Guest essay by Eric Worrall
When green virtue signalling goes bad.
Australia looks to access US fuel reserves to shore up supplies amid Persian Gulf tensions
By political reporter Jane Norman
Australia is eyeing off the United States’ tightly guarded fuel reserve as it seeks to overcome having less than a third of the stocks it should.
Key points:
- Australia has less than a third of the fuel supplies it is required to under an international agreements
- Defence Minister Linda Reynolds said the Coalition was eyeing off America’s tightly guarded reserves
- It comes as Australia considers sending vessels to the Persian Gulf amid escalating tension
It comes as Australia contemplates sending vessels to the oil-rich Persian Gulf amid escalating tension on the Strait of Hormuz.
Australia holds just 28 days’ worth of fuel imports, well below the 90-day minimum required under international agreements.
Rather than buying and storing the required amount of petroleum domestically, Defence Minister Linda Reynolds said Australia was seeking to access America’s emergency supplies.
“The Government is in the early stages of very constructive discussions with the United States about the potential to access their strategic petroleum reserve, which would greatly boost our own stocks and also the flexibility of supply,” she said.
…
It is unclear how much it would cost Australia to tap into the US reserve, but Energy Minister Angus Taylor said it would be cheaper than creating a “physical” reserve here.
“The whole point of this is to minimise costs,” he said.
Critics of this approach argue economics should not be the sole consideration when it comes to national security.
Australia’s four oil refineries produce about half of the country’s transport needs, which means the other half comes via shipments from the Middle East and Asia.
…
Read more: https://www.abc.net.au/news/2019-08-05/australia-looks-to-buy-us-oil-amid-reserve-concerns/11384196
I must say its awfully nice of the USA to consider letting Australia freeload off your strategic reserves. But this ridiculous situation would likely never have arisen if politicians hadn’t made such a mess of Australia’s domestic energy policy.
Australia has substantial energy reserves. But they are mostly still in the ground, and likely to stay there for the foreseeable future; Australia’s hardline green state governments have made exploration and development of new fields very difficult.
South Australia recently blew up their last coal plant. The plant was still viable, but its existence offended South Australian politicians. Other coal plants are scheduled for closure, and are not being replaced. States are increasingly relying on gas and “emergency” diesel generators for electricity when the solar panels and wind farms fall to deliver.
The result is ongoing shortages and capacity problems.
Australia is woefully under resourced when it comes to domestic refining capacity, so even if we started pumping more oil and building new refineries, it would take years to build enough domestic refining capacity to process the additional oil.
I might be Australian but I’m disgusted at the recklessness of our politicians, and their arrogant assumption the USA is always ready to ride to our rescue and have your generosity abused, because our politicians think expecting the USA to foot the bill of maintaining strategic reserves and not pass on the cost is an acceptable way to treat an ally.
Update (EW): Updated some wording for clarity.
Update (EW): Added John Tillman’s link to Australia’s substantial energy reserves
Correction (EW): David Middleton points out the substantial energy reserves article I quoted was PR puff from a failed resource company. However there are substantial resources. From the Australian government;
Crude Oil, Condensate and Liquified Petroleum Gas
Read more: https://www.ga.gov.au/scientific-topics/energy/basics
Australia’s crude oil resources, located mostly in the Carnarvon and Gippsland basins, are only small by world standards but are boosted by substantial condensate and LPG resources associated with the major largely undeveloped gas fields in the Carnarvon, Browse and Bonaparte basins off the northwest coast of Western Australia. A number of sedimentary basins remain to be assessed. Australia also has significant oil shale resources, especially near Gladstone, Queensland that could provide additional liquid fuels if developed.
Reminds me of Germany before WW1. Except fuel instead of food.
People should read Donald Horne’s book “The Lucky Country”.
America’s Strategic Reserve can only be tapped during emergencies.
Even then, the reserves that have been drained from the Strategic Reserve must be replaced soon, within reason.
Is America supposed to sell Strategic Reserves to Australia for current prices, where America bought many of those Reserves at substantially higher prices?
Somewhere, the concept of “Strategic Reserve” has been misunderstood.
Nor do I believe the President would consider Australia’s poor planning an emergency.
Well, until it becomes an actual emergency.
Australia’s suicidal destruction of energy sources, fuel processing plants and plentiful supplies on hand are the source problem(s).
