NRMA: Australia's fuel supply a threat to our security

Lack of fuel security plan a risk to Australia

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Motoring and insurance company NRMA says Australia faces a growing threat to its fuel supply chain, as we become more and more dependent on imported fuel and oil.

According to the company, Australia now sources 90% of its crude and fuel imports for transport, up from just 60% in 2000. Even the Australian Navy is feeling the heat with news that the domestic supply of a special type of fuel will no longer be refined locally by mid-2014.

In a new report, the NRMA says Australia has very low supplies of liquid fuel, as indicated by the following picture.

 

NRMA fuel supply Mar 2014

 

Source: NRMA

And the NRMA says there is no plan to stop the decline, as Australia is on track to depend on sourcing 100% of its transport fuel needs from offshore. In fact, the NRMA says in just 17 years, Australia will have no refineries, less than 20 days' supply of liquid fuel and 100% imported liquid fuel dependency.

In its report, NRMA says "having no refineries would be akin to being 100% dependent on imported food – a situation Australians would be likely to find unacceptable."

In just the last two years, the situation has accelerated. In 2012, Australia had 7 refineries in 2012 but only has 4 currently. Caltex Australia Limited (ASX: CTX) recently closed its Kurnell refinery, transforming it into an import terminal instead.

Australia is also consistently the only one of 28 member countries that fails to meet its International Energy Agency (EIA) 90-day net oil import stockholding level. (Even New Zealand manages that with 93 days).

In an effort to fix the issue, the report suggests that the first thing we need to do is reduce demand for liquid fuel. The NRMA also notes that only 5% of freight on our more populous East Coast is carried by rail, with the rest by the trucking industry.

Foolish takeaway

Diversifying our transport fuel sources through the use of biofuels, LPG, electricity and gas-to-liquid fuels is another major step that Australia needs to take. We may yet see oil majors such as Woodside Petroleum (ASX: WPL), Santos Limited (ASX: STO), BHP Billiton (ASX: BHP) incentivised to export less gas and petroleum, and rather to supply the local market.

Motley Fool writer/analyst Mike King owns shares in Santos. You can follow Mike on Twitter @TMFKinga

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