1 00:00:04,160 --> 00:00:07,000 S1: You've noticed the hike in prices at the petrol pump, 2 00:00:07,000 --> 00:00:10,360 S1: but how high might prices go? And are we at 3 00:00:10,360 --> 00:00:13,920 S1: risk of running out of petrol? I'm Samantha Selinger Morris, 4 00:00:13,920 --> 00:00:16,720 S1: and you're listening to Morning Edition from The Age and 5 00:00:16,720 --> 00:00:20,919 S1: The Sydney Morning Herald. Today, energy reporter Nick Toscano on 6 00:00:20,920 --> 00:00:24,360 S1: what plans our government and fuel companies have to manage 7 00:00:24,360 --> 00:00:27,680 S1: this crisis, and how long it might take for prices 8 00:00:27,680 --> 00:00:32,360 S1: to return to normal. It's March the 24th. Hey, Nick. 9 00:00:32,360 --> 00:00:33,640 S1: Welcome back to the pod. 10 00:00:33,680 --> 00:00:35,440 S2: Hey, Sam. Thanks for having me back. 11 00:00:35,640 --> 00:00:38,160 S1: Oh, I'm so happy to have you back because I'm 12 00:00:38,159 --> 00:00:41,120 S1: sure many listeners are like myself and they're quite confused 13 00:00:41,120 --> 00:00:43,880 S1: by this. So before we get into everything that's been happening, 14 00:00:44,200 --> 00:00:46,360 S1: can you just tell us where we actually get our 15 00:00:46,360 --> 00:00:47,879 S1: fuel from in Australia? 16 00:00:48,200 --> 00:00:50,760 S2: Sure. Well, I guess that's a question with an answer 17 00:00:50,760 --> 00:00:54,160 S2: that's changed quite a bit over the past couple of decades. Australia. 18 00:00:54,520 --> 00:00:57,080 S2: We once had a considerable fleet of our own domestic 19 00:00:57,080 --> 00:01:00,680 S2: oil refineries. So these are the sort of sprawling industrial 20 00:01:00,680 --> 00:01:04,640 S2: complexes of pipes, machines and giant chimney stacks that turn 21 00:01:04,680 --> 00:01:07,440 S2: crude oil into the fuels that we actually use every day, 22 00:01:07,480 --> 00:01:10,600 S2: like petrol, diesel and aviation fuel. At the turn of 23 00:01:10,600 --> 00:01:14,520 S2: the century, we had eight oil refineries spread across the country. 24 00:01:14,520 --> 00:01:17,880 S2: That produced not all, but a good chunk of our 25 00:01:17,920 --> 00:01:22,440 S2: liquid fuel needs. Today, we're left with just two. That's 26 00:01:22,440 --> 00:01:24,920 S2: the Geelong oil refinery in Victoria, which is run by 27 00:01:24,959 --> 00:01:28,040 S2: Viva Energy and the Lytton oil refinery in Brisbane, which 28 00:01:28,040 --> 00:01:32,160 S2: is operated by Ampol. So I guess what's happened is 29 00:01:32,160 --> 00:01:34,559 S2: that refined fuels in this day and age are so 30 00:01:34,560 --> 00:01:37,360 S2: widely available from so many different parts of the world 31 00:01:37,360 --> 00:01:40,600 S2: that can be easily shipped to buyers anywhere as far 32 00:01:40,600 --> 00:01:45,040 S2: afield as Australia. And it's easier, simpler, and in most cases, 33 00:01:45,040 --> 00:01:48,760 S2: cheaper to import fuels into shipping terminals here instead of 34 00:01:49,280 --> 00:01:52,520 S2: going through the effort to produce them ourselves. So while 35 00:01:52,520 --> 00:01:55,480 S2: there's been a desire to, um, a strategic desire from 36 00:01:55,480 --> 00:01:59,000 S2: the industry and from governments to retain some of our 37 00:01:59,000 --> 00:02:03,800 S2: capacity to be able to produce our own fuel, Australia 38 00:02:03,800 --> 00:02:07,920 S2: has the problem of having a relatively small market, and 39 00:02:07,960 --> 00:02:12,840 S2: that means we have relatively smaller and higher cost oil refineries, 40 00:02:12,840 --> 00:02:14,920 S2: which have found themselves in the past little while just 41 00:02:14,919 --> 00:02:20,000 S2: increasingly less and less able to compete with cheaper imports 42 00:02:20,000 --> 00:02:23,400 S2: coming from the mega refineries of South East Asia in particular, 43 00:02:23,440 --> 00:02:25,200 S2: that can pump out fuels for a fraction of the 44 