Explainer: what is energy security, and how has it changed?


Samantha Hepburn, Deakin University

The idea of energy security has been at the centre of much policy debate recently. The federal government defines energy security as the adequate supply of energy across the electricity, gas and liquid fuel sectors.

But this notion has become outdated, following the spate of electricity blackouts that have occurred in the past few years. The concept of energy security is now increasingly synonymous with resilience: responding to problems quickly and avoiding power outages.




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To be secure, the national energy market must ensure a sufficient supply of electricity at an affordable price and be able to respond to major disruptions. Being “energy secure” in this context now means having a backup plan. Unfortunately, Australia doesn’t.

All about oil

Historically, energy security was purely about oil supply. It evolved as a policy response to the 1973 Arab oil embargo. At the time, the aim was to coordinate among the industrialised countries if supply was disrupted, to avoid future supply problems and to deter exporters from using resources as a strategic weapon. Four key developments emerged from the embargo:

  • the International Energy Agency (IEA), whose members are the industrialised countries;

  • strategic stockpiles of oil, including the US Strategic Petroleum Reserve;

  • continued monitoring and analysis of energy markets and policies; and

  • energy conservation and coordinated emergency sharing of supplies in the event of a disruption.

Australia is not ‘secure’

When Australia joined the IEA in 1979, it was a net exporter of oil and was therefore exempt from the requirement to stockpile liquid fuel. Since this time, however, Australia’s oil production has peaked and is now in decline.

Reasons for this are various but include the reduction in oil refining capacity and significant increases in reliance on imported oil products.

In 2012 Australia became non-complaint with the IEA requirement that all members maintain oil stocks equivalent to at least 90 days of the previous year’s daily net oil imports.

In contrast with many other IEA members, Australia does not have a public (or government-owned) stockpile of oil and has instead relied on commercially held stocks. Currently, Australia has an aggregated fuel reserve of roughly 48 days, including about 22 days’ supply of crude oil, 59 days of LPG, 20 days of petrol, 19 days of aviation fuel, and 21 days of diesel.




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Australia’s fuel stockpile is perilously low, and it may be too late for a refill


This lack makes Australia very vulnerable in a crisis – 98% of our transportation relies on liquid fuel, as do all of our major defence platforms. An extended disruption means our economy, policy force and army could cease to function.

While the federal government intends to return to compliance by 2026, our ongoing failure to understand and respond to a changing environment has resulted in us becoming, at least in the context of liquid fuel, energy “insecure”.

Are we ready for a new approach?

The modern energy landscape is complex, and energy security is a much broader and more dynamic concept than it was thirty years ago. Public expectations have also evolved. Australia must address a multitude of new challenges that include: climate change, integrating renewable energy, rising peak demand, rising domestic gas prices and a raft of new geopolitical rivalries.

In many parts of the world, mechanical and analogue systems traditionally powered by oil-products, have been replaced with automated and networked systems that run on electricity. As a result, the number of digitally connected devices has grown from 400 million in 2001 to in excess of 25 billion in 2018.

These changes make electricity and natural gas, in addition to oil, key supports of many facets of society. They ensure that the modern world is completely dependent on energy generation. Within this context, resilience is a critically important requirement.

Future energy systems, responsive to this enlarged concept of energy security will therefore look very differently. Large fossil fuel and synchronous generators will be replaced by a clean electricity system composed of small-scale, clean asynchronous generators. It will mix large renewable projects (which will mean extending the physical transmission network) with distributed energy generation (for example, from rooftop solar), and the network will require new systems to ensure coordination and stability.

Renewable energy is an important component of energy security but it works differently to fossil fuels. For example, inertia functions differently. Inertia is the capacity of a power system to respond to unexpected shocks, and its ability to react and stabilise the system’s balance.

Inertia slows down the rate at which frequency changes after a disruption in the grid, such as the failure of a power plant or a transmission line. Inertia has traditionally been provided by fossil fuel generators. However, within a mixed energy framework, renewables will provide synthetic inertia. For example, modern wind turbines can use the kinetic energy stored in the generator and blades to be responsive during grid stress. This can provide an efficient injection of power into the grid where it is required, and the delivery can be flexibly controlled to suit regional grid conditions. New storage technologies will, however, need to be incorporated into networks early so their application in practice can be understood.

These are all responses to a new understanding of energy security. Today, what is essential to the definition of energy security is not just an adequate supply of energy at an appropriate price but an adequate supply of sustainable, resilient energy at an appropriate price, which is responsive to the demands of a decarbonising economy.




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In light of this, energy security is perhaps even more crucial in our modern world than it was back in 1973. Understanding the evolving meaning of energy security means we are better equipped to comprehend the different ways in which our global interconnection can make us vulnerable.

