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Maritime Union Raises Australian Fuel Security Concerns

With less than three weeks of liquid fuel reserves, Australia risks grinding to a halt following a global economic shock or conflict along a major trade route, warns the Maritime Union of Australia (MUA).

The MUA commissioned a new report to demonstrate its concerns: Australia’s Fuel Security: Running on Empty, written by former Director of the Maritime Transport Policy Centre at the Australian Maritime College, John Francis.

The report that states that a fleet of 60 tanker ships could maintain supplies, and calculates the cost of using Australian-owned and crewed tankers to maintain fuel supplies to be less than one cent per liter at the bowser.

There are currently no Australian-crewed tankers supplying fuel to the nation, down from 12 tankers in the year 2000. Australia is the only developed oil importing country in the world with no government controlled stocks of crude oil or clean (refined) petroleum products, no mandated commercial stock requirements for oil companies and no government involvement in oil markets. Furthermore, four petroleum refineries have recently been closed on economic grounds, and the refining capacity has not been replaced. 

Key Findings of the Report

1. Australia’s oil import dependence (crude and clean products) stood at about 90 percent in 2017-18. This growing dependence on overseas sourced petroleum products can be contrasted with Australia’s repeated failure to meet its 90 day IEA stockholding obligation, with stocks of key products standing at 18 to 21 days. 

2. The exclusive reliance on foreign flagged tankers supply chains removes any opportunity for the Commonwealth to be able to requisition national flag tankers if necessary to secure minimum import or coastal distribution requirements following major economic or geopolitical disruptions to oil markets. It has also diminished skills training for those operating and managing critical petroleum import supply chains and infrastructure.

3. Any risk assessment of bank liquidity and potential disruption to world credit markets needs to include consideration of the cascade effects on world freight markets. This includes the likelihood of ships being arrested by suppliers of bunkers and other creditors such as ship mortgagees; those holding liens against the vessel such as ship’s crew seeking unpaid wages; unpaid ship repair facilities; and insurers etc. 

4. If a comprehensive risk assessment indicates that retention of a minimum number of tankers owned, managed and crewed by Australians is justified on national security grounds, the Commonwealth, in consultation with stakeholders, should investigate options to equitably apportion the differential costing.

5. The additional cost per liter of cargo carried by an Australian tanker carrying clean petroleum import cargoes ranges from 0.49 cents to 1.25 cents per liter, and depends on the size of the ship and the distance from the supply country to the port of importation. This additional cost could be spread across the entire import volume to provide a modest cost per liter. For example, the cost of five Australian ships spread across the projected import volume of 38,087 ML in 2018-19 results in a cost of less than one-tenth of a cent per liter. 15 Australian ships would cost less than a quarter of a cent per liter. Even if the whole future import volume covered by 60 ships, the cost is less than one cent per liter.

The report is available here.

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With less than three weeks of liquid fuel reserves, Australia risks grinding to a halt following a global economic shock or conflict along a major trade route, warns the Maritime Union of Australia (MUA).

The MUA commissioned a new report to demonstrate its concerns: Australia’s Fuel Security: Running on Empty, written by former Director of the Maritime Transport Policy Centre at the Australian Maritime College, John Francis.

The report that states that a fleet of 60 tanker ships could maintain supplies, and calculates the cost of using Australian-owned and crewed tankers to maintain fuel supplies to be less than one cent per liter at the bowser.

There are currently no Australian-crewed tankers supplying fuel to the nation, down from 12 tankers in the year 2000. Australia is the only developed oil importing country in the world with no government controlled stocks of crude oil or clean (refined) petroleum products, no mandated commercial stock requirements for oil companies and no government involvement in oil markets. Furthermore, four petroleum refineries have recently been closed on economic grounds, and the refining capacity has not been replaced. 

Key Findings of the Report

1. Australia’s oil import dependence (crude and clean products) stood at about 90 percent in 2017-18. This growing dependence on overseas sourced petroleum products can be contrasted with Australia’s repeated failure to meet its 90 day IEA stockholding obligation, with stocks of key products standing at 18 to 21 days. 

2. The exclusive reliance on foreign flagged tankers supply chains removes any opportunity for the Commonwealth to be able to requisition national flag tankers if necessary to secure minimum import or coastal distribution requirements following major economic or geopolitical disruptions to oil markets. It has also diminished skills training for those operating and managing critical petroleum import supply chains and infrastructure.

3. Any risk assessment of bank liquidity and potential disruption to world credit markets needs to include consideration of the cascade effects on world freight markets. This includes the likelihood of ships being arrested by suppliers of bunkers and other creditors such as ship mortgagees; those holding liens against the vessel such as ship’s crew seeking unpaid wages; unpaid ship repair facilities; and insurers etc. 

4. If a comprehensive risk assessment indicates that retention of a minimum number of tankers owned, managed and crewed by Australians is justified on national security grounds, the Commonwealth, in consultation with stakeholders, should investigate options to equitably apportion the differential costing.

5. The additional cost per liter of cargo carried by an Australian tanker carrying clean petroleum import cargoes ranges from 0.49 cents to 1.25 cents per liter, and depends on the size of the ship and the distance from the supply country to the port of importation. This additional cost could be spread across the entire import volume to provide a modest cost per liter. For example, the cost of five Australian ships spread across the projected import volume of 38,087 ML in 2018-19 results in a cost of less than one-tenth of a cent per liter. 15 Australian ships would cost less than a quarter of a cent per liter. Even if the whole future import volume covered by 60 ships, the cost is less than one cent per liter.

The report is available here.

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