00:02:25,200 --> 00:02:27,960 S2: cost and have really pressured the profit margins of the 45 00:02:27,960 --> 00:02:30,640 S2: plants that we have left. Then rewind a couple of 46 00:02:30,639 --> 00:02:33,560 S2: years ago, the onset of the Covid 19 pandemic, as 47 00:02:33,560 --> 00:02:37,519 S2: we saw, you know, basically brought travel and petrol and 48 00:02:37,520 --> 00:02:41,400 S2: diesel use to an absolute standstill everywhere. And that was 49 00:02:41,440 --> 00:02:44,200 S2: sort of the final crushing blow for, um, for a 50 00:02:44,200 --> 00:02:47,040 S2: couple of the last refineries that we did have in 51 00:02:47,080 --> 00:02:50,280 S2: Perth and another one in Melbourne's western suburbs. So that 52 00:02:50,280 --> 00:02:52,639 S2: forced the closures of two more, leaving us with just 53 00:02:52,639 --> 00:02:56,840 S2: two remaining. And that's left us reliant on imported fuels 54 00:02:56,840 --> 00:03:00,760 S2: from places including, but not limited to Malaysia, Singapore, Korea, 55 00:03:00,800 --> 00:03:04,320 S2: China for our fuel needs and we get smaller amounts 56 00:03:04,320 --> 00:03:07,160 S2: from from the Middle East and from America. So as 57 00:03:07,160 --> 00:03:11,120 S2: things stand today, imported products account for about 90% of 58 00:03:11,120 --> 00:03:12,760 S2: our total liquid fuel needs. 59 00:03:12,960 --> 00:03:15,440 S1: And, you know, this has gone beyond the headlines now 60 00:03:15,440 --> 00:03:18,040 S1: because we are seeing the impact on prices at the 61 00:03:18,040 --> 00:03:20,880 S1: petrol pump right across the country. So can you just 62 00:03:20,880 --> 00:03:24,160 S1: explain to us how this war is driving prices? 63 00:03:24,360 --> 00:03:26,560 S2: Well, since the outbreak of the war a couple of 64 00:03:26,560 --> 00:03:30,400 S2: weeks ago now, the price of petrol has shot up dramatically. It's, uh, 65 00:03:30,400 --> 00:03:33,040 S2: it's gone up 30% in the space of a couple 66 00:03:33,080 --> 00:03:35,400 S2: of weeks. It's actually reached an all time high. We've 67 00:03:35,400 --> 00:03:39,240 S2: never seen prices national average prices this high. We're at 68 00:03:39,240 --> 00:03:42,960 S2: $2.19 a litre for unleaded, which is a record. So 69 00:03:42,960 --> 00:03:45,040 S2: primarily the high cost of petrol comes down to one 70 00:03:45,040 --> 00:03:47,840 S2: thing most of all. And that's the fact that the 71 00:03:47,840 --> 00:03:50,040 S2: price of oil, the cost of a barrel of oil 72 00:03:50,040 --> 00:03:53,160 S2: has surged faster and higher than we've seen for years 73 00:03:53,160 --> 00:03:55,800 S2: and years. The cost of a barrel of oil before 74 00:03:55,800 --> 00:03:57,640 S2: the war, at the start of the year, was about 75 00:03:57,640 --> 00:04:01,960 S2: 70 USD a barrel, and that's blown past the $100 mark. 76 00:04:02,120 --> 00:04:06,360 S2: It's even briefly touched $120 a barrel. Crude oil is 77 00:04:06,440 --> 00:04:09,760 S2: is the natural resource that is refined into petrol, diesel 78 00:04:09,760 --> 00:04:12,320 S2: and jet fuel and therefore makes up the biggest and 79 00:04:12,320 --> 00:04:15,600 S2: most important and I guess most volatile input costs to 80 00:04:15,640 --> 00:04:17,920 S2: the fuel that we use. The reason this has happened, Sam, 81 00:04:17,920 --> 00:04:20,640 S2: is that countries in the Middle East and around the 82 00:04:20,640 --> 00:04:23,200 S2: Persian Gulf, where much of the fighting is taking place, 83 00:04:23,200 --> 00:04:27,480 S2: so we're thinking Iran, Saudi Arabia, the United Arab Emirates, Bahrain, 84 00:04:27,480 --> 00:04:30,480 S2: they account for a massive chunk of the world's overall 85 00:04:30,480 --> 00:04:33,880 S2: supply of oil, and a good portion of that supply 86 00:04:33,880 --> 00:04:37,080 S2: is now disrupted. The biggest cause there is that Iran 87 00:04:37,080 --> 00:04:40,120 S2: has done something that energy