Fixing Australian energy policy  

The Age has an article on Australia's confused energy policy and its blindness to the threat peak oil poses to oil importers - The good oil is that stocks are already running thin.

AUSTRALIA'S abundant endowment of natural resources has provided a cushion against the need for energy security policies. No longer.

Declining domestic oil production, refinery disruptions, extended supply lines, geopolitical turmoil and the carbon constrained future are all sending warning signals: Australia's easy energy ride is over, and moves to encourage renewable transport energy sources are long overdue.

It is a message the Howard government ignored. Rudd so far has shown little interest.

Given Australia's increasing reliance on oil imports, and our relative isolation, such political apathy is a mystery.

Some attribute it to government concern to appease the oil majors to keep them in the local refining business.

Refinery numbers have been cut to seven, all owned by the oil majors. More refinery consolidation is widely expected, further inhibiting competition.

Others believe there is a widespread view in the bureaucracy that Australia has a window of about 20 to 30 years before peak oil has an impact on global markets. Why worry about renewables while there is a flourishing global trade in cheaper oil?

Rudd's reluctance to embrace renewable fuel is all the more puzzling given that it runs counter to other Labor initiatives. Rudd is prepared to mandate 20 per cent renewables for electricity generation, but not in transport fuel.

The Rudd Government is also pouring $1.3 billion into a green car fund as part of its $6.2 billion package to support the car industry.

How do you run green cars? Not on standard petrol. Maybe hybrid electricity, hydrogen or high-percentage ethanol, such as E85, requiring specially adjusted engines.

Rudd's renewable transport fuel vacuum is also at odds with the global mood. The International Energy Agency argues that between the demands of energy security and climate change challenges, nothing short of an "energy revolution" is required. Global demand for energy, it says, will rise by 45 per cent by 2030, with oil and coal remaining the major fuel sources despite increases in nuclear and renewable energy.

The agency says that while peak oil may not happen until about 2030, shortages could start to show up from about 2015, posing a real risk for Australia's energy security. ...

There are signs Australia's lethargy on transport renewables is about to end.

Resources and Energy Minister Martin Ferguson has released three reports in the build-up to a new energy white paper later this year. These reports set a different tone than the complacent 2004 energy security report, which gave scant regard to renewables.

Indeed, the National Energy Security Assessment now rates Australia's projected liquid fuel security as overall only moderate in 15 years' time, down from the high prevailing now and extending through to 2018. There could be another downward notch to come. The report says that both adequacy and price actually could be low by 2023, which translates as queues and big price rises for motorists.

Despite abundant coal, gas and uranium stocks, Australia remains vulnerable on oil. We now rely on imported oil for two-thirds of our refinery output.

Stocks are thin, accounting for just five to 15 days of refinery consumption.

"With increasing dependence on imported crude oil and the ongoing prospect of unplanned interruptions in domestic refineries, it is possible that these levels of cover may not be sufficient to ensure adequate supply in domestic markets in the event of a major supply disruption," ACIL Tasman says in a brief on Australia's liquid fuel vulnerability, also released by Ferguson.

This year will be a time of reckoning for Australia's energy security.

The May budget will indicate whether cabinet has backed Ferguson's plan for a flow-through share scheme to encourage small resource companies, as well as financial support for oil search in basin frontier areas.

The white paper later in the year must then generate competitive supply routes, not just on renewable fuel but also terminal storage capacity, now a major impediment to competing fuel prices.