Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Hansard source

I rise to speak on the Liquid Fuel Emergency Amendment Bill 2017 because it seeks to address a major issue of Australian national security. Australia currently holds no significant national liquid fuel strategy reserves to call on in the event of a disruption to the supply chain. As noted in the Senate inquiry of 25 June 2015—Australia's transport, energy resistance and sustainability inquiry—this makes Australia noncompliant with the International Energy Agency 90-day holding requirement, despite it being a requirement of our membership. In simpler terms, this means that in the event of a major economic shock or international armed conflict inevitable fuel shortages would result.

Australia currently does not hold any substantial fuel reserves within its borders to help it weather such a storm. This has been allowed to happen against the backdrop of a slowly multipolarising world. The Pax Americana of the post-World War II world appears to be eroding both from within the world's liberal democracies themselves and from the resurgence of powerful authoritarian states. The current nuclear brinkmanship between North Korea and the United States, and the very real possibility of a calamitous conflict brings Australia's vulnerability into sharp relief. It is in this startling context that I both welcome the steps this bill will take to build up Australia's strategic fuel reserves and decry how slowly it intends to achieve compliance with the International Energy Agency standards. As dreary as a topic as fuel reserves might sound, let me be clear: this is a very serious issue and an issue that will affect every Australian.

The Senate inquiry report that I referred to noted that Australia is almost totally reliant on liquid fuels for transport and transportation services which underpin significant economic activity, utilities and essential services. Any substantial disruption to Australia's transport fuel supplies would have a significant impact on safety, national security, national productivity and society.

Australia's declining crude oil production and refining capacity, coupled with its growing reliance on crude oil sourced from relatively unstable regions, is changing Australia's fuel-risk profile. Noting Australia is at the bottom of a long supply chain, the committee was repeatedly reminded of the vulnerabilities to the supply chain that result, quite apart from Australia's continuing inability to meet the International Energy Agency's stockholding requirement.

It is my understanding that Australia is currently the only member country to the International Energy Agency that does not have the fuel reserves that the agency believes to be necessary for an absolute minimum to safeguard our economy and way of life in the face of a disruption. To put that into a practical context, let us consider chapter 4 of the Senate inquiry report. In this chapter, the report referred to the federal government analysis of the Port of Adelaide which revealed:

… were a container ship to run aground at the entry to the port, off-loading the ship and its removal would take up to 14 weeks. The port retains up to 12 days of fuel stocks. The report revealed that, while the port remained blocked, only 10 per cent of Adelaide's fuel demand would reach Adelaide City after the first two weeks of supply ran out. Therefore, the state would have to survive on 10 per cent of its demand for up to 10 weeks. Air Vice Marshal Blackburn (Retired) explained the consequences:

If you lose 90 per cent of your fuel to a capital city for eight to 10 weeks, I have got to tell you that that is absolute chaos. It is not war. That is because there are single points of failure through our supply system.

I also note the major disruption that was caused at Melbourne Airport in November 2016 when a single shipment of aviation fuel failed quality controls. This followed two major aviation fuel shortages in 2015.

On 4 March 2017 this year, the Adelaide Advertiser ran a front-page article entitled 'Panic stations' which reported that police feared an outbreak of civil disorder as South Australians scrambled to stock up on essential items during the statewide blackout. Frantic emergency messages show, and details obtained by The Advertiser reveal, the true extent of how close South Australia came to chaos during the September blackout. The story went on to state that police warned of 'civil disorder if fuel is not available to public'. While the service stations had fuel in their tanks, there was no electricity to pump the fuel. If the disruption to fuel supplies created by a statewide blackout can cause the police to be seriously concerned about the possibility of a breakdown in social order, one can only imagine the widespread distress that ruthless fuel rationing would incur.

This bill does take some steps towards rectifying the situation by granting authority to the federal government to enter into commercial oil stockholding contracts with foreign or Australian entities, an arrangement commonly known as ticketing. However, the government's management of this issue is far from perfect. Firstly, they do not expect to achieve 90-day fuel reserve compliance until 2027—that's a full decade away, a full decade of global instability. In the meantime, oil companies in this country will progressively continue to close oil refineries and convert them to import terminals. Secondly, this ticketing system is but a conditional commercial arrangement which does not result in Australia holding physical reserves. This leaves us beholden to exactly the same breakdown of international commerce we are trying to avoid. I also cannot help but wonder whether these ticketing contracts also have force majeure provisions.

In conclusion, I welcome the government's willingness to remediate Australia's complete lack of strategic fuel reserves and work towards the 90-day International Energy Agency compliance. However, I question the efficacy of purchasing commercial tickets rather than holding physical stocks and, with the background of a challenging geopolitical environment, I strongly urge the government to greatly accelerate their efforts towards full compliance. We have increasing uncertainty in the world, and a decade is too far away.

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