markets and governments around the 88 00:04:40,120 --> 00:04:41,760 S2: world have long feared it would do if it ever 89 00:04:41,760 --> 00:04:45,520 S2: came under attack. And that's forcing the effective shutdown of 90 00:04:45,680 --> 00:04:48,680 S2: a shipping corridor, which you're no doubt familiar with now 91 00:04:48,680 --> 00:04:52,960 S2: called the Strait of Hormuz, which is off Iran's southern coast. Typically, 92 00:04:53,360 --> 00:04:57,320 S2: in ordinary times, that shipping channel accounts for about one 93 00:04:57,320 --> 00:05:01,160 S2: fifth of all the world's oil and natural gas supplies, 94 00:05:01,680 --> 00:05:05,679 S2: and that's basically come to a complete standstill, a complete halt. Now, 95 00:05:05,720 --> 00:05:08,720 S2: Iran has been threatening to attack any foreign oil tankers 96 00:05:08,720 --> 00:05:12,000 S2: that attempt to pass the strait. And that's basically left 97 00:05:12,000 --> 00:05:16,080 S2: all this oil and refined fuel from those Persian Gulf 98 00:05:16,080 --> 00:05:19,440 S2: countries with essentially no way to exit, with essentially no 99 00:05:19,440 --> 00:05:22,560 S2: way to get their oil out into the ocean and 100 00:05:22,560 --> 00:05:25,360 S2: take it to customers who want it. The world has 101 00:05:25,360 --> 00:05:28,440 S2: been trying to reduce its reliance on oil and other 102 00:05:28,440 --> 00:05:30,760 S2: fossil fuels for a long time now by pushing harder 103 00:05:30,760 --> 00:05:34,000 S2: to add more renewables and drive electric vehicle uptake. But 104 00:05:34,000 --> 00:05:36,880 S2: oil is still hugely important. The world consumes in excess 105 00:05:36,880 --> 00:05:41,720 S2: of 100 million barrels of oil every day. And the 106 00:05:41,720 --> 00:05:43,880 S2: stuff that's stuck in the Persian Gulf now, that's about 107 00:05:43,880 --> 00:05:46,920 S2: 20 million barrels. So it's it's literally 20% of our 108 00:05:46,920 --> 00:05:47,800 S2: overall supply. 109 00:05:48,279 --> 00:05:51,160 S1: Wow. And of course, we've seen reports of people panic 110 00:05:51,160 --> 00:05:54,400 S1: buying and petrol stations being out of petrol. So how 111 00:05:54,400 --> 00:05:57,320 S1: bad is the problem? Like, are we actually at risk 112 00:05:57,320 --> 00:05:58,640 S1: of running out of petrol? 113 00:05:59,040 --> 00:06:01,600 S2: No we're not. At least not yet. Sam, there are 114 00:06:01,600 --> 00:06:05,520 S2: localised problems that we're seeing emerge across the country, in 115 00:06:05,520 --> 00:06:09,320 S2: regional areas, in metropolitan areas as well. People are getting worried. 116 00:06:09,360 --> 00:06:11,799 S2: You know, they're reading that reading the headlines. They're seeing 117 00:06:11,800 --> 00:06:14,560 S2: prices rise. There's been what the industry is calling a 118 00:06:14,600 --> 00:06:19,320 S2: rush on demand rather than any structural supply deficit. Yet 119 00:06:19,360 --> 00:06:22,080 S2: people are filling up jerry cans with fuel to stock 120 00:06:22,080 --> 00:06:25,919 S2: at their homes. People are filling up their cars unnecessarily. 121 00:06:26,279 --> 00:06:29,200 S2: And what that's done is it's caused supply disruptions. These 122 00:06:29,200 --> 00:06:33,680 S2: are localized disruptions. The fuel industry says they're typically resolved swiftly. 123 00:06:33,880 --> 00:06:36,720 S2: But it goes to show, I guess, the volatility of 124 00:06:36,720 --> 00:06:39,000 S2: the market right now that people are making a dash 125 00:06:39,000 --> 00:06:41,719 S2: for the petrol station. People are often finding the bowsers 126 00:06:41,720 --> 00:06:44,960 S2: having run dry at the moment. Sam, there's no risk 127 00:06:44,960 --> 00:06:47,440 S2: of a shortage. The fuel industry and the federal government 128 00:06:47,480 --> 00:06:50,560 S2: say we have more than enough supplies to cover demand. So, 129 00:06:50,800 --> 00:06:53,200 S2: you know, a lot of these problems are being driven 130 00:06:53,200 --> 00:06:58,320 S2: by consumers panic buying. There are still ships arriving to Australia. 