While Australia has an abundance of resources that can be used to generate biofuels, the biggest issue facing the industry is security of our local supply – that is, significantly increasing our domestic fuel base.

The industry in Australia currently has no conflict with food crops that would support a ‘food vs fuel’ argument against biofuels. Our current production comes from waste streams, and is truly sustainable. By contrast, many imported product have either a conflict with food (for example, corn production) or the impact on the destruction of native lands (such as obtaining palm oil through the destruction of rainforests).

A local supply chain means that international markets would have less of an impact on pricing of fuels here, because if the majority of fuels are produced domestically, the pricing is far less susceptible to any international volatility or fluctuations.

Another benefit of having an increased domestic supply of sustainable biofuels is that of the security of having a national supply of fuel on hand at all times. The NRMA estimates that Australia now imports 91% of its fuel. Disruptions to Australia’s international fuel supply are a possibility, and if these streams were interrupted, essential transport operations would not be able to continue. Indigenous production of biofuels will go some way to ensuring the safety and security of Australia’s fuel supply.

 

Biofuels offer improved fuel security

The BAA believes the case for increasing stockholdings for liquid fuels is quite clear. Fuel is critical to the smooth running of vital Australian services – but our current fuel stockholdings are below our IEA stockholding obligations, and with over 90% of our fuel imported, our stocks are vulnerable to disruptions – disruptions that we have seen have disastrous impacts on our agriculture and transport sectors.

According to a recent Bureau of Resources and Energy Economics (BREE) report, at the end of September 2014 Australia had only 19 days cover for automotive gasoline, 18 days cover for aviation fuel and 16 days cover for diesel. This level of stock holding is well known to be below our IEA stockholding obligations and it seems incredible that Australia is the only country of the 28 participating countries that fails to meet this obligation[1]. Australia’s combined dependency on crude and fuel imports for transport has grown from around 60% in 2000 to over 90% today.

Given Australia’s Agricultural and Transport (automotive, truck, maritime & aviation) sectors are almost 100% reliant on liquid fuels (fig. 1) this level of cover leaves our industries very vulnerable to supply disruption.

sources-of-energy-by-sector

Figure 1: Sources of Energy by Sector (Petajoules PJ)

The transport sector is not only critical for moving people from point to point, but is also vital for everything from the provision of essential and emergency services to the supply and distribution of food, health supplies, defence and all manner of goods and services. Clearly any interruption to liquid fuel supplies will have a significant and immediate impact on all Australians.

In their recently released Green Paper, the Department of Industry sets out its intention to attract energy resource investment and acknowledges that Australia has limited reserves of crude oil, condensate and liquefied Petroleum Gas (LPG). The paper does not acknowledge the fact that Australia is almost totally reliant on imported fuel for the Transport and Agricultural sectors nor does it address the risks associated with a disruption to this supply to the Australian economy and society. There is also no mention of targeting investment incentives towards reducing this reliance on imported product.

When our reliance on imports is coupled with a lack of local liquid fuel storage infrastructure then the depth of our vulnerability to supply disruptions becomes evident. As recently as May this year after having issues with the quality of diesel in two shipments to WA, Perth experienced widespread stock-outs and lack of diesel availability and this follows a similar event in Melbourne the year before[2]. Disruptions will undoubtedly increase as our reliance on the import supply chain increases. Even more concerning of course is that Australia’s vulnerability has been identified by terror group Al Qaeda who have published a map of critical petroleum shipping routes.

al-qaeda-shipping-lanes

Figure 2: Al Qaeda view of global oil shipping lanes.

The BAA strongly supports the increase of mandatory stockholdings together with a focus on increasing local production of alternative fuels, including biofuels.

Given the infrastructure throughout Australia and the fact that we are increasing our usage of liquid fuels by about 1.3% per annum, we will continue to be reliant on liquid fuels for many years to come.

The BAA suggest that investing in growing the biofuel sector can be an alternative method in increasing not only the fuel security of our nation, but also add to Australia’s economic and social well-being creating high value jobs in regional communities. Biofuels offer one pathway to improving Australia’s resilience to potential disruptions to the fuel supply chain, by increasing our level of indigenous fuel production and reducing our dependence on imported fuel. Indeed, energy security concerns have driven many countries, including the US and Sweden, to introduce policies to actively encourage the development of their biofuels industry. Biofuels capability in Australia is also an area being closely watched by Defence personnel, particularly as our US allies are moving to significantly increase the use of renewable fuels in Navy vessels. Interoperability is a key factor to consider for the Australian Navy, as often shared supply chains are used for fuel.

 

[1] Liquid Fuels Vulnerability Assessment, ACIL Tasman 2012

[2] Press Release: BP 29 May 2014