Australia’s strategic oil reserve
With the current political debates in Australia around energy and climate policy, it’s easy to neglect the sleeper of Australia’s energy policy – the lack of an oil strategic reserve. The IEA was established in November 1974 in response to the first Middle Eastern oil crisis. One of the rules of membership for oil importing nations is a publicly-held strategic reserve of at least 90 days of consumption.
In the years following the oil crises, Australia’s indigenous supply of oil increased with the development of the Gippsland Basin, followed by the Carnavon and Bonaparte Basins in the 1980s and 90s, and later Browse. Nearly all oil imports were refined locally. Australia almost achieved oil self-sufficiency in the 1990s, but the trend dramatically reversed in 2000. The gap between production and consumption has been steadily widening – Australia is now 38% self-sufficient in petroleum. Furthermore, Australia has been steadily increasing imports of refined fuels rather than local refining of imported crude. Australia’s 8 major refineries have been reduced to 4 as follows –
- Viva/Shell Geelong refinery, Vic, 120 kb/day
- Mobil Altona refinery, Vic, 135 kb/day
- BP Kwinana refinery, WA, 138 kb/day
- Shell Clyde refinery, Sydney, NSW, shut 2012
- Caltex/Chevron Kurnell refinery, Sydney, NSW, shut 2014
- BP Bulwer Island Refinery Brisbane, Qld, shut 2015
- Caltex Lytton refinery, Brisbane, Qld, 109 kb/day
- Mobil Port Stanvac, Adelaide, SA, shut 2003
What does all this mean? Australia has zero public holdings of oil reserve. All holdings are commercial. Mushalik estimates average commercial holdings as follows –
- Gasoline, 21 days
- Diesel, 17 days
- Jet fuel, 18 days
- LPG, 27 days
In the event of another Middle East crisis or strife in the South China Sea, Australia would be the first OECD country with a severe oil shortage problem. Australia’s dependence on refined product through the South China Sea and Malacca Strait make it especially vulnerable to interruptions to sea lanes – Japan (23%), Korea (24%) and Singapore (26%) are Australia’s key suppliers of imported diesel, and of course these countries equally rely on importations of crude. The lessons for the first and second oil crises, and Cuba’s loss of oil as a consequence of dissolution of the Soviet Union, provide clear evidence that even modest embargoes can be devastating for an economy.
The parliamentary inquiry Australia’s transport energy resilience and sustainability recommended compliance with the mandatory 90 day public stock holding. But the Government’s “clear intention is to look for the lowest cost and most efficient way to maintain membership of the IEA”. So there you are.