131 00:06:58,320 --> 00:07:01,200 S2: There are still lots of oil and refined fuel arriving 132 00:07:01,200 --> 00:07:05,560 S2: on our shores. We have a significant national stockpile of fuel, 133 00:07:05,800 --> 00:07:08,279 S2: enough to cover more than a month's worth of typical 134 00:07:08,279 --> 00:07:11,040 S2: demand of diesel and petrol. We still have more than 135 00:07:11,040 --> 00:07:12,800 S2: a month's worth there, even though we've released some of 136 00:07:12,840 --> 00:07:16,760 S2: that recently. So things aren't at the pointy end yet, 137 00:07:16,760 --> 00:07:20,280 S2: even though we're seeing prices rise. I guess the sense 138 00:07:20,280 --> 00:07:22,080 S2: coming out of the fuel industry and the people that 139 00:07:22,080 --> 00:07:24,560 S2: I've spoken to over the past week, is that things 140 00:07:24,560 --> 00:07:27,120 S2: are okay now, but a lot will depend on what 141 00:07:27,120 --> 00:07:29,760 S2: happens next and how long this goes for. And if 142 00:07:29,800 --> 00:07:33,400 S2: we're still having this conversation in a month's time. It'll 143 00:07:33,440 --> 00:07:34,640 S2: be a different conversation. 144 00:07:39,480 --> 00:07:40,440 S1: After the break. 145 00:07:40,720 --> 00:07:42,920 S2: I think what will happen first is if there's no 146 00:07:42,920 --> 00:07:46,240 S2: resolution to this conflict, and suppliers continue to come under 147 00:07:46,240 --> 00:07:48,760 S2: pressure and be choked into the Asian regions, you will 148 00:07:48,760 --> 00:07:51,400 S2: see prices rise even potentially rise even further than they're 149 00:07:51,400 --> 00:07:54,800 S2: trading at now. Beyond that, there could well be a 150 00:07:54,800 --> 00:07:56,600 S2: shortage of product coming into Australia. 151 00:08:04,120 --> 00:08:06,760 S1: And so how is it that ships fuel are still 152 00:08:06,800 --> 00:08:08,880 S1: making their way to Australia. Is it because these are 153 00:08:08,880 --> 00:08:11,160 S1: ships that had already sort of stocked up on the 154 00:08:11,160 --> 00:08:13,400 S1: fuel from the Persian Gulf, and they'd already sort of 155 00:08:13,440 --> 00:08:16,120 S1: been made their way before the Straits of Hormuz essentially 156 00:08:16,120 --> 00:08:16,880 S1: was closed. 157 00:08:17,160 --> 00:08:20,000 S2: Well, again, Australia gets most of its fuel, not from 158 00:08:20,000 --> 00:08:23,040 S2: the Middle East. We source most of our fuel and 159 00:08:23,040 --> 00:08:26,760 S2: some of our oil from the Asian region in particular. 160 00:08:26,800 --> 00:08:29,640 S2: There are bigger sources of supply. The problem that we're 161 00:08:29,640 --> 00:08:34,160 S2: seeing emerge now, the problem that's coming into view is 162 00:08:34,160 --> 00:08:37,160 S2: that the Asian region sources much of its crude oil 163 00:08:37,200 --> 00:08:40,200 S2: to process into fuels at its mega refineries from the 164 00:08:40,200 --> 00:08:44,079 S2: Middle East. And there's been a notable drop off of 165 00:08:44,080 --> 00:08:48,959 S2: oil tankers arriving in Asia. That's going to eventually disrupt 166 00:08:48,960 --> 00:08:52,319 S2: the traditional flow of oil and fuels that we source from. 167 00:08:52,920 --> 00:08:55,240 S2: At the same time, that problem is being made worse 168 00:08:55,240 --> 00:08:57,840 S2: by the fact that China, a huge customer and a 169 00:08:57,840 --> 00:09:02,240 S2: huge supplier of refined fuels, have basically cut off their exports. 