Producing our own oil and gas would fuel Australia

There has been much concern about Australia’s stockpiles of fuel recently as flows from the Middle East dry up in the wake of the Iran war.

But there is some misunderstanding about what our stockpiles should be.

Australia has signed an international agreement to keep 90 days’ worth of net imports of fuel in storage.

Keep in mind the word “net”.

When Australia produced enough for our needs, our net imports of petroleum were minimal, so we did not need to store much to easily meet the requirement.

However, in the past 20 years the Bass Strait, our primary supply of oil, dried up.

So, as our production fell, and imports surged, the net import requirement went up.

It would cost Australia somewhere around $20 billion to store the 90 days commitment here.

So instead, we meet the commitment by paying for oil to be stored in countries that produce a surplus (like the United States), and we have the right to access those supplies if needed.

Keep in mind the 90-day requirement is not principally about protecting Australia.

The international agreement is about keeping stores of oil all over the world that can keep the market functioning for long enough during a crisis.

Keeping three months’ supply does not provide much protection for us when conflicts can last years.

What would provide protection would be for Australia to produce enough of our own oil and gas.

Then all we would need to do is build some refineries, and if a crisis emerged, then we would be self-sufficient however long a conflict lasted.

We got to a resilient position on fuel security in the 1960s because the Menzies Government actively promoted oil and gas development.

Back then, the Government passed the Petroleum Search Subsidy Act 1957 which provided a 50 per cent subsidy to companies drilling for oil and gas in Australia.

BHP, partnering with the world’s best geologist at the time, Lewis Weeks, took advantage of the largesse, drilled the Bass Strait and the rest is history.

When the 1970s oil crisis hit Australia did not have a problem with fuel supplies.

In contrast to that approach, we have made it harder and harder to invest in oil and gas.

The best chance to find new deposits of the kind of oil we need to fuel cars and trucks is in Victoria and the Kimberley.

But state governments have banned fracking in these areas. This is despite fracking being a part of global oil and gas development since the US civil war.

It was the use of fracking that has transformed the US from the biggest net importer of oil to the biggest producer of oil in just 20 years.

The same time frame over which we have let our oil production decline.

During the Biden administration, the United States achieved a new record by producing more oil in one year than any country had in history.

Instead, we have naively pursued a net zero agenda that has made Australia weaker and poorer.

Thanks to Labor’s net zero obsession, it imposes a carbon tax on the two remaining oil refineries in Australia. This program called a “Safeguard Mechanism” requires large emitters to reduce emissions each year.

For facilities like oil refineries, they need to buy carbon credits.

Some refineries today are facing up to a $1 billion annual cost to reach net zero.

No wonder no one is investing in oil and gas in Australia.

If we want to be a prosperous nation again, we need to scrap our carbon taxes and aggressively develop our oil and gas resources.

It is the only way that we can return to being self-sufficient and resilient in these difficult times.