Plus, Australia needs to carefully consider President Trump’s international deals and treaties.
A hard and fast rule President Trump has been applying across the board is that other countries no longer benefit at America’s expense.
Australia should follow the norm and strike some deals with the large fossil fuel companies for regular fuel deliveries, at market pricing.
Shipping in Europe (and maybe further afield) will be required to reduce pollution from burning heavy fuel oil. (Sulphur a big issue) Australia already has vessels burning LPG, SeaRoad for example on the Bass Strait run. It’s only a question of time then until military vessels use LPG instead of diesel and Australia should be in a prime position to provide for all of the LPG requirements. The stupid thing is that when state government licensed the extraction and export of natural gas or LPG they didn’t set aside a percentage for domestic consumption. This percentage would have been at cost plus rather than international market pricing. Basically we’re giving away our energy then paying market price to import it.
we had affordable 1500$ gas conversions for cars
gas was cheap
govt subsidised the cars swaps 1k and the conversions roase to 2500 and the price of gas trebled.
thats how Aus manages to screw its people every time
Australia has shut down the following refineries:
Western port 1984
Matraville 1985
Port Stanvac 2009
Clyde 2012
Kurnell 2014
Bulwer 2015
Our lack of reserve problem dates back over a decade, this is a self inflicted wound
I thought Bulwer was still in operation.
Those politicians will figure it out when the machinery stops running, the store shelves are empty, and they see those mobs coming for them, carrying the lanterns and pitchforks.
That is when The Anointed use the last of whatever fuel is left to fly themselves and their cronies to a safe haven.
Immediately available Strategic supplies are for urgent strategic situations. No problem as long as everyone gets along. That will never happen, right? As long as you don’t need to fly in anger or sail the fleet in a hurry, who cares.. The US will take care of us. < See what we did there? Oh wait.. how will they fill their planes and ships when the arrive to fend off the bully?? On second thought, I'd better add a /sarc.
The grasshopper and the ant?
As an Australian this is both an harassment and a cause of fury. Like many, i have been aware of this for a while while our idiot politicians fiddled. We are an island, albeit a large one. If our sea lanes are blocked then our fuel imports are blocked, whether we have access to US supplies is thus moot. We have the raw materials but it is going to take blackouts (where we cant be saved by French nuclear power ,like Germany or the UK ) before our useful idiots in our cities wake up to the fact.
As I type, the airwaves tell me that Victorian State Premier, Daniel Andrews, has just confirmed that the ban on fracking will continue.
Why? Geoff S
maybe because farmers land is THEIR land?
and they dont want it trashed.
its the ONLY thing andrews got right
and you know even if the landowners who paid for it maintain it and pay taxes were over ruled
the NONexistent but amazingly vocal indigenous peoples would be blocking it anyway
cos someone somewheres granny used to live there etc etc.
overstating it?
NOPE
we can NOT dig a posthole in a park area to put a signpost/info sign up
because a non existing local indigenous persons remains MIGHT be found
ps the land is an old dumpsite and bones will be from animals if any
Ozspeaksup,
Simply wrong.
For a given area of land, the most valuable common resource is oil/gas/mineral. The value that can be extracted in a term of years to a few decades (then restored) is greater than any other use. Farming is excellent and given the Endowment of Nature, it is not and will not cause a farming problem in 99% of cases (or so, I am guessing at how to express a tiny number). Housing is another land use, but on the scale of areas that mines take up, it is easy to build your houses elsewhere until mining rehab is finished. There is a whole set of land uses that are more in the mind than in reality, including for native title, for historic preservation, for miscellaneous and usually synthetic reasons.
If the U.S. is any example, it shouldn’t come as a surprise that there are geographical areas that resist not only fracking but the use of natural gas, even if it means the citizens there will pay more for their energy – or simply go without power.
Environmental leaders on both coasts of the U.S. make such a show of hatred of fossil fuels that the price of LNG has become intolerable. This Obama promise is fulfilled.
The U.S. Is Overflowing With Natural Gas. Not Everyone Can Get It.
U.S. gas production is at a record high, but the infrastructure needed to move the fuel around the country hasn’t kept up
https://www.wsj.com/articles/the-u-s-is-overflowing-with-natural-gas-not-everyone-can-get-it-11562518355
One trading hub in Washington this spring was selling LNG for $200 / million BTUs. In Southern California, it reached $23, On the East coast, at “Transco Zone 6” the price spiked in January to about $150 BTUs. “In 2018, natural gas prices in New York City surged as high as $175 during a snowstorm that spurred record heating demand. A week later, they returned to about $3.”