170 00:09:02,240 --> 00:09:05,400 S2: They typically account for 15% of the Asian market. They've 171 00:09:05,400 --> 00:09:07,199 S2: put a halt on all that. That's going to hit 172 00:09:07,200 --> 00:09:08,480 S2: home eventually, too. 173 00:09:08,850 --> 00:09:11,089 S1: And so what are the contingency plans then? Like what 174 00:09:11,090 --> 00:09:13,570 S1: is the government and fuel companies? What have they said 175 00:09:13,570 --> 00:09:14,690 S1: that they're going to do about it? 176 00:09:14,929 --> 00:09:17,329 S2: Well, the first and most important thing I think, that 177 00:09:17,330 --> 00:09:19,250 S2: the federal government has done is they've tapped into the 178 00:09:19,250 --> 00:09:23,209 S2: strategic reserve, the strategic stockpile of fuel to provide something 179 00:09:23,250 --> 00:09:27,210 S2: of a buffer. Australia is in breach of its requirement 180 00:09:27,370 --> 00:09:30,250 S2: as a member of the International Energy Agency to hold 181 00:09:30,250 --> 00:09:33,449 S2: 90 days worth of refined fuel products, but we still 182 00:09:33,450 --> 00:09:35,970 S2: have more than a month's worth of supply. I think 183 00:09:35,970 --> 00:09:39,210 S2: it's 3 or 4,000,000,000l at last check of fuels. The 184 00:09:39,210 --> 00:09:42,809 S2: energy minister, Chris Bowen, has decided to release, I think, 185 00:09:42,850 --> 00:09:44,970 S2: 5 or 6 days worth of petrol and diesel to 186 00:09:45,010 --> 00:09:47,929 S2: help provide that sort of cushion and help insulate us 187 00:09:47,929 --> 00:09:51,170 S2: from the from the effect of of any shock. There 188 00:09:51,170 --> 00:09:53,370 S2: may be another draw down soon, we don't know. The 189 00:09:53,370 --> 00:09:55,970 S2: other thing is other initiatives that have that have happened 190 00:09:55,970 --> 00:09:58,850 S2: in the past couple of weeks have been a decision 191 00:09:58,850 --> 00:10:03,530 S2: to enable Ampol, which is the operator of the Lytton 192 00:10:03,530 --> 00:10:07,970 S2: oil refinery in Brisbane, to supply the market with fuel 193 00:10:07,970 --> 00:10:11,610 S2: that would ordinarily be in breach of emissions limits for 194 00:10:11,610 --> 00:10:14,450 S2: Australian vehicles feel that it would normally export. It's now 195 00:10:14,490 --> 00:10:17,929 S2: delivering into the local market. Ampol has also delayed a 196 00:10:17,929 --> 00:10:21,689 S2: planned maintenance closure of the Lytton oil refinery. It was 197 00:10:21,690 --> 00:10:23,850 S2: going to come offline for a couple of months as 198 00:10:23,850 --> 00:10:26,450 S2: of June. That's now been pushed back to April to 199 00:10:26,490 --> 00:10:29,450 S2: enable it to pump out another 300,000,000l of fuel product 200 00:10:29,450 --> 00:10:30,329 S2: into the economy. 201 00:10:30,450 --> 00:10:32,810 S1: And so you've mentioned there that sort of month, Mark, 202 00:10:32,850 --> 00:10:35,090 S1: you know, should we be talking about this in another month? 203 00:10:35,130 --> 00:10:37,370 S1: Should this war still be going on? And the Straits 204 00:10:37,370 --> 00:10:40,850 S1: of Hormuz closed for another month? That might be, I guess, 205 00:10:40,890 --> 00:10:42,890 S1: a sort of tipping point. Is it like, is that 206 00:10:42,890 --> 00:10:45,570 S1: when things might start to get a bit more serious 207 00:10:45,570 --> 00:10:47,610 S1: in terms of us looking down the barrel of a 208 00:10:47,610 --> 00:10:50,130 S1: possible real significant fuel shortage? 209 00:10:50,770 --> 00:10:54,410 S2: That's the prevailing fear. I think what will happen first 210 00:10:54,410 --> 00:10:57,210 S2: is if there's no resolution to this conflict, and suppliers 211 00:10:57,210 --> 00:11:00,210 S2: continue to come under pressure and be choked into the 212 00:11:00,210 --> 00:11:02,850 S2: Asian regions, you will see prices rise even potentially rise 213 00:11:02,850 --> 00:11:06,370 S2: even further than they're trading at now. Beyond that, there 214 00:11:06,370 --> 00:11:09,130 S2: could well be a shortage of product coming into Australia. 