Panic at the petrol stations: Australia and New Zealand pay dearly for their dependence on crude oil
Supply disruptions could lead to consequences similar to those of covid-19
Sidney“Demand has doubled, but usage has not”, said Chris Bowen, Australia’s Minister for Climate Change and Energy, in a parliamentary debate more akin to a farce, were it not for the fact that following the blockade of the Strait of Hormuz, a litre of petrol has exceeded 3 dollars (1.80 euros) and more than a hundred petrol stations have run out of fuel.
On the other side of the Tasman Sea, in New Zealand, the country’s main airline, Air New Zealand, announced that from May it would reduce its capacity by 5% (around 1,100 services) due to the conflict in the Persian Gulf. Oil prices have also skyrocketed, and some oil companies have run out of crude in a country that imports every litre of fuel, diesel, and kerosene.
Four weeks after the attacks by the United States and Israel against Iran – which the US administration did not bother to warn its main oceanic allies about – Canberra and Wellington find themselves in an energy security crisis situation for which they were not prepared. “It’s uncharted territory,” says Timothy Welch, a professor at the Faculty of Arts and Industries at the University of Auckland. “The current problem is much bigger than in 1979,” recalls Tony Wood, Senior Energy Researcher at Australia’s Grattan Institute. For Wood, the main problem is that fuel demand has skyrocketed because of “if we ran out [of petrol]”, causing a greater disruption than the 20% drop in global supply. Both Bowen from Canberra and Christopher Luxon’s government in Wellington rushed to assure that their countries had supplies for 32 and 60 days, respectively, causing panic at petrol stations.
New Zealand closed its last refinery in 2022 and has since been supplied mainly by sea routes from refineries, especially from South Korea and Singapore. As Timothy Welch explains, the country obtains between 80 and 90% of the electricity it needs from renewable energy, but the transport sector “depends highly on fossil fuels”. “A large part of our GDP depends on exports that begin their journey by truck,” he remarks.
Between 2010 and 2022, the state invested 1.3% of its GDP in building or improving road transport infrastructure, not including the cost of maintenance or operation. At the same time, the conservative government of Luxon, elected after the last term of Jacinda Ardern, has decided to end subsidies for electric vehicles and discard the construction of a tram in Auckland, the country's most populous city. “As soon as supply is affected, costs start to affect not only consumers but the entire economy,” emphasizes Welch, who warns that this energy crisis will increase inequality in a country of 5 million inhabitants and 4.7 million vehicles; “Getting more supplies or reducing our demand is the only viable option,” he concludes.
In Australia, the energy crisis could cost the country 16.5 billion dollars (991 billion euros) in 2025 alone, according to the forecasts of the government treasurer, Jim Chalmers. Tony Wood, a researcher in Energy and Climate Change at the Grattan Institute, calls for the executive to be very clear with people: “If the situation worsens, you have some more difficult options left. You might have to think about rationing fuel.”
A situation that Australia has already experienced during World War II, with ration cards and permits to fill the tank, and in mid-1979 when a strike at a local refinery and the oil crisis forced the government to limit vehicles with even and odd license plates to buy gasoline on alternate days. This time, the Albanese government has announced the creation of a specific working group reporting to the prime minister's department to coordinate the crisis response.
However, some experts warn that the situation could be worse than the crisis caused by covid-19, when the country had to extend subsidies, freeze rent prices, or even make changes to the temporary visa system to mitigate the impact. “I would put it on the same level,” said John Blackburn, a former FA-8 Fighter pilot and now a defense and security consultant on the podcast 7am, “the effects will likely last longer because we haven't learned the lesson.”
Don't go to the doctor
In a 2013 report delivered to the Australian government, Blackburn warned that the country was too dependent on fuel imports, while reducing refinery capacity (from 12 to 2 in two decades) and exposing itself to global supply chains.
Today Australia imports 90% of the refined petroleum products it needs, and even sends part of the oil it produces to Japan or Singapore to be refined and returned to Australia. Only mines have railways that can transport fuel, and the alternative is by road or by tankers from private companies in a country that is the sixth largest landmass in the world. Therefore, more and more voices, including Blackburn's, are calling for electrification and renewables to reduce dependence on the global market. But also to avoid situations like the one denounced by the rural doctors' association that some patients will have to choose between going to appointments or skipping them due to the price of fuel.
For Wood, after this crisis, a new impetus for electrification will be “inevitable” and warns that it is a matter of security, as “the same situation could occur if someone blocks the South China Sea”.