Meanwhile in Midland, Texas, the price in spring was negative nine dollars / million BTUs, and according to several recent articles they’ve been flaring it, or burning it off because there’s no way to get it to a market. In spite of (or because of) the craziness on both coasts, the U.S. now exports as much LNG as we import, and we are importing it from places like Russia.
Maybe we should get our own house in order.
From the update:
“Australia also has significant oil shale resources, especially near Gladstone, Queensland that could provide additional liquid fuels if developed.”
This shows why it isn’t that simple. These developments aren’t being blocked by greenies or socialists. They have been around for a long time – I even did a little associated work last century. They were blocked by economics. This may change, but not yet.
That was in 2003. Shale extraction methods have improved and extraction costs have plummeted since then.
Our labour and transport costs have not 🙂
To give you an idea I can get a 1kg parcel from China to Perth for $4.50 AUD, to get it from Perth to my city flat which is 3km from the Perth sorting centre $12.50 AUD.
Australia sets an example?
https://www.smh.com.au/politics/queensland/protesters-vow-more-disruption-to-come-as-more-than-70-arrested-in-brisbane-20190806-p52eds.html
The US really doesn’t need our strategic reserves at the moment. Our net imports are ~1MM barrels/day of which more than 3MM come from Canada. Unless Canada decides to stop exporting oil we are kind of set. I am more than happy to offer Australia access to our reserves… for a good price.
We absolutely do need our strategic petroleum reserve. While it was designed as an insurance policy for imported oil disruptions, it has mostly been tapped when hurricanes have disrupted Gulf of Mexico oil production and Gulf Coast oil production, refining and distribution.
Our net imports of crude oil are just over 4 mmbbl/d. We import about 7 mmbbl/d and export about 3 mmbbl/d…
https://www.eia.gov/dnav/pet/pet_move_wkly_dc_NUS-Z00_mbblpd_4.htm
Almost 4 mmbbl/d of our gross imports come from Canada and about 2 mmbbl/d from OPEC.
https://www.eia.gov/dnav/pet/pet_move_impcus_a2_nus_epc0_im0_mbblpd_m.htm
Yes, but add in the exported finished products, and you should see that our net imports (crude + products) is far less than what we import from Canada. Perhaps lumping crude and products is not quite appropriate (energy density and all that), but even if we went with the 3MMbbl/day our strategic reserve is far larger than what we need.
chadb,
If the US sells off our strategic reserve, what do you propose we use when a natural disaster creates immediate need or a belligerent China decides to pursue a Pearl Harbor type attack? The whole idea of a national reserve is to have resources immediately available, to meet an immediate need!
Maybe when they come clean about their Ambassador spying on the trump campaign and trying to entrap people with fake information.
To be an anti gun country the politicians seem to be good at shooting themselves in the foot. And burning bridges to enforce an agenda not successful is no way to keep options open.
ozspeaksup said – maybe because farmers land is THEIR land?
Oz Farmers land title docs all say – “LAND EXCLUDES MINERALS……..”
NSW & Vic State Govts both have effective oil n gas bans
With respect to the concern that Australia’s security of crude oil import supply might be threatened by events in the Persian Gulf, a few statistics From the British Petroleum Statistical Review of World Energy might be enlightening. In 2018, world crude oil trade involved 71.3 million barrels of oil per day from many sources. The Middle East was the export source of 24.6 million barrels per day, or 35% of the global total, far lower than it was twenty or thirty years ago. Australia’s 2018 oil imports from the Middle East (almost all from the U.A.E.) totalled 6.6 million tonnes. The Middle East supplied only 28% of Australia’s crude oil imports. You can speculate as to what percentage of supply through the Straight of Hormuz would be impeded by the Iranians and for how long, but given the magnitude of the international coalition that would align itself against Iran to prevent such a blockage, I submit that the interruption would be relatively minor and brief. Prices would rise, of course, as the speculators took their usual cut, but it seems highly unlikely (absent really foolish government policies) that Australians’ crude oil supplies would decline very much.
Ms Norman works for fake news Radio New Zealand.