215 00:11:09,170 --> 00:11:11,370 S2: And the other thing the fuel industry is doing in 216 00:11:11,370 --> 00:11:13,290 S2: response to all this is they're working around the clock 217 00:11:13,290 --> 00:11:16,010 S2: to try and lock in additional sources of supply from 218 00:11:16,050 --> 00:11:19,530 S2: countries where we wouldn't normally source a huge amount of 219 00:11:19,530 --> 00:11:23,530 S2: of our refined product from, including the EU and including 220 00:11:23,530 --> 00:11:25,890 S2: North America to try and make up to try and 221 00:11:25,929 --> 00:11:28,650 S2: offset the declines that we're seeing into Asia. 222 00:11:29,010 --> 00:11:30,730 S1: Okay. Well, let's look at the other side of the coin, 223 00:11:30,730 --> 00:11:33,330 S1: which is the question that if the war ends tomorrow, 224 00:11:33,370 --> 00:11:35,650 S1: how long would it take for prices to drop and 225 00:11:35,650 --> 00:11:37,090 S1: the supply to go back to normal? 226 00:11:37,410 --> 00:11:39,850 S2: That's a good question. There would be an impact seen 227 00:11:39,850 --> 00:11:44,370 S2: almost immediately. Prices would begin to ease. Obviously petrol prices 228 00:11:44,370 --> 00:11:47,569 S2: take longer to to fall than they do to rise 229 00:11:47,570 --> 00:11:50,490 S2: in these sorts of scenarios. But the fact of the 230 00:11:50,490 --> 00:11:54,130 S2: matter is the world has no shortage of oil and 231 00:11:54,130 --> 00:11:56,810 S2: of refined fuels. What's happened here is that there is 232 00:11:56,809 --> 00:11:59,410 S2: this this huge disruption, this at this choke point that's 233 00:11:59,410 --> 00:12:02,130 S2: causing this big bottleneck. Before the outbreak of the war, 234 00:12:02,410 --> 00:12:04,929 S2: the oil price was at 70 USD a barrel in 235 00:12:04,929 --> 00:12:09,090 S2: a context of a weak global economy, rising inflation, which 236 00:12:09,090 --> 00:12:12,610 S2: led to subdued demand. so the world had more oil, 237 00:12:12,809 --> 00:12:16,810 S2: more oil and fuel than it needs. Nothing structurally changed 238 00:12:16,809 --> 00:12:19,329 S2: over the past two weeks that would change that environment. 239 00:12:19,330 --> 00:12:22,890 S2: It would return to an environment of oversupply, but there 240 00:12:22,890 --> 00:12:25,690 S2: would be some impacts that would take longer to recede. 241 00:12:25,809 --> 00:12:28,729 S2: Not only is there the Strait of Hormuz being blockaded, 242 00:12:28,730 --> 00:12:31,490 S2: but there's also now been, especially over the past week, 243 00:12:31,850 --> 00:12:36,569 S2: serious damage inflicted on oil and natural gas infrastructure in 244 00:12:36,570 --> 00:12:40,810 S2: the region. There's actual, you know, actual refineries, actual production 245 00:12:41,090 --> 00:12:43,290 S2: fields that have been that have been blown up or 246 00:12:43,290 --> 00:12:45,530 S2: that have been that have been struck by drones or 247 00:12:45,890 --> 00:12:48,929 S2: what have you. To return to your question, it may 248 00:12:48,970 --> 00:12:51,650 S2: take a lot longer than just the reopening of the 249 00:12:51,650 --> 00:12:54,610 S2: Strait of Hormuz. For all of that price pain to proceed, 250 00:12:54,650 --> 00:12:56,930 S2: given the world may take longer for supplies to catch 251 00:12:56,929 --> 00:12:57,490 S2: up again. 252 00:12:57,809 --> 00:13:00,090 S1: What you've just mentioned there, of course, the gas production 253 00:13:00,090 --> 00:13:02,130 S1: sites that have been hit in strikes. And that brings 254 00:13:02,130 --> 00:13:03,890 S1: me to what I wanted to ask you about, which 255 00:13:03,890 --> 00:13:07,010 S1: is that will other sources of energy be affected in 256 00:13:07,010 --> 00:13:09,890 S1: Australia with regards to what's, of course, going on in 257 00:13:09,890 --> 00:13:10,930 S1: and around Iran? 258 00:13:11,330 --> 00:13:13,209 S2: The other big commodity that's been affected by all this 259 00:13:13,210 --> 00:13:15,530 S2: is natural gas, which is a fuel that's used in 260 00:13:15,530 --> 00:13:18,730 S2: Australia and around the world for cooking, for