September 5th 2009

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Articles from this issue:

OBITUARY: Australia loses great champion of the unborn - Charles Hugh Francis AM QC RFD (1924-2009)

COVER STORY: Huge turn-out for Canberra marriage summit

CANBERRA OBSERVED: The Christian vote and Kevin Rudd

EDITORIAL: Bushfire Royal Commission ignores fuel-reduction burning

SCHOOLS: 'Historic leap forward' to shake up WA schools

ENERGY I: ETS will deter oil and gas exploration

ENERGY II: Renewable energy: what about the ethanol industry?

FINANCIAL CRISIS: World economy is still 'anaemic'

ASIA: Vulnerable Taiwan facing new trade challenges

QUEENSLAND: GP protests - we are doctors, not baby-killers

MARRIAGE AND FAMILY: Family the key to social inclusion and cohesion

OPINION: Patient ruling creates moral, ethical impasse

EDUCATION: ALP's 'education revolution' copies UK's failed policies

OPINION: Integration, the missing ingredient of immigration

CO2 and turf (letter)

Ian Plimer on Christianity (letter)

Treasury's role in OzCar affair (letter)

Governmental child abuse (letter)

AS THE WORLD TURNS: UK Health gives child molester Viagra; Vic. council paid $620,000 to a 'white witch'; Women in combat

BOOK REVIEW: FAIR WORK: The New Workplace Laws and the Work Choices Legacy, eds. Anthony Forsyth and Andrew Stewart

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ETS will deter oil and gas exploration

by Peter Westmore

News Weekly, September 5, 2009
Comparatively little attention has been given to the problem of Australia's increasing dependence on imported fuel, which is expected to increase over the years ahead, and will be adversely affected by an emissions trading scheme (ETS).

As a result of the low population density of Australian cities and the vast distances between them, Australia is particularly dependent on the continued availability of diesel and petrol at reasonable prices.

The provision of reliable inexpensive energy is crucial to families and the nation's economic development.

The price spike in 2008, which saw crude oil prices soar to $US150 a barrel, and domestic petrol prices reach $1.70 a litre in the cities, showed how vulnerable Australia is to both shortages of supply and high prices of imported oil.

The price spike last year was caused by a combination of factors. One of them was the surging demand for petroleum from China, whose economy was still growing at a rate of over 10 per cent a year. Another factor was the fear that supply disruption from the Middle East - for example, a political/military breakdown in Iraq, or a blockade by Iran - might seriously interrupt the flow of oil through the strategic Straits of Hormuz, effectively crippling the world's economy.

In the event, the global financial meltdown caused a collapse in demand for oil, while improvements in the political situation in Iraq and internal opposition to the rule of the clerics in Iran have improved the stability of the Middle East as a reliable supplier of oil to the world.

Yet Australia remains acutely vulnerable, in the medium to long-term. The main problem is the widening gap between domestic supply and demand.

In 2007-8, according to the book, Energy in Australia 2009, produced by the Australian Bureau of Agricultural and Rural Economics (ABARE), Australia produced about 25.8 gigalitres (GL) of crude oil and condensate from a variety of fields around the country, but imported over 26.2 GL. A significant part of Australia's domestic production is exported to countries such as South Korea, Japan and Singapore, under long-term export contracts.

Over the past six years, Australia's domestic production has declined significantly, principally as a result of declining production among the older producers, particularly in the Bass Strait oil fields.

The shortfall of crude oil and condensates is paralleled with refined fuels. Domestic production of refined fuel totalled about 40 GL in 2007-8, while consumption was over 50 GL. (Energy in Australia 2009, p.61).

The gap between production and consumption has to be imported - and is expected to grow in the years ahead.

A Senate inquiry into Australia's future oil supply and transport needs (2007) forecast that Australia's net self-sufficiency in oil production would fall from around 84 per cent to 20 per cent over the next 20 years (p.17).

The financial consequences will be immense, if nothing is done. In 2005, imports exceeded exports by around $4.7 billion.

The Australian Petroleum Production and Exploration Association has estimated that by 2015 the deficit on liquid fuels could range from $12 billion to $25 billion, depending on levels of local production.

With Australia's net foreign debt now $670 billion, and the Federal Government moving deeply into debt as it attempts to stimulate domestic demand, the high cost of imported oil could be the straw that breaks the camel's back.

Because of the long lead-times needed to develop oil fields, it is urgent that all levels of government facilitate a major expansion of oil and gas exploration in Australia. According to bodies such as the CSIRO, there is a high probability of finding major new oil and gas fields, despite the low success rate of oil exploration in the past.

Geoscience Australia told the Senate inquiry which reported in 2007 that, by world standards, Australia's sedimentary basins have been only lightly explored. It said that fewer than 9,000 exploration and development wells had been drilled here, compared to three million in the United States, which has a comparable area.

Levels of oil exploration in Austra-lia remain depressingly low, principally because of the high cost of exploration, the risk of failure, uncertainty over future oil prices, and the lack of tax incentives compared to other countries.

Unrealistic targets

For the oil and gas industries, there is nothing comparable to the subsidies currently being offered on renewable energy sources such as wind and solar power. In fact, the preoccupation with what are, arguably, unrealistic renewable energy targets has led to the abandonment of incentives for domestic production of fuels on which Australia will become increasingly dependent in the years ahead.

An emissions trading scheme which imposes a tax on new carbon-based energy will discourage exploration at the very time that Australia needs it most.

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