We need to minimise risk and reduce exposure. We need to imagine what a secure energy framework of the future looks like. We need energy policy that is more responsive to the social, economic and environmental demands of modern Australia.The Conversation

Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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Australia imports almost all of its oil, and there are pitfalls all over the globe



File 20180523 51105 7k0ca3.jpeg?ixlib=rb 1.1
An oil tanker leaves Sydney Harbour.
Saberwyn/Wikimedia Commons, CC BY-SA

Anthony Richardson, RMIT University

Australia’s fuel security is far more precarious than we might realise. Not only do we not have the internationally mandated 90-day stockpile, but the ongoing closure of Australia’s refineries means we are on track to be 100% reliant on imported petroleum by 2030.




Read more:
Australia’s fuel stockpile is perilously low, and it may be too late for a refill


Australian refineries import roughly 83% of the crude oil they process from more than 17 countries, mainly in Asia (40%), but also Africa (18%) and the Middle East (17%). We are a significant oil producer, but export 75% of our crude production, with the largest recipients being Indonesia and Singapore.

At the same time, the importance of importing refined petroleum from overseas is only increasing as our local production declines.

Australia’s imports and production of refinery products.
Dept Environment and Energy/Dept Industry, Innovation and Science

Currently, 51-53% of our imported refined petrol comes from Singapore’s refineries, with 18% from South Korea, 12% from Japan and the rest from a range of other countries. Asian refineries in particular are extremely competitive in terms of production and transport costs.

Australia’s fuel supply routes.
NRMA

The consequences of disruption

Without significant fuel reserves, Australia could face serious consequences in the event of disruption to these imports. In any complex system, even temporary disruptions can cause “cascading failures” across other parts of the system, and these effects don’t stop the moment the supply is restored.

Maintaining our oil supply is not just about keeping our cars on the road. Any serious disruption would have consequences within days for our food supplies, medication stocks, and military capacity.

Australia’s liquid fuel reserves compare poorly with stockpiles of other goods.
NRMA

If a complex system is to be resilient, it needs redundancy. This means that it has backup processes that enable the overall system to continue to function even when some part of it breaks down.

Unfortunately, such backup systems are not efficient, because the system is doubling up on resources. Efficiency is therefore one of the enemies of system resilience – this is best demonstrated by the concept of “just in time” supply chains, in which stock arrives when it is needed, minimising the costs of holding excess inventory in stock. Such an approach is certainly efficient, but it is also fragile. This is a pretty good description of Australia’s current oil supply chains.

The 90-day oil reserve recommended by the International Energy Agency is a textbook example of system redundancy, as are local oil refineries. They provide onsite reserves (5-12 days) and local refining capacity. But in the interests of economic efficiency we have chosen not to invest in this redundancy.

Possible causes of disruption

Australia’s geographically dispersed oil supply chains mean that there are several places around the world where they can potentially be disrupted.

More than 40% of the world’s oil passes through the Strait of Hormuz, the only sea passage out of the Persian Gulf. Controlling the strait remains a clear (and possibly achievable) aim of Iran in any military confrontation.

This has arguably been made more likely by the US administration’s decision to reimpose economic sanctions on Iran. At the same time, the recent shale gas revolution in the United States has weakened the traditional US strategic imperative to keep the strait open.

The ongoing tensions in the South China Sea also threaten Australia’s other major supply route for oil, not least because of our difficult geopolitical position in the middle of the heavyweight rivalry between the US and China.

Finally, the apparent defeat of the Islamic State group in Iraq and Syria has led to concerns that radicalised Indonesians are returning home to continue the fight. The vulnerability of our supply lines through Indonesia has already been recognised.

Trading places

Oil is often described as a “fungible commodity”. This means that oil from different suppliers is interchangeable, so if supply is disrupted we can just buy it from somewhere else.

But it is not as straightforward as that. First, the point in the system at which supply is disrupted is crucially important. For example, Australia’s fuel ports represent particularly problematic junctions, as a 2013 fuel security review for the National Roads and Motorists Association pointed out:

For example, the primary fuel port in South Australia is at Port Adelaide; a single, narrow, shipping channel services the port. A blockage of that channel, as the result of a shipping accident/incident, could result in significant and prolonged disruption to fuel supplies for Adelaide and a large part of the state … given the inability to transport sufficient fuel stocks overland to South Australia.

What’s more, while it is generally true that oil is fungible within an open global market, not all suppliers necessarily share this assumption. Thus China, faced with rising domestic consumption, is planning to outbid Western oil companies for contracts, or else buy the entire companies outright.

Just like the US, China sees oil more as a national security concern than as a fungible global commodity. Access to even a share of the global oil supply can be a tool of political or economic influence, as the OPEC embargo in the 1970s infamously showed.




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Four decades later, has America finally got over the oil crisis?


