Opinion: Securing fuel supplies is essential

By: Warren Clark


Security over the means of propulsion should be a government priority

Opinion: Securing fuel supplies is essential
Warren Clark

 

On 7 May 2018 the then Minister for the Environment and Energy, the Hon Josh Frydenberg, announced a review of Australia’s fuel security.

NatRoad supports an examination of how fuel is supplied and used in Australia, including the country’s resilience to withstand disruptions from both overseas and in Australia.

Supplies of diesel fuel are the lifeblood of the road transport industry. The review was to be completed by end 2018 but no results of the inquiry have been made publicly available. This step should be fast-tracked.

The review will contribute to a broader consideration of energy security across liquid fuel, electricity and gas supplies in the National Energy Security Assessment by mid-2019. The National Energy Security Assessment will also consider energy security issues related to liquid fuel such as the interaction between liquid fuel and electricity supplies.


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Liquid fuel, especially diesel, accounts for 98 per cent of transport needs. Reports of the limited period attached to reserve holdings of liquid fuel have alarmed members: at the time the review was announced reserves of diesel were at three weeks.

The NatRoad concern around this issue is related to the link between the timely supply of fuel and business survival. Road transport businesses need the uninterrupted availability of energy sources at an affordable price.

For example, if fuel was unavailable to a road transport business for seven days or was rationed to less than 50 per cent of the requirement for two weeks, it is unlikely that business would survive given the low margins and high operating costs of most road transport businesses.

Those that did weather this storm would be forced to sell assets, reduce employee numbers and refinance their business.

In this context, we emphasise that competition remains the dominant feature of the industry (the largest four firms have a combined market share of only 15 per cent) and profit margins are becoming much tighter over time. Owner drivers/small freight operators account for less than 12 per cent of the industry’s operating income, but they represent nearly two-thirds of the total number of operating businesses.

If there is a significant widespread disruption to fuel supply, through acts of terrorism or paralysis on the docks, there will be long term consequences for thousands of family businesses and many larger fleets. It would also have a devastating effect on Australian society generally.

Hence, NatRoad has in its Pre-Budget submission to the Treasurer asked that the Government’s review should be fast-tracked. Returning Australia to holding 90 days’ worth of oil stocks should be a priority goal that Government sets out a plan to achieve. Any infrastructure development and maintenance should be fully funded to meet this aim.

NatRoad hopes that the fuel security review will provide the details that are needed to ensure that ongoing fuel supplies are readily available and adequate reserve stocks are held.

Warren Clark is CEO of the National Road Transport Association (NatRoad)

 

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