In the film Mad Max,
an oil shortage leaves Australian society teetering on the brink of total collapse.
In real-life, things aren’t quite that dystopian yet Down Under. But with barely a month of stockpiled diesel left and hundreds of forecourts running dry, the anxiety is palpable.
Australia has one of the highest per-capita rates of diesel consumption in the world but it relies almost entirely on imports to meet that demand. There are two domestic refineries producing petrol but up to 90pc of that is imported, too.
Iran’s closure of the Strait of Hormuz has stifled one fifth of the world’s supply of oil. Much of this goes to the Asian refineries that supply Australia. Now, they’re running short.
So the problem in Australia isn’t just the soaring price of fuel. It’s the prospect of not being able to get any at all.
The country has 38 days’ worth of petrol left in reserve before reaching critical levels, at which point rationing would need to kick in. For diesel, it’s 31 days and for jet fuel, just 28.
For truckers and farmers in particular, the supply crunch feels near-existential.
“Growers are right now weighing up whether they can afford to buy seed, fuel the tractor and sow their crop,” says Hamish McIntyre, the president of the National Farmers Federation.
In a country that is the fifth-largest producer of wheat and second-largest grower of barley, McIntyre warns that “most farmers will need to decide before Anzac Day [April 25] whether they will plant a crop this year”.
Mathew Munro, the chief executive of the Australian Trucking Association, sounds equally alarmed. He recently described the situation for the country’s 60,000 trucking businesses as “an emergency”.
“Trucking businesses… are running out of time,” he said. “They are running out of money. They can’t see a way forward.”
For three decades, Australia has consistently been one of the rich world’s most robust economies, but its unique combination of high fuel consumption and import dependence has shaken the country’s self-belief.
Earlier this month, the ANZ-Roy Morgan index of consumer confidence dropped to its lowest level since the survey began in 1972.
Australians may not have taken to the streets over fuel prices,
as the Irish have done, but the crisis taps into a deep-rooted sense of vulnerability.
Begging bowl in Asia
In the early years of white settlement, the isolated colonists would scan the horizon for the lifeline of arriving supply ships. Two centuries later, newspapers have started listing the names and arrival dates of incoming petrol and diesel tankers.
But Anthony Albanese, the Australian prime minister, isn’t standing on the shoreline with his binoculars.
His Labor Party is vulnerable to the resurgence of Pauline Hanson, a Right-wing populist firebrand, and her One Nation party.
So on Friday, he jumped on a plane to Singapore.
The Asian city-state is the world’s third-largest refining hub behind Houston in the US and Rotterdam in the Netherlands. Australia gets 55pc of its petrol and 15pc of its diesel from there. Australia’s other major suppliers are South Korea, India, Malaysia and Taiwan.
Albanese signed what he called a “win-win” statement on energy trade with Lawrence Wong, the Singaporean prime minister. They vowed to
keep fuel flowing south and Australian liquefied natural gas heading north.
Ominously, Wong did remind his guest that Singaporean exports could only be forthcoming “as long as upstream supplies continue”.
Singaporean refiners get about 70pc of their crude from the Middle East. They’re now looking to the US, Africa and even Russia. But they’re running low and they are competing with crude buyers from all over the world. This will only get worse if the Hormuz disruption lingers on.
Albanese is undaunted. He also reportedly plans to visit Brunei this week and Richard Marles, his deputy, has visited Japan. Reports also suggest that Canberra has extracted a guarantee from Indonesia on fertiliser supplies.
But Albanese won’t be bringing any fuel supplies home in the hold of the prime ministerial jet. Governments don’t buy and sell fuel, businesses do.
So before he went to Singapore, the prime minister dropped into the Lytton refinery in Queensland to announce a more tangible (and potentially expensive) fix.
The government has amassed an A$2bn (£1bn) fund to help the country’s two biggest importers, Viva Energy and Ampol, buy surplus fuel on the volatile world spot market.
If their purchases are at unusually high prices, the taxpayer will cover their losses and also meet the cost of storing or holding the extra supplies. It’s essentially a contract-for-difference arrangement.
“We want to minimise taxpayers’ exposure. But our first priority, to be very clear, is supply,” Albanese said.
He will be hoping the scheme works – and fast. As of the weekend, 173 of Australia’s 7,940 forecourts were out of diesel.
There are now more than 50 tankers en route to Australia that will arrive in the next five weeks, but that won’t make much of a dent in the problem.
Prices are at record highs. Even a swingeing cut to the fuel excise offered only temporary relief to diesel users: the price is already back near record levels, selling for A$3.25 a litre in the cities.
Big-ticket fixes
Conservative politicians are calling for more dramatic solutions. Angus Taylor, the newly installed opposition leader, has said Australia should further exploit its own oil reserves.
“We must dig and we must drill. We need more Australian oil for Australians. We have the resources beneath our feet to secure our future,” he said.
The energy companies claim the economics don’t stack up. Australian-made oil would be vastly more expensive than buying from abroad.
Australia doesn’t have the debt problem of Britain or France, but the treasury would be reluctant to pour the required billions into such a scheme.
There have also been calls for Australia to rebuild its own refining capacity. From a position of near self-sufficiency, the number of refineries has dwindled from eight to two in the past 25 years.
This, too, would be expensive. But Albanese last week flagged that it might be an option.
He said the Hormuz crisis had buried the notion that “there would always be someone else, somewhere else, who would sell us what we needed cheaper than we could make it ourselves”.
Polling commissioned by the lobby group Australian Energy Producers found almost 80pc of the public supported the idea.
Another option would be to publicly fund the construction of extra storage facilities, allowing Australia to get its meagre stockpile up to the International Energy Agency’s benchmark of 90 days.
Chris Bowen, the energy minister, has suggested this could cost A$20bn.
The state of Western Australia, which hosts much of the country’s mining industry, is considering building its own diesel stockpile.
Bowen has already released some of the national stockpile to help deal with panic-buying. That marks stage two of a four-step plan the government set out last month.
The third step, which would reportedly be triggered if the stockpile thinned to 15 days’ worth of fuel, would be to encourage people to cut consumption voluntarily.
The final step, if the stockpile dropped to 10 days or fewer, would be rationing.
“But we are a long way from that,” Bowen said last week.
At the weekend, he told fretful Australians that “we have roughly as much, if not more, fuel in Australia today than we did when
the bombing of Iran started”.
It’s only two weeks until Anzac Day – when farmers will have to start making a call on what is feasible for the winter growing season.
“If farmers cannot access reliable and affordable inputs, they will scale back plantings,” says McIntyre, the farming boss.
That could mean less food on Australian supermarket shelves later this year, even if the Strait of Hormuz is back to normal. Bowen admitted at the weekend that “this is going to have a long tail, this crisis”.
Australia isn’t yet anywhere near Mad Max territory. But like the long-running film franchise, McIntyre fears that there could be more instalments.
