Craig Thomson (Dobell, Australian Labor Party) Share this | Link to this | Hansard source

Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Link to this | Hansard source

I welcome the opportunity to address the very serious issues raised by the member for Dobell. Like many on this side of the House, he understands the complexities of this debate not only from the domestic point of view but also from a global point of view. On that note, I say not only to Australia but to the global community that the Jeddah energy meeting this Sunday is an opportunity for producing and consuming nations, in association with industry, to work towards finding a way forward to express our concern about the uncertainty and volatility of the global petroleum market at the moment. It also enables us to concentrate on the complexities of the debate and the serious issues which confront not only Australia but also the world at large. The facts are rather stark.

The oil burden, as a share of global GDP, is fast approaching the level of the 1970s oil crisis, as are real oil prices. As we all know—and as I have expressed to the Prime Minister—there are no simple solutions and, more importantly, no one nation can shoulder the burden of record oil prices. There are five areas that I intend to raise on behalf of the Australian community to seek cooperation of like-minded nations at a Jeddah meeting. These include a need for the global community to urgently address the key issue of foreign investment restrictions. We all know in Australia how important foreign investment has been in the history of our development. We are a welcoming nation to foreign investment and I will rigorously pursue these issues at the Jeddah conference.

Secondly, we will work with OPEC countries and encourage investment in additional spare production capacity—it speaks for itself. Thirdly, we will work to improve oil market data transparency. Transparency is the key to a freely operating market system. Fourthly, we will consider refining and other options for increasing middle distillate output, diesel, jet fuel and kerosene, which are exceptionally important to ongoing economic growth in the global community. Fifthly, we will work with developing countries and the International Energy Agency to address the difficult issue of fuel subsidies and associated budget, balance of trade and inflation pressures.

While international oil companies are investing as fast as they can, the reality is that unfortunately there are many places in the world where oil is easier and cheaper to produce but access is limited. The important role for national governments such as our own is to work to allow the market to properly perform and remove regulatory impediments to investment and trade—something that Australia prides itself on.

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

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Martin Ferguson (Batman, Australian Labor Party, Minister for Resources and Energy) Share this | Link to this | Hansard source

Unfortunately it is something the member for O’Connor does not understand. We operate in a global market driven community. In the meantime, we need to work with the international oil companies and OPEC countries, to encourage them to invest as much as possible in additional production capacity. There is also a need to improve the quality of data available about reserves in OPEC countries and demand in the rapidly growing economies such as China. The non-OECD countries where economic growth is highest are also the most energy intensive. The fuels that are the key to economic growth are the middle distillates—diesel, jet fuel and kerosene. Demand for these fuels is growing much faster than for other refinery products. Refineries around the world have no spare capacity at the moment to increase their output of diesel and jet fuel.

Also, these refineries have to cope with changes going to the availability of crude oil, changes which mean there is less potential at the moment for middle distillate production without more hydrotreating and coking. Middle distillates are also the fuels produced in gas to liquids and coal to liquids processes, something the government has spoken about over a considerable period and something the previous government unfortunately neglected as a serious debate.

We as a nation will encourage producing nations and the international oil companies to accelerate the development of next generation gas-to-liquids and coal-to-liquids technologies that could reduce cost and, in the case of coal to liquids, improve its environmental credentials. That is why, just as in relation to coal fired power generation, the development of carbon capture and storage technology is important. I am pleased to advise the House that earlier this week the government introduced the carbon capture and storage legislation going to offshore storage of CO2.

In conclusion, an international effort is required to address these important issues. I hope the Jeddah energy meeting will be a step in the right direction. Let us ensure that the global community does not waste this opportunity.