Lack of cargo ships and lax fuel security leaves Australia exposed

Australia is ludicrously, irresponsibly, culpably, madly unprepared for any serious external national security emergency where the Americans don’t ride to our rescue.

Take two critical examples: cargo ships, and fuel security.

Once we had more than 100 cargo ships flagged and or controlled by Australia. Now we have 13. That’s right, 13. Four of these are dedicated LNG tankers that will soon be replaced by foreign vessels.

By comparison, Britain, about two and a half times our population and with a similar standard of living to us, has something like 470 such vessels.

In the normal scheme of things, not owning anything can be a cheap way to operate. We are wealthy because of iron ore, coal and other bulk commodities. As a Harvard study showed, we are the simplest and least-sophisticated economy of any nation in the world at our standard of living.

We use our mineral wealth to pay for a services economy that finances good hospitals and well resourced universities. In both those we do some clever things. But as far as possible, we make nothing in Australia and buy it all from overseas.

If the world is perfectly peaceful, and you’re confident your minerals will last forever, that accords with economic theory and will maximise your income.

But national security trumps economic theory, or it should do. If the world is messy, and it mostly is, you’re in trouble very fast.

Our true national security policy has long been contained in five words: America will look after us. We better pray the Americans are always able and inclined to come to our rescue.

A civilian cargo shipping fleet is an essential element of national security. We don’t have one. Unlike almost any other developed nation, we couldn’t be bothered.

Vice Admiral Tim Barrett says Australia is afflicted by “sea blindness”. We are not “girt by sea” but girt by beach. We cannot see beyond the breakers.

In World War II, as Barrett points out, we lost more merchant sailors than navy sailors. Our cargo ships kept us alive. That won’t happen next time because we don’t have cargo ships.

Appalling industrial relations in our ports is one factor that killed our shipping industry. Therefore we need strategic government intervention. Every developed nation that has cargo ships does this. Barrett, who is on the board of Maritime Industry Australia Limited, says we could not in an emergency guarantee supply of our own fuel, pharmaceuticals, key agricultural products or many of the other things critical to a modern economy.

His views on this are shared by former deputy prime minister, John Anderson; Australian Industry Group chief Innes Willox; Australian Strategic Policy Institute head Peter Jennings; and indeed everyone else who knows the field that I spoke to.

Willox says we are perhaps more vulnerable to external shock than at any time since World War II.

Michael McCormack, the Deputy Prime Minister and Transport Minister, says the government is working on the issue and rules out deregulating the industry (though it is well capable of disappearing without deregulation), building a strategic fleet or paying big subsidies.

Naturally, he blames Labor. But we have had a conservative government since 2013 and we now have just 13 ships. Here’s the truth: the government doesn’t take this issue seriously because as a nation we don’t altogether take ourselves seriously.

Consider fuel security. Last week, we learnt we would lose another oil refinery, leaving us with a pitiful two refineries.

We have no strategic fuel reserve in Australia. According to the International Energy Agency, we are supposed to have 90 days reserve. But really I couldn’t care less about the IEA. It’s obvious if a crisis comes we would need a reserve in Australia.

Ninety days is no more than a useful benchmark for the obvious, incontrovertible and strategic common sense: we need a strategic fuel reserve in Australia.

Again, this contradicts free market theory. It’s cheapest to do everything “just in time”. So why store fuel, when that costs money? It’s cheaper to buy it just in time, every time. Well, of course, in the real world you might get a pandemic-induced disruption much worse than COVID. Or a colossal natural disaster. Or, most likely of all, geo-strategic and military disruption.

So long as the Americans insist on looking after our security, we are probably OK, but we are too lousy and too short-sighted to look after ourselves. Nearly a year ago, Energy Minister Angus Taylor announced that he had bought us a fuel reserve. And where is it? In the US of course, because we don’t have any storage capacity.

Remember again that since 2013 we have had a national security-focused conservative government in Canberra. And then remember that 15 years ago we had eight refineries, one year ago we had four, and soon we will have two. At the same time as we bought our US-based reserve, which is only of use to us if there is no emergency, that is to say in circumstances where we won’t need to use it at all, Taylor also announced we would build storage facilities in Australia; fuel farms.

So one year later, how’s that going?

You’ll be pleased to hear that a grants process is in train to see if folks will apply for a government grant in order to get paid to build a fuel farm. Operating at warp speed, work just might commence by the end of this year. Another year or two and a fuel farm might actually be built.

One of the drollest observations on our national security was that in the time we take to write a defence white paper, China conquered and militarised the South China Sea. We are happy campers in a row boat notionally chasing an ocean liner disappearing over the horizon.

Despite all the government’s many counting and accounting tricks, we have a little more than three weeks supply of most types of fuel. Even when, or if, the fuel farms are all built, we still won’t keep a 90-day reserve supply onshore but a good deal of that will be in ships on the oceans. This is a brilliant policy, Carruthers, provided there is never, ever going to be any trouble.

Taylor is not the villain here. He has done more than his predecessors. The Morrison government inherited our woeful vulnerability born out of our long complacency. But it is not answering the problems with anything like the urgency they need.

Extracted from The Australian

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