heating, for 261 00:13:18,730 --> 00:13:21,610 S2: hot water. It's used to power our electric grids and 262 00:13:21,610 --> 00:13:25,209 S2: it's used in a range of industrial processes. Qatar is 263 00:13:25,410 --> 00:13:29,930 S2: the world's second biggest supplier of liquefied natural gas. So 264 00:13:29,970 --> 00:13:33,610 S2: that's our LNG. That's natural gas that has been super 265 00:13:33,610 --> 00:13:35,690 S2: cooled down to the point that it becomes a liquid, 266 00:13:35,690 --> 00:13:37,810 S2: and then it can be put onto ships to be 267 00:13:37,809 --> 00:13:41,850 S2: sent around the world. Qatar's main LNG production hub was 268 00:13:41,850 --> 00:13:44,370 S2: hit by a drone strike in the early days of 269 00:13:44,410 --> 00:13:48,050 S2: this conflict in itself, that knocked out about one fifth 270 00:13:48,050 --> 00:13:51,530 S2: of the world's LNG supply. Qatar is a major supplier 271 00:13:51,530 --> 00:13:55,329 S2: to Asia, and Asian economies are very heavily dependent on 272 00:13:55,330 --> 00:13:58,210 S2: imported LNG for their energy needs. So what's happened? There 273 00:13:58,210 --> 00:14:00,530 S2: is prices have gone through the roof in Asia. They've 274 00:14:00,530 --> 00:14:04,450 S2: gone through the roof in Europe. Australia hasn't been affected 275 00:14:04,450 --> 00:14:07,490 S2: so badly, at least yet. We are a big gas 276 00:14:07,490 --> 00:14:10,890 S2: exporter ourselves. We produce a lot of gas for the 277 00:14:10,890 --> 00:14:14,130 S2: domestic and for the international markets. So far, our prices 278 00:14:14,130 --> 00:14:17,650 S2: have remained steady, even though there is often a link 279 00:14:17,650 --> 00:14:20,170 S2: between the price that we pay here and the prices 280 00:14:20,170 --> 00:14:25,050 S2: that our exporters are earning from selling cargoes into international markets. 281 00:14:25,330 --> 00:14:27,410 S2: At the moment it's been pretty steady. They've stayed around 282 00:14:27,410 --> 00:14:30,850 S2: the $10 a gigajoule mark this whole time, which is 283 00:14:31,050 --> 00:14:35,370 S2: historically quite subdued. But again, the longer this drags out 284 00:14:35,370 --> 00:14:39,410 S2: and the more there is a overall international shortage causing 285 00:14:39,410 --> 00:14:42,450 S2: a mad scramble for any spare gas supplies. There's a 286 00:14:42,450 --> 00:14:44,690 S2: fear that that could start being felt here at home 287 00:14:44,690 --> 00:14:45,170 S2: as well. 288 00:14:45,730 --> 00:14:47,730 S3: And Nick, just to wrap up, I mean, I really. 289 00:14:47,730 --> 00:14:50,130 S1: Want to ask you what the lesson is in all 290 00:14:50,170 --> 00:14:52,170 S1: of this or what it perhaps should be, because we 291 00:14:52,170 --> 00:14:54,370 S1: know that this is far from being the first oil 292 00:14:54,370 --> 00:14:57,770 S1: shock that Australians have experienced in their lifetime. There was 293 00:14:57,770 --> 00:15:03,250 S1: a massive fuel crisis in 1973, in 1979 again. So 294 00:15:03,810 --> 00:15:05,490 S1: what should we be take from all of this? 295 00:15:06,010 --> 00:15:08,770 S2: Well, I guess the biggest thing probably, Sam, is the 296 00:15:08,770 --> 00:15:13,890 S2: risks of relying on globally traded energy supplies that are 297 00:15:13,890 --> 00:15:16,930 S2: critical to our needs, but that can be essentially held 298 00:15:16,930 --> 00:15:20,810 S2: for ransom in geopolitical events like this. The closure of 299 00:15:20,810 --> 00:15:23,130 S2: the Strait of Hormuz has been something that's been long feared, 300 00:15:23,130 --> 00:15:27,010 S2: but it's never really come to pass until now. I 301 00:15:27,010 --> 00:15:30,330 S2: guess what's happening now just shows it just underscores the 302 00:15:30,330 --> 00:15:33,370 S2: significance of the threat of relying on on other countries 303 00:15:33,370 --> 00:15:41,290 S2: for our energy supplies. Advocates of renewable