Fiona Nash (NSW, National Party) Share this | Hansard source

I rise tonight to talk about ethanol. In the 2001 election the government announced a policy for a target of 350 million litres of biofuels by 2010. For many years I have been a very strong supporter of the biofuels industry and tonight I particularly want to talk about ethanol. The benefits are many. There are health benefits and environmental benefits, new market opportunities for the agricultural sector, and jobs for our regions. An obvious benefit for the nation when we look at our trade deficit in fuel is the development of a domestic ethanol industry. In 2000-01 the fuel deficit was less than $500 million. In 2004-05 that jumped to almost $6½ billion. And now in 2005-06 it has jumped to a whopping $11.7 billion.

The other great advantage for motorists, which is very topical at the moment, is of course cheaper fuel. It just seems common sense to do what we can to ensure that we have a sustainable biofuels industry in this nation. When you compare us to countries overseas, in terms of ethanol production, this country is an absolute backwater. Brazil this year is producing 15 billion litres. If we look at the United States, we see it is around 16 billion litres. At the moment, Australians are facing historically high fuel prices and we are at the mercy of world oil prices, and people do appreciate that. But they do want this government to do everything it possibly can to reduce the burden and one way of reducing that burden is increasing the availability of E10 blended fuel, which is cheaper than unleaded fuel.

It was pointed out back in May by the Leader of The Nationals, Mark Vaile, that E10 fuel should be cheaper for motorists, and it was Mark Vaile recently who pushed for E10 blends to be included on the list of fuels that were monitored by the ACCC to ensure fair pricing. We saw the commitment last week by BP and Caltex to sell E10 blends 3c a litre cheaper than unleaded fuel. While that was welcome, it was glaringly obvious that they should have been doing that anyway. The question is: why haven’t the oil companies been passing on that 3c a litre saving to Australian motorists before now?

When we look at Shell, what do we see? Shell is not even on the radar with E10. At this point they do not supply any at all. In fact, they recently told a Senate committee hearing that they were not going to have any El0 available until at least the end of the year—this in a climate where we have got our motorists facing such high fuel prices.

There is no doubt that there has been a lack of will by the oil companies to take up ethanol to a greater degree. While there has been some movement, which I do acknowledge, it is nowhere near enough. In September last year I made an adjournment speech on ethanol in which I said:

If we have a requirement of 350 million litres by 2010, it seems to me fairly simple, sensible and obvious that we have an annual volumetric target placed upon those oil companies, that they have to meet for each year up until 2010 so that we can indeed implement the policy.

In December last year the Prime Minister, the Deputy Prime Minister and the oil companies met to formulate industry action plans. The oil companies agreed to meet voluntary annual biofuel targets and for this year the minimum was 89 million litres. To be precise it is 89 to 124 million litres. At the time of the December meeting it was decided that there would be a six-monthly review put in place to determine whether the oil majors were on track to meet their targets. We still have not been advised of the outcome of that review.

Senators need to have a very clear understanding of where the oil companies are up to with the amount of ethanol that has been sold since the announcement of those biofuels action plans. This requires the release of the six-monthly review data that details the collective volume of ethanol sold in Australia for the two distinct groups—the oil majors and the independents. The 89 million litre biofuels target should really only be applied to the oil majors, not the independents. It should be remembered that it is the ethanol component, not the biodiesel component, that is what will deliver cheaper fuel to Australian motorists. The independents are already doing the heavy lifting, supplying the majority of E10 blended fuels to Australian motorists. Without the benefit of the data, best calculations for the six months from January to June this year for ethanol are as follows: the department says around 25 million litres of fuel ethanol is sold; through the independents it is around 17 million litres; and the best guess from the three suppliers of ethanol, Manildra, CSR and Rocky Point, is eight million litres—eight million litres of ethanol out of a biofuel target for this year of 89 million litres! Around 110 million litres could be taken for blending if the oil majors would take it up. Eight million litres is less than one-tenth of one per cent of the total petrol market of 20 billion litres in this nation. You do not have to be a rocket scientist to figure out that that does not look good, and it does not look like those targets are going to be met.

Recently one of the Senate committees has been holding an inquiry into Australia’s future oil supply and alternative transport fuels. Both BP and Shell appeared as witnesses at that hearing. It was very enlightening. When asked about their potential biofuels use for this year—bearing in mind that the target is 89 million litres—Mr Bill Frilay, who is the Manager of Government Relations for BP, said: ‘We will be producing this year about nine or 10 million litres.’ And, interestingly, Shell in their submission said:

Internationally, Shell is ... one of the largest blenders of bio-components into road transport fuels, selling nearly three billion litres in 2005, mostly in the US and Brazil where legislators favour ethanol.

The committee went on to ask Mr Russell Caplan, Chairman of Shell, who appeared at the hearing, whether or not the use of ethanol by oil companies was directly linked to the fact that it was mandated. His reply was, ‘Absolutely; it is.’

Oil companies have been given plenty of time to increase their use of ethanol. We are told that they are improving on this—and they are improving—but they are working off a very, very low base. There is a simple equation: the longer the major oil companies stall on increasing their use of ethanol the longer our motorists in Australia are going to be denied access to cheaper fuel. We have a sufficient ethanol supply in this country and motorists want to use it. The only things standing in the way of the availability of cheaper fuel in this country are the major oil companies.

I have said it before and I will continue to say it: if the oil companies are not going to meet the annual targets on a voluntary basis then those targets should be mandated. I acknowledge that the biofuel targets contain biodiesel targets as well as ethanol targets, but at the moment, to my mind anyway, ethanol is the priority because motorists right around this nation are suffering as a result of world oil prices, which are at the highest level that we have seen. It is the responsibility of us as the government to ensure that we reduce that burden if we can. If the only thing standing in the way of greater availability of ethanol for E10 blends in the marketplace is the oil companies who are not taking it up enough then we need to make them take it up. It is not just about cheaper fuel for motorists in the short term; it is about a sustainable renewable fuels industry in the long term. So, while we can have significant and immediate benefits for motorists, we also need to ensure that this country has a vision for the future in terms of renewable fuels. The onus is on the oil companies to increase their use of ethanol. If they do not, it is the motorists of this nation who will continue to be hurt.