While the Defence Strategic Review looked at enhancing our strategic capabilities well into the future, much of that effort will be wasted if we don't enhance our strategic fuel reserve.
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We have already seen what happened to Russian armoured vehicles when they ran out of fuel. Ukraine, thinking outside the box, targeted Russian fuel tankers, making Russian armoured vehicles sitting ducks to be destroyed at Ukraine's leisure.
The Defence Strategic Review mentions that fuel and energy security are important to national resilience but does not go into further detail.
Having an adequate national strategic fuel reserve is not just critical for the military, it's also critical from a national security perspective. Without fuel, much of Australia's transport system will grind to a halt, creating chaos for Australian industry and consumers.
We've seen in other countries the effects of petrol shortages, with desperate motorists queuing for days for fuel for their vehicles. It could make our COVID-19 conflicts over toilet paper seem fairly pedestrian.
What exactly is a strategic fuel reserve?
It refers to fuel inventories (or stockpiles) held by the government, as well as private industry, to safeguard the economy and help maintain national security during an energy crisis. Strategic reserves are intended to be used to cover short-term supply disruptions.
Fuel crises come about when demand exceeds supply, or when fuel supply is reduced or interdicted. This could be down to a range of factors - a decision by exporters to reduce fuel exports, problems with transportation, problems at overseas refineries, interdiction of supply lines, and so on.
It's generally considered that the minimum national fuel reserve should be 90 days. This is what China has achieved after a 20-year program to make itself less vulnerable to foreign supply problems.
In 2020, Australia signed an agreement with the US to lay the groundwork for Australia to lease space in the US Strategic Petroleum Reserve to store and access Australian-owned oil. The problem with that is the assumption we'll have the means to go and get it in a crisis situation - noting that we now have very little merchant shipping to call our own.
Former Defence Department secretary Dennis Richardson has described the decision to house Australia's strategic fuel reserves in the US as "an absolute joke".
Air Vice-Marshal John Blackburn AO RAAF (Ret'd) noted in 2018: "we need to apply the national security framework and analytical methods that we have applied to our nation's defence forces to areas of risk such as energy security, that are critical to our national security."
According to Air Vice-Marshal Blackburn, a thorough risk assessment should investigate the potential impact of geopolitical and economic disruption across all major elements of the national and regional petroleum supply chain, including the ownership, management and crewing of tankers.
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We currently import more than 90 per cent of our liquid fuel stocks and remain at the mercy of overseas supply interruptions - notwithstanding our International Energy Agency (IEA) stockholding obligations. (IEA member countries are required to hold stocks (crude oil and petroleum products) equivalent to at least 90 days in total of net imports and, in the event of a global oil supply disruption, to release stocks to the market.)
In November 2022 the federal government announced that it would ensure the nation had a reliable and available stockpile of fuel to protect consumers from major disruptions to supply. It stated that the guaranteed minimum stock levels of transport fuels would improve domestic fuel reserves.
This would protect motorists, businesses and industries from future market turmoil and the crisis triggered by Russia's invasion of Ukraine.
From July 2023, the Minimum Stockholding Obligation will require Australia's two refineries, and our major importers of refined fuels, to hold baseline stocks of:
- 24 days of petrol, increasing to 27 days in 2024;
- 20 days of diesel fuel, increasing to 32 in 2024;
- 24 days of jet fuel, increasing to 27 days in 2024.
(Refiners and importers will be required to report stock levels fortnightly, then weekly from July 1, 2024.)
This is of course a far cry from having 90 days' worth of fuel on tap; Australia's fuel vulnerability is an accident waiting to happen.
- Clive Williams is a visiting fellow at the ANU's Strategic and Defence Studies Centre.
