What is the value to Australia of having crude oil—not even petrol or aviation fuel but crude oil that then has to be processed—stored in a country on the other side of the world? It still has to be transported to Australia and, in the event of a serious disruption, that might not be possible. So storing it somewhere else simply didn't make sense. It certainly didn't make sense to me and the people who spoke to me about it.

So now the government does want to impose what we call minimum stock obligations on Australia's 15 fuel importers in order to meet critical demand, and I think that's a good thing to do. We have obligations on the private sector to store fuel in order to meet critical demand. The problem, however, is this: when you look at the definition of 'critical demand', it is estimated to be 16 per cent of normal demand for diesel, six per cent for jet fuel and four per cent for petrol. It doesn't give me confidence that that's going to be a great amount of fuel that is being stored in the event of an emergency or crisis situation. Those figures are hardly reassuring. Indeed, I suspect that to most people they would not be reassuring. Whilst they might enable what I'll call critical elements of the economy to tick over, that's about all that amount of fuel would enable us to do.

We have also heard from other speakers about what would happen in the event of a global conflict or serious global disruption of liquid fuel supplies. Given that we rely on the Middle East, an area or region of the world that is constantly in some kind of conflict, for about 40 per cent of all of our fuel supplies, it is not terribly reassuring to think that that is what we have to rely on. We are reliant on not only overseas oil but overseas refineries and overseas owned shipping vessels and tankers, and we have to rely on access through overseas or international waters that we don't always have control over. As we saw recently again, there was a disruption because one of those routes was interfered with because of a breakdown of a vessel. So, in essence, every step along the way of the process of getting fuel to Australia is dependent on everything going right with a party that is totally outside of Australia's control. Again, it doesn't give me a lot of confidence and nor does it give the Australian people a lot of confidence. Not surprisingly, it was public pressure that finally got this government to act in respect of this matter.

As other speakers have pointed out, Australia has the third-highest per capita ownership of motor vehicles. Our take-up and marketing of electric vehicles lags well behind that of other countries, and I don't have to repeat the statistics that have been used in this debate time and time again. The reality is that we lag well behind with respect to conversion or take-up of electric vehicles. That would certainly diminish the need for fuels, at least for motor vehicles in terms of diesel and petrol, but the reality is that, even if we do that, it will be many years before our reliance on liquid fuels diminishes to the point that we feel comfortable that we can have the necessary supplies. I will quote from the Liquid fuel security review: interim report:

… we need to be prepared for new and emerging threats … antiglobalist attitudes are rising and we face a diverse range of security threats, including foreign interference.

In fact, for years Australia has not been adequately prepared. This legislation provides little confidence that Australia's liquid fuels will be secured into the future.

I'll finish on this note. We also have a reporting system in this country that tells us how much fuel we have in hand. The problem with that reporting system is that it's already six weeks old at the time the reports are submitted, unlike other countries where the reports are about a week old. We have an increase in diesel usage in this country, and it will continue to be the case because of our reliance on mining, agriculture, transport and rail. Given that that is the case and that those matters are critical to the Australian economy, it is critical that we have secure liquid fuel supplies in this country. Whilst this legislation goes a small step of the way towards doing that, it does not go anywhere near far enough. We need to do a lot more if we are to be self-sufficient and have confidence in our liquid fuel supplies into the future.

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