Iran rejects Trump’s peace plan, makes counteroffer over Strait of Hormuz; petrol prices at record high
Garbage companies have warned that waste collections may be canceled due to the shortage of trucks. Hundreds of gas stations are out of at least one type of fuel. Farms delayed planting crops because their tractors could not be refueled. Truckers are stranded at rural filling stations whose water has been drained. Charter fishing vessels operating out of Sydney Harbor face tight margins. The government denies rumors of rationing but has relaxed security regulations to attract more supplies from abroad. The market looks worryingly tight.
You can blame all this on decades of complacency and misguided subsidies. Other countries should not assume they are immune. Fuel shortages have already prompted talk of emergency conditions in the Philippines and South Korea, while knock-on effects in Australia could impact global food and raw material supplies.
Some of this diesel dependency is inevitable. Mining is a voracious consumer of fuel, with it being a versatile power source for energy-hungry trucks and machines used on remote job sites. Farmers use it to power their harvesters, tractors and pumps for similar reasons.
Partly it’s just geography. Australia’s population isn’t much larger than Florida’s, and it’s spread over a continent nearly as large as the entire United States. As a result, a very large trucking industry transports goods on road trains with two, three and even four trailers between major cities that are rarely less than 1000 kilometers from each other.
But bad policy made the problem much worse than it needed to be. Despite having the world’s largest coal and natural gas reserves, Australia is a minor oil producer and imports about 90 percent of its diesel from Asia. Stocks are currently only enough for 30 days. This is the lowest rate among International Energy Agency members, which require at least 90 days of inventory. With the Strait of Hormuz closed and major suppliers China, Japan and South Korea restricting exports to prevent local shortages, Australia’s safety net looks distinctly outdated.
Things would be much better if successive governments had not spent years encouraging wasteful consumption. Industrial users receive tax credits to cover the costs of using diesel, a program that has become one of the largest expenditures in the budget. The federal government will spend $10.8 billion on diesel rebates this fiscal year; That’s more money than goes to the army or navy, and nearly as much as goes to public education.
This unexpected event acts as a financial brake on decarbonization initiatives. Other countries stand out.
It doesn’t take an energy shock for Australia to see how wrong it has gone in its dependence on dirty, expensive and unsafe diesel. If the current alarm is to help change this narrow-mindedness, it will not come too soon.
Bloomberg
