Let's suppose that a major conflict erupts in the Middle East, a reasonable supposition at some point I believe, then where is that going to leave li'l old Australia, tucked down out of sight and out of mind deep in the Southern Hemisphere?
Well, on the surface of it, we'll all be thinking how good it is to live so far away from the flash point and everything that goes with that. But there's a lot more to something like this, and the consequences that will flow. I want to concentrate on what a conflict would mean for fuel supplies to Australia.
A conflict in the Middle East is highly likely to impact on oil and gas supplies in the same way that two separate skirmishes have previously in my working lifetime – the 1973 Arab-Israeli war, and then the 1979 Iranian revolution. Supplies of oil could easily be cut by enough to massively increase the price per barrel, regardless of the source. Oil is a commodity that is priced according to the market across the world. If it's in short supply, or even perceived to be, then the price will skyrocket.
And it may not even be a case of pricing. It may simply be very difficult to get ready shipments of oil into Australia due to a shortage of available shipping, or other countries directing supplies that they do have towards a war machine, for instance.
Australia's own oil production is equivalent to about a third of the total amount of oil used here. But it's more complicated than that. Almost all home produced oil is actually exported to South East Asia for refining. That's party because the majority of oil production is off the north west coast of the country and is therefore much closer to Singapore, for instance, than it is to the two refineries still operating in Australia, both of which are on the eastern side of the continent.
Hence, we actually import around 90 per cent of the oil used here – whether as unrefined or refined product. And, as has been noted many times in recent years, our on-hand stocks of fuels are notoriously low.
So, in a time of serious conflict, we could, presumably, divert our own oil production to the two refineries here. But that's not anything like enough energy to keep the country going. The two refineries only have the capacity to produce about a quarter of the refined petroleum we need on a daily basis.
The greenies will say that, if we all switched to electric cars, this would help alleviate the problem. It might do somewhat, and be a part of the solution down the track, but it's not going to happen any time soon. Let's be more practical than that.
Faced with queues of cars looking to fill up with petrol, probably at exorbitant prices, what does the country do? A part of the answer lies blowing in the wind.
That's ethanol, that is produced from a number of different sources such as, sugarcane, sorghum, sugar beet, corn, etc. And we're pretty good at growing crops in this country, to say the least, particularly sugar. Moreover, if we were to be struggling to sell some of those crops overseas due to conflict, then better to use them here. We wouldn't be able to eat them all!
Mixing what fuel we can get during a world emergency with higher mixes of ethanol than we've been accustomed to would go some way to alleviating the problem. But it would mean having the production facilities here in Australia to be able to produce a lot more ethanol than we do today.
Some people will immediately say that the use of ethanol in their car will cause damage. Well, necessity is the mother of invention. If the choice is between running E50, for instance, or nothing, then we'll soon work out how to make our cars, and other internal combustion powered machinery, run reliably on E50. It's not as though it hasn't been done already. And some would downright welcome it. Just ask every turbocharged JDM junkie.
I've come at the angle of supporting ethanol production from the point of view of fuel security, a subject that has been highlighted as being a serious Australian strategic weakness in recent years.
But it also has the potential to be a considerable contributor to Co2 reduction targets. Not only are the crops, from which ethanol is produced, renewable on an annual basis, they could be produced using much more carbon-friendly methods than is currently the case, from harvesting through to delivery. Furthermore, the crops themselves, to a varying degree, absorb more Co2 from the atmosphere than they give off as they grow.
The Federal Government needs to make greatly expanding the home production of ethanol a priority not only for fuel security reasons but also as part of an overall Co2 reduction policy.
For sure many consumers won't be over the moon with the reduced range that goes with increasing the level of ethanol content in a litre of petrol. But they'll be very happy to have some range, when the alternative, at some point, could be zero.
And let's not forget bio-diesel. In the quest to keep Australia's economy functioning at a time of crisis, diesel will be even more important than petrol. We are as reliant on imported diesel as petrol. Again, agriculture can be part of the solution. Bio-diesel can be made from vegetable oils as well as waste cooking oils and the like. Feedstocks such as soybeans and rapeseed can readily be grown here, as well as others.
Once more, the federal government should be ensuring that bio-diesel, and it's local production, is a priority for both security and carbon emissions reasons.
Unfortunately, I think it will take a war somewhere, and severely compromised fuel supplies as a consequence, for people to take advantage of resources (renewable resources) we have in our back yard, and, unlike most countries, it's an enormous back yard that can support our food needs as well as making a sizeable dent into our energy needs.
Ethanol's day will come. Of that I'm sure.