Australia has plenty of diesel for now. But running out could upend our economy
- Written by: Lurion De Mello, Senior Lecturer in Finance, Macquarie University
It’s been hard to ignore[1] growing fears of a looming fuel shortage in Australia. Conflict in the Middle East has led to what the International Energy Agency has called[2] the “largest supply disruption in the history of the global oil market”.
The federal government has been at pains to reassure the public Australia’s fuel supply is secure until mid-April[3]. Tankers carrying diesel, petrol and jet fuel are already heading here from places such as India, Malaysia, Singapore and South Korea. In the short term, supplies look steady.
However, there’s one fuel where Australia is particularly exposed: diesel. Our whole economy depends on it. Trucks[4] that move our food and goods around, machinery used in farming[5] and mining, and even backup generators[6] all rely on diesel.
And because most of it is imported and takes weeks to arrive, even a small disruption could cause serious problems. Recent price spikes are a sign of how sensitive the system is. Hundreds of service stations around Australia have reportedly run out of fuel[7] due to soaring demand.
This is where our diesel goes now, why switching off supply would cause major problems – and some of the hard choices we could face as a country if things get worse.
Keeping things moving
Diesel is a crucial fuel for a wide range of industries. One of the most important uses of diesel is simply moving people (and small loads) around.
According to the Australian Industry Group[8], by activity, 26% of diesel consumption goes to powering cars and utes.
After that, trucks and mining sit close behind, each accounting for 24% of consumption. Other significant use activities include agriculture (8%) and manufacturing (7%).
And it’s important not to forget the importance of diesel in various other essential functions for communities. Many remote areas, for example, rely on diesel power[10] as a backup power source.
Similarly, when power goes out at a hospital, diesel generators are an important source of backup electricity[11], where continuity of power is crucial.
Why is it hard to switch?
There are a few key reasons why switching away from diesel is so hard. One is that diesel is the preferred fuel for large vehicles and heavy industry[12].
Many of diesel’s key uses – powering freight and long-distance trains, trucks or even large shipping vessels[13] – require a huge amount of energy. In very simple terms, diesel contains more energy per litre[14] than petrol. It’s also more fuel-efficient than petrol. That fuel efficiency has enticed many Australians to buy diesel vehicles.
Over the past 15 years, there’s been a surge in diesel sales[15], with more small trucks and vans on the road required to keep up with Australia’s booming demand for online deliveries.
Our transport and industry infrastructure in Australia is built around access to diesel. Transitioning away from this fuel can’t be done easily or in a hurry.
Read more: Why do we use gasoline for small vehicles and diesel fuel for big vehicles?[16]
How bad could things get?
If diesel stops flowing to Australia (or is severely restricted), one of the most immediate impacts will be on freight.
It’s highly unlikely there will be no diesel at all. But if we can’t get enough stock into the country, what is available could become extremely expensive.
Many freight companies will be unable to absorb these costs, and so will likely push them onto their customers in the form of higher prices.
It’s more difficult to speculate about the speed and severity of other impacts, such as on food production[17] or the cost of construction. But these effects could be significant in a prolonged crisis.
What’s on the way
Federal Energy Minister Chris Bowen said on Sunday six fuel tankers[19] scheduled to arrive in Australia had been cancelled or deferred, but that this was out of 81 expected in total.
My own analysis, using the latest shipping data from financial data firm LSEG[20], indicates fuel is still headed for and arriving in Australia.
At the time of this article’s publication, there were no visible fuel shipments scheduled beyond April 14. But that isn’t necessarily any reason to panic. Typically, departure data is only made available within a couple of weeks before a ship departs (sometimes only a few days before).
It will be important for the government to remain transparent about exactly how much is expected to come into the country.
Tough choices
If we zoom out to the bigger picture, Australia’s reliance on diesel is the result of years of particular choices.
If the situation doesn’t improve before mid-April, the country could face hard choices – such as rationing fuel, requiring people to work remotely if possible and minimise travel, or switching to alternatives such as electric vehicles.
But our reliance on diesel isn’t inevitable, and other systems are possible. For one, Australia is one of the world’s largest producers and exporters[21] of liquefied natural gas (LNG). Why isn’t our economy based around this prime asset?
Nations such as India and China have already demonstrated how transport can pivot away from diesel, rolling out both LNG-powered[22] and electric trucks[23] in large numbers.
Even if it’s resolved soon, this crisis will have forced Australia to finally confront tough questions about its energy security.
References
- ^ hard to ignore (theconversation.com)
- ^ called (www.iea.org)
- ^ secure until mid-April (www.abc.net.au)
- ^ Trucks (theconversation.com)
- ^ farming (theconversation.com)
- ^ generators (theconversation.com)
- ^ run out of fuel (www.theguardian.com)
- ^ Australian Industry Group (www.australianindustrygroup.com.au)
- ^ Matthew Alexander/Unsplash (unsplash.com)
- ^ rely on diesel power (theconversation.com)
- ^ important source of backup electricity (www.vhba.vic.gov.au)
- ^ preferred fuel for large vehicles and heavy industry (theconversation.com)
- ^ large shipping vessels (www.energy.gov.au)
- ^ more energy per litre (www.acea.auto)
- ^ surge in diesel sales (www.abc.net.au)
- ^ Why do we use gasoline for small vehicles and diesel fuel for big vehicles? (theconversation.com)
- ^ food production (theconversation.com)
- ^ Mick Tsikas/AAP (photos.aap.com.au)
- ^ six fuel tankers (www.abc.net.au)
- ^ LSEG (www.lseg.com)
- ^ world’s largest producers and exporters (www.ga.gov.au)
- ^ LNG-powered (iifiir.org)
- ^ electric trucks (ieefa.org)
