Liquid Fuel Refining Motions

I thank Senator Madigan for introducing this motion and for his contribution. He referenced the work of John Blackburn, who has been a very well-informed and powerful voice in this area. Senator Madigan may not be aware that he, in fact, was here in Parliament House just two days ago, briefing the Defence Subcommittee of the Joint Standing Committee on Foreign Affairs, Defence and Trade on these very issues. We talked through a whole range of aspects of Australia’s fuel security, so I understand Senator Madigan’s concern.

The fact is that in Australia at the moment we still have four refineries operating, as Senator Madigan said. The challenge for Australia is to look not just at the supply side, as important as that is. It is also to look at how we reduce the demand side. The important areas to understand are where we are using energy, where the alternative sources are and, importantly, how quickly we are using energy and how we can reduce supply demand. Even things such as inquiries into climate have identified that car emissions and car use of fuel as we make cars more efficient can cumulatively cause a substantial reduction in the demand for liquid fuels. So part of the whole the equation is not just looking at the supply side but understanding how we can work with car manufacturers on the standards we put on imported cars to make sure that the fuel consumption of cars not only benefits the environment but reduces the demand for liquid fuels such that we balance up that issue between supply and demand.

Australia currently exports both crude oil and refined products, and it imports both crude oil and refined products from a wide range of sources. One of the advantages Australia has is that it is an energy-producing nation. One of the things that Australia has been good at for many years is fuel source innovation. In looking at supply, we need to consider the roles of unconventional oils, natural gases, natural gas liquids and even biofuels as well as the role of traditional petrochemicals.

In relation to the market, we have seen throughout the world’s history that, even in times of calamity or conflict, there can be responses by governments to work through what would otherwise be considered failures of the market. Where commercial shipping has failed ships, we have seen ships taken up from trade—governments have, essentially, taken over or nationalised supply lines. There are areas where you can overcome issues with insurers through governments paying premiums and looking at ways to make sure that we do have continuity of supply. As Senator Madigan has indicated, Singapore is a hub; but we also have liquid fuels coming from places like Japan, as well as from the Middle East via Singapore. There are alternatives that the government can look at, but Senator Madigan’s point about the need for a suitable risk analysis is well made and was brought out just this week in the briefings that I was discussing.

One of the issues for refinery capacity within Australia is that the scale in Australia makes it very difficult for commercial viability for companies to invest in new refining capability here or to sustain capability in the face of product that they can bring in and make available to the consumer at a lower price. One of the problems with the simple reaction, which is that we should just mandate more production capacity here, is that it starts to distort the market. We already know the price pressure that consumers quite rightly highlight in relation to petrol prices and other liquid fuels. If we were to mandate or in some way regulate a capacity on the commercial market it would drive up prices for Australian consumers. So it is a balancing act to try to understand what the supply chain is, the parts where there are weaknesses and how we can work constructively with industry to make sure that we have both reliability and security of supply whilst making fuels available for Australian consumers, whether they be farmers or people in the cities who need that fuel for their daily life. That needs to be done in a way that does not drive up prices but achieves the outcome that the government is looking for. We understand the factors that have led Senator Madigan to put forward this motion. Studies have been done and there is currently a process underway in which Mr Blackburn and others have been advocating for further risk studies. I cease my remarks there.