Parliament Updates

Zali Steggall MP speaks on Fuel Security Bill 2021 and consequential amendments

16 June, 2021


I rise to speak on the Fuel Security Bill 2021 and consequential amendments. This bill implements two measures from the recent budget. Firstly, it establishes a minimum stockholding obligation for industry to ensure they hold minimum quantities of transport fuels. Secondly, it enables a production payment for refinery operations, also known as the fuel security services payment, to provide a cents-per-litre payment to refineries. In return, they will guarantee to continue operating until 2027. The payment can reach a maximum amount of just over $2 billion by 2030 in a worst-case scenario—a massive amount; let's be very clear.

The package will also support transitioning our refineries to reduce sulphur content, and that will cost $300 million. While not entirely against the fuel security package—and, specifically, the measures to reduce the sulphur levels of fuels, which I have called for—I am against the government not complementing any support of fuel refineries with a meaningful package to support transition to lower emissions transport, which is necessary for energy security and to meet our climate targets.

The history of oil refineries is important in this debate. Most of Australia's oil refineries were built in the mid-1950s and mid-1960s. During that time, refinery operators enjoyed a sheltered existence with limited competition from others in the region, protective tariffs and price and demand stability. But those protections are gone. Despite investment in modernising the infrastructure and facilities, the sector is under pressure from lower-cost facilities in Asia, increasing capital and labour costs for operation and maintenance, and a tougher regulatory environment. As a result, Australia's oil refineries have been in decline for some years. We have to be clear about that.

Business headwinds were exacerbated by the pandemic. In 2010-11, there were seven oil refineries in Australia. By early 2020, there were just four. This year BP and Exxon Mobil both announced they would close their refineries in Western Australia and Victoria, and the two remaining refineries were also threatening to go the same way, which is why we are now here debating such a prop-up by means of public funds.

Twenty years ago almost all of our oil demand was met by domestic refineries. Now it is less than half. As oil refineries have closed, there have been some concerns about our overall energy security. That is, ultimately, the argument often put forward: having fewer refineries may reduce Australia's ability to refine fuels if shipping and supply chains are ever severely disrupted for any reason in the future. But that view is contested. For example, the Energy white paper 2012 saw no risk from refineries closing, for the reason that those risks are mitigated by diversified supply chains. This contention hasn't stopped the government from providing a subsidy package for the remaining refineries, but the question has to be asked: how long can we prop up a system that is not self-sufficient and is not economically viable?

The Australian production of oil is not enough to meet our own demand. The oil produced from Australian wells is condensate, which is not readily available to be refined in Australia due to costs. It can be in an emergency, but it's not preferable. As a result, like many Asia-Pacific nations, Australia is highly dependent on importers. Over 90 per cent of our fuel is imported from countries in the Middle East, Asia and North America, which leaves Australia exposed to potential supply disruptions in our region, emanating from conflict, natural disasters and other pressures.

Australia spends roughly $29 billion per year on imported fuel. From the making of consumer products, to chemical feedstock, to transport, which uses 75 per cent of our total fuel demand, many sectors are exposed to oil supply shocks. This trend is worsening. The Department of Industry, Science, Energy and Resources has projected that oil demand will increase to 2040 if we don't change policies. The dependence poses a long-term risk. Rather than thinking that we're just going to continue propping this up, we need to think about the transition away. As the Australian Financial Review editorialised, 'The refineries plan doesn't mean self-sufficiency, even with more than $2 billion in subsidy,' as Australia will continue to import most of its crude oil anyway.

There are many other reasons to switch—in particular, reducing emissions. A fortnight ago, the International Energy Agency, one of the most conservative energy institutions in the world, released a landmark report called Net zero by 2050: a road map for the global energy sector. In it, the IEA modelled scenarios to get to net zero. The report sent shockwaves through the world, not least because it told Australia, one of the largest fossil fuel exporters in the world, that we cannot support any more fossil fuel developments from now on. But it also shone a light on other sectors, like transport. Transport emissions make up almost 18 per cent of our total emissions, or 90 million tonnes per year, the majority coming from light passenger vehicles. Prior to the COVID-19 pandemic, transport was our fastest-growing sector and source of emissions. The Australia Institute projects that emissions from transport could grow to 125 million tonnes per year by 2030. For perspective, that's the equivalent of almost eight Hazelwood coal-fired power stations. The IEA found that, to reach net zero by 2050, 60 per cent of global car sales will need to be electric by 2030.

So there is a chasm between the goal and where we stand today, especially here in Australia, where there is a policy vacuum. Other countries are taking steps to reduce oil dependency and ambitiously attempting to meet climate targets. Today less than one per cent of new car sales are electric in Australia. That's compared to over 11 per cent in the United Kingdom and 80 per cent in Norway. We are far, far behind—global laggards. The Bureau of Infrastructure and Transport Research Economics has modelled that, under our current policies, Australia will only reach 27 per cent of new car sales being electric by 2030—and that is putting a good gloss on it—putting net zero absolutely out of reach. Unfortunately there is no plan forthcoming from the government in relation to this. This antiquated fuel security package is yet another example where we're failing to do that orderly transition that's so required.

