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<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>FYI, Todays AFR, 30 May 2006, Opinion Piece<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Transport fuel the big worry<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>May 30<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'> Allan Fels<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>There is a lot more to the Howard government's sudden tilt
to nuclear energy than politics.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>While Prime Minister John Howard and Opposition Leader Kim
Beazley manoeuvre for political advantage on the trio of nuclear issues -
uranium mining, enrichment and nuclear power - Howard's cabinet is also aware
the nation faces a looming energy black spot that could make high petrol prices
appear benign.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Senior cabinet ministers recently held an informal
discussion on an issue that is starting to cause heartburn from <st1:country-region
w:st="on">America</st1:country-region> to <st1:place w:st="on">Europe</st1:place>:
energy security.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>With high oil prices, <st1:country-region w:st="on">US</st1:country-region>
President George Bush has starkly warned that the <st1:country-region w:st="on">United
States</st1:country-region> has become addicted to <st1:place w:st="on">Middle
East</st1:place> oil. West Europeans are alarmed at <st1:country-region w:st="on"><st1:place
w:st="on">Russia</st1:place></st1:country-region>'s use of energy nationalism
in Gazprom's actions against neighbours. With vast coal and reasonable gas
resources, <st1:country-region w:st="on"><st1:place w:st="on">Australia</st1:place></st1:country-region>
is relatively well off for stationary energy, although nuclear power generation
adds a twist to the emissions debate.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Transport energy is the shocker. Until a few years ago, <st1:country-region
w:st="on"><st1:place w:st="on">Australia</st1:place></st1:country-region> was a
net oil and gas exporter. That changed in 2003-04, and is rapidly
deteriorating. The deficit was $3 billion in 2004-05, and for calendar 2005
reached $4.7billion. A study for the Australian Petroleum Production and
Exploration Association says the deficit could be anywhere between $12 billion
and $25billion a year within nine years.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><st1:country-region w:st="on"><st1:place w:st="on"><font
size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'>Australia</span></font></st1:place></st1:country-region><font
size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'> now is not
just importing oil for refining, it is increasingly importing refined petrol to
meet rising demand. A few years ago, BP, one of the major local refiners,
imported no refined product. It now brings in 100 shiploads a year, and expects
that to increase to 300 shiploads by 2010. <st1:country-region w:st="on"><st1:place
w:st="on">Australia</st1:place></st1:country-region>'s problem, as cabinet
discussed, is that demand is blowing out, forcing up imports at the same time
as local production is falling away. <st1:country-region w:st="on"><st1:place
w:st="on">Australia</st1:place></st1:country-region> was 78 per cent self-sufficient
in oil and refined product in 2003-04. That will drop to 50 per cent by 2030.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>An energy squeeze is coming. It will be costly and possibly
threatening.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Studies by the Australian Bureau of Agricultural and
Resource Economics to model the effect of high petrol prices show Australia's
gross national product could be hit anywhere between 0.8 and 1.2 per cent
between now and 2010, if oil prices stay above a "reference price"
that results in it gradually falling back to $US31 barrel. Oil is now about
$US70 a barrel.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Price and economic shocks aside, oil will increasingly come
from unstable areas of the world, the Middle East, <st1:country-region w:st="on">Russia</st1:country-region>
and <st1:place w:st="on">West Africa</st1:place>. Any supply disruption in,
say, the Malacca Strait could cause shortages in Australia, which has no stockpiles
and only a few days' supply between shipping terminal, refinery and service
stations.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Cue the cabinet debate. The prospect of surging demand and
lower local production creating a huge current account deficit concentrates
minds about the nation's energy security.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Industry Minister Ian Macfarlane will meet oil companies and
the renewables industry on Thursday for an update on their action plan to meet
the government's target of blending 350million litres of ethanol into petrol by
2010. The target will probably be met, but at less than 1per cent of petrol
usage, it is a drop in the proverbial bucket.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><st1:City w:st="on"><st1:place w:st="on"><font size=2
face=Arial><span style='font-size:10.0pt;font-family:Arial'>Canberra</span></font></st1:place></st1:City><font
size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'> will need
to manifoldly increase this target if ethanol is to meet its promise of
replacing some foreign oil and also aiding the environment. One idea is to
require oil companies to use an oxygenate in petrol, as the <st1:country-region
w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region> does, to
burn it more efficiently, getting rid of many tailpipe nasties. This would in
effect mandate an ethanol blend in petrol.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Renewables aside, cabinet discussed the potential of
alternative fuels such as LPG, gas-to-liquid and coal-to-liquid technologies.
Oil at $US40 a barrel makes coal-to-liquid economic, and <st1:country-region
w:st="on"><st1:place w:st="on">Australia</st1:place></st1:country-region> has
vast coal deposits.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><st1:country-region w:st="on"><font size=2 face=Arial><span
style='font-size:10.0pt;font-family:Arial'>China</span></font></st1:country-region><font
size=2 face=Arial><span style='font-size:10.0pt;font-family:Arial'> and the <st1:country-region
w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region> are both
looking at coal-to-liquid plants.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>If <st1:country-region w:st="on">China</st1:country-region>,
with its similarly large coal reserves and mounting energy security paranoia,
ever embraces the technology it could cause a stampede.With <st1:country-region
w:st="on">Australia</st1:country-region>'s unique renewable and alternative
fuels potential, taking a lead could create opportunities in <st1:place w:st="on">Asia</st1:place>
for our technology.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>The real energy challenge for <st1:country-region w:st="on"><st1:place
w:st="on">Australia</st1:place></st1:country-region> is not whether it uses
its plentiful supplies of coal or uranium to fire power stations. It is how the
nation copes with its looming transport energy gap. It would be tragic if <st1:country-region
w:st="on"><st1:place w:st="on">Australia</st1:place></st1:country-region>'s
future energy security were viewed only through the media and political prism
of nuclear energy, rather than the broader bio-fuel and alternative energy
potential.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Allan Fels is dean of the <st1:country-region w:st="on"><st1:place
w:st="on">Australia</st1:place></st1:country-region> and New Zealand School of
Government and a former chairman of the ACCC. Fred Brenchley is a former editor
of the AFR.<o:p></o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'><o:p> </o:p></span></font></p>
<p class=MsoNormal><font size=2 face=Arial><span style='font-size:10.0pt;
font-family:Arial'>Christal George<br>
</span></font><font size=2 face=Arial><span lang=EN-US style='font-size:10.0pt;
font-family:Arial'>Corporate Ethics Researcher<br>
Centre for Australian Ethical Research (CAER)<br>
<st1:address w:st="on"><st1:Street w:st="on">PO Box</st1:Street> 229</st1:address>,
Belconnen ACT 2616<br>
Ph: +61 2 6201 1957<br>
Fax: + 61 2 6201 1987<br>
E-mail: <a href="mailto:cgeorge@caer.org.au" title="mailto:psloane@caer.org.au">cgeorge@caer.org.au</a><br>
Web: <a href="http://www.caer.org.au" title="http://www.caer.org.au/">www.caer.org.au</a></span></font><o:p></o:p></p>
<p class=MsoNormal><font size=3 face="Times New Roman"><span style='font-size:
12.0pt'><o:p> </o:p></span></font></p>
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