energy and some 304 00:15:41,290 --> 00:15:44,930 S2: political leaders say that we shouldn't be wasting this opportunity 305 00:15:44,930 --> 00:15:49,890 S2: to double down on transitioning our energy system to adopt 306 00:15:49,890 --> 00:15:53,690 S2: more sources of renewable energy, to reduce our reliance on, on, 307 00:15:53,730 --> 00:15:56,850 S2: on other countries. And yet you can't hold the wind 308 00:15:56,850 --> 00:16:01,930 S2: and the sun hostage like you can hold fossil fuels hostage. Obviously, 309 00:16:01,970 --> 00:16:05,250 S2: driving the uptake of electric vehicles speaks to the same issue. 310 00:16:05,570 --> 00:16:08,010 S2: I guess the other lesson from this is I'm not 311 00:16:08,010 --> 00:16:10,090 S2: sure what the government will take away from it, but 312 00:16:10,090 --> 00:16:13,050 S2: there has been this long running debate about how much fuel, 313 00:16:13,050 --> 00:16:15,970 S2: how much oil products we should be holding in storage. 314 00:16:16,010 --> 00:16:18,490 S2: It's a tricky one for the government because it costs 315 00:16:18,490 --> 00:16:20,730 S2: a lot of money. I think the last estimate from 316 00:16:20,730 --> 00:16:23,210 S2: the federal government was if we were to increase our 317 00:16:23,210 --> 00:16:27,530 S2: fuel stockpiles from 35 days to to the 90 day 318 00:16:27,570 --> 00:16:30,450 S2: benchmark set by the International Energy Agency, that would cost 319 00:16:30,450 --> 00:16:33,370 S2: nearly $20 billion. Is that a cost that taxpayers and 320 00:16:33,370 --> 00:16:37,210 S2: consumers would be willing to wear? That's obviously a debatable point, 321 00:16:37,530 --> 00:16:40,330 S2: but I mean, it's like an insurance policy. You only 322 00:16:40,330 --> 00:16:42,330 S2: need it when you need it. And I imagine there 323 00:16:42,330 --> 00:16:45,330 S2: will be a significant discussion taking place on the other 324 00:16:45,330 --> 00:16:49,530 S2: side of this conflict about whether our stockpiles do provide 325 00:16:49,530 --> 00:16:51,930 S2: enough of a buffer for a country like Australia. That's 326 00:16:51,970 --> 00:16:53,930 S2: at the very end of a global supply chain. 327 00:16:58,250 --> 00:16:59,850 S1: Well, Nick, we are so lucky to have you to 328 00:16:59,890 --> 00:17:02,690 S1: walk us through this. It is quite complicated. So thank 329 00:17:02,730 --> 00:17:04,170 S1: you so much for your time. 330 00:17:05,010 --> 00:17:06,129 S2: No worries. Thanks, Sam. 331 00:17:12,090 --> 00:17:15,730 S1: And in other news today, the long awaited Australia. EU 332 00:17:15,770 --> 00:17:19,490 S1: free trade deal will be finalized today. Under it, Australian 333 00:17:19,490 --> 00:17:23,010 S1: red meat exports to Europe are set to rise tenfold. 334 00:17:23,530 --> 00:17:28,250 S1: Union groups have joined churches, health organizations and community advocates 335 00:17:28,609 --> 00:17:31,969 S1: to demand that Prime Minister Anthony Albanese move urgently to 336 00:17:32,010 --> 00:17:37,330 S1: enact gambling reform, citing the $32 billion that Australians lose 337 00:17:37,330 --> 00:17:41,090 S1: every year, and children and teenagers who turn to AI 338 00:17:41,130 --> 00:17:45,930 S1: companion chatbots for relationships are being exposed to sexually explicit 339 00:17:45,930 --> 00:17:50,649 S1: content and are being encouraged to self-harm or suicide, according 340 00:17:50,690 --> 00:17:56,650 S1: to a new report by the Esafety commissioner. Today's episode 341 00:17:56,650 --> 00:18:01,210 S1: was produced by Josh towers. Our executive producer is Tammy Mills, 342 00:18:01,210 --> 00:18:05,370 S1: and our podcasts are overseen by Lisa Muxworthy and Tom McKendrick. 343 00:18:05,690 --> 00:18:08,570 S1: If you like our show, follow The Morning Edition and 344 00:18:08,570 --> 00:18:11,890 S1: leave a review for us on Apple or Spotify. Thanks 345 00:18:11,890 --> 00:18:12,690 S1: for listening.