The government needs to support this orderly transition. For the moment, we simply don't see it. For example, with the transition to EVs we need to overcome the barriers to purchase. There are many barriers that are getting in the way of uptake of EVs. It's highly dependent on the cost of electric vehicles becoming comparable to the cost of internal combustion engine vehicles, consumer acceptance of the range limitations of these cars and the charging infrastructure rollout. Let's be clear: the government uses this as a political weapon, come election time, to stir up fears around range and whether there are limitations. That is so negative. It is so counterproductive. Ultimately it is against our national interest, because we need to do the transition.

The government actually has a duty to properly educate as to the opportunities in this sector. In forum after forum in Warringah I get asked about why the government is not helping overcome these barriers. One gentleman at a forum just last week in Balgowlah was puzzled that the energy minister, on the ABC's 7.30 program, would use convenient excuses like range anxiety as a reason to not support electric vehicles. People in Warringah want to do the right thing. In a recent Lowy poll, 77 per cent of Australians supported providing subsidies for the purchase of EVs. In New Zealand, just yesterday they announced that they're providing generous incentives for EVs. New Zealanders will get an $8,600 subsidy towards that. In Australia, it's quite the opposite. You get a very limited state based incentive—that is, a little of your stamp duty—and that's all. And we have a completely uncoordinated approach as some states go completely the opposite way and tax EVs.

Current policies in the Future Fuels Strategy, the government's tokenistic attempt at spurring investment in low-emissions vehicles, is just not enough to overcome the barriers. The Future Fuels Strategy is $70 million of repurposed funding from ARENA. It's not even new funding. That stands in stark contrast to the package fuel refineries got. So, on the one hand, we take away funding—$70 million—from ARENA to theoretically go towards a Future Fuels Strategy, but we put $2 billion towards gas guzzlers.

The strategy is unambitious and contains questionable modelling to justify no action. There is a do-nothing strategy. There are no vehicle efficiency standards or vehicle transition targets and there's no money for support towards those transitions. How could we expect any more from a government which, with due respect, is known for saying—and a Prime Minister who is known for saying—electric vehicles would 'steal the weekend' at the last election? It is so embarrassing and out of touch and it's so contrary to any principle of actually ensuring Australia is on the front foot of new technology and actually enabled to embrace opportunities.

With a lack of federal government action, we're seeing a dysfunctional policy from state governments. We're seeing the Victorian parliament pass a bill that would institute the world's first EV tax and then we have just a completely disparate and uncoordinated approach around the country. That's because the federal government is not taking up the responsibility. It is shirking its responsibility. We need a coordinated and meaningful national plan to transition our transport. The other sad part is that the package doesn't ensure jobs. There's no bang for our buck on this one. The return on investment is terrible. There are way better ways to spend so much public money.

There will be a maximum of 1,750 construction jobs and support for about 1,250 existing jobs, so that's about 3,000 jobs. With a package costing a potential $2.3 billion by 2030, that is almost $800,000 per job. If you spend $800,000, for example, on renewables, you could generate up to four times the jobs. Look at it another way: if you spent $2.3 billion on renewables, you would generate up to 12,560 jobs. This government is always claiming that it focuses on job creation, and yet time and again it ignores the industries, the mechanisms and the technologies by which more jobs can in fact be created.

We have such enormous potential to win the transition race. We could actually be fuel secure, reduce our pollution and benefit economically. Last month we saw Queensland's Tritium list on the Nasdaq with a valuation of over $1.8 billion. The reason? Tritium are supplying the world with high quality Australian EV chargers. You can see the charging stations dotted around Europe and the United States. We have several in Australia, but we don't have anywhere near the policy mechanism to actually support the rollout. We can process minerals for EVs. We can make batteries. We can build charging infrastructure. We can build the software for the clean technology revolution right here in Australia, if there was just the political will to do it. If an equivalent amount of this fuel security package could be spent towards a transition and some vision for the future, we might actually have some opportunities. I don't disagree with supporting the oil refineries and fuel sectors more generally at the moment, but, at a time of record debt, good governance requires a sensible plan for an orderly transition away from this dependence on oil across all the affected sectors. If we ignore the problem and fail to do this, the transition will occur regardless of whether Australia likes it or not and regardless of whether politically it is palatable or not. That transition is happening all around the world. We have two choices for this government: it can be done in a highly disruptive way, because we failed to have a coordinated response and plan, or it can happen in an orderly way. For it to happen in an orderly way, it requires some planning and transition policy.

The government policy must be used for a smooth transition and make it as least disruptive as possible on communities, on our economy and on our private sector. I implore the government, especially the Prime Minister: we need a parallel plan to support the transition and to explore the economic opportunities that come with it after coming back from G7, where we're positioning Australia. At the end of the day, our children will pay the price for the lack of vision and leadership in coordinating a transition.