The ConversationIn the end, while other countries move to secure their national fuel supplies, we continue in our misguided faith in an unfettered global oil market being able (or willing) to supply our needs in situations of crisis. Hopefully the proposed Fuel Security review will mean these challenges are finally taken seriously.

Anthony Richardson, Research Fellow, Future Social Service Institute, RMIT University

This article was originally published on The Conversation. Read the original article.

PETROL PRICES NOT FALLING AS OIL PRICE CRASHES


Oil Prices have continued to fall in recent weeks, yet the price of petrol has hardly moved from near $1.54 a litre in New South Wales, Australia. The Australian dollar has also tumbled, but even allowing for this the price of petrol should be considerably lower than it is.

Newspaper reports say that we may need to wait another 3 weeks before we see any worthwhile drop in petrol prices in Australia – yet how soon do we see the price of fuel rise when the oil price goes up. I think this would be what we term petrol price gouging.

Australians should be paying closer to $1.20 to $1.30 a litre rather than that which we are paying currently.

OIL IS UP AGAIN


The price of oil shot up today by US $25.14 a barrel at one point before closing on US $121.00 a barrel – a rise of about US $16.00 a barrel for the day. This massive rise came about because of fears that the US economy was moving into a recession and the resulting weakness of the US dollar.

The Australian dollar has risen against the US dollar, closing the day at close to 0.84 US dollars as investors abandoned the US dollar. The Australian dollar was close to parity with the US dollar several weeks ago and then fell to around 0.78 US dollars about a week ago before beginning to rise again.

For Australian motorists the price per litre of unleaded petrol has fluctuated between $1.52 and $1.62 over the last couple of weeks, with little advantage gained by the low oil price in the previous few weeks. With the rise in oil today it is unlikely that Australian motorists will see any advantage in the lower price of oil over the past couple of weeks.

It is widely speculated that Australians have been getting a raw deal at the petrol pumps over the last couple of months.

DO YOU GET THIS TYPE OF SERVICE AT A PETROL STATION?


With petrol prices in Australia not reflecting the falling oil price, Australians would be justified in questioning the service you actually get at service stations. Are service stations becoming like banks – being so preoccupied with profits that fairness is no longer an option?

How can petrol sell at $1.62 a litre today when oil has now dropped to around $95.00 a barrel US? This is the highest price for petrol that I can remember – even higher than when oil was up towards $150.00 a barrel US! Doesn’t make a lot of sense does it?

In this video which is an advertisement for Total Service Stations it seems that customer service is very important to Total. Has this been your experience in customer service when fuelling your vehicle at a service station?

CRUDE OIL PRICE FALLING


The price of crude oil continues to fall, yet despite the continued falls the price of petrol in Australia remains high. On Friday the price of petrol was still $1.65 per litre. The price of oil per barrel has now fallen to $123.26 US.

It’s incredible how the oil companies are so quick to pass on the rise of oil in their petrol pricing, yet when the price of crude falls they seem to be so slow in passing on the price reduction. Maybe it’s just me or is this not a display of greed and a consequence of a lack of competition?

The price of crude is falling due to a number of factors I believe, including the slowing of the global economy, which is due to a large degree to the overwhelming price of petrol at the bowser (as well as the global credit crisis). There is also a rise in supply of fuel, largely due to the fall in demand I expect rather than any increased output by OPEC countries.

The increase in demand for oil, which led to the record price of $147.27 US a barrel on the 11th July 2008, has been led by the booming economies of China and India. These two countries alone now have a population well over 2 billion people and the oil required to fuel these two economies must be enormous. It is unlikely that the 200 000 barrels a day increase in output by OPEC to about 32.9 million barrels a day is unlikely to hold the price of oil to the current lower price for long. The price of crude can only go up as these two economies begin to pick up once again.

FUEL PRICES CONTINUE TO RISE


The price of unleaded petrol in Australia reached 173.9 cents a litre this past week, with expectations that it may well reach $2.00 a litre by the end of the year. A report from the CSIRO stated that petrol prices may well reach $8.00 a litre by 2018.

With the way that fuel prices are continuing to rise, petrol is rapidly becoming a luxury item that low income earners will soon be unable to afford, if they can still afford it now.

There are various ways that Australians are trying to cope with the rise of fuel prices – use less petrol, ensure you do everything you need to do with the one car journey, use petrol reduction dockets when possible, no longer purchase some items or take part in certain entertainment, etc.

What does the future hold for ordinary Australians? Surely there will be a major shift in the way we live our lives should there be no alternative to petrol in the near future. There may well be major economic consequences with various industries collapsing (such as tourism) and staff being unable to get to their jobs, etc. Perhaps there will be employer funded transport (such as company bus runs, etc). It is likely that public transport will soon be under major stress and the need for increased public transport infrastructure will soon become apparent.

One thing is sure – something will soon have to give. Things cannot continue the way they currently are.

Petrol Bowser

Petrol Bowser