Australian oil reserves below international standards and will cost billions to fix, energy white paper says

Updated

The Industry Minister has revealed motorists could be slugged up to 2 cents a litre at the petrol pump to help the Government pay for "extraordinarily expensive" options to boost oil reserves to international standards.

Reserves have plunged to 52 days' worth of imports following a wave of refinery closures over the last decade.

International Energy Agency (IAE) rules say reserves must equal at least 90 days' worth.

Australia is the only IAE member country among 29 developed economies whose reserves are not meeting that obligation.

Industry Minister Ian Macfarlane told the ABC the cost of complying would run into the "billions and billions and billions of dollars", which would be recovered from road users.

"The impact on the cost of fuel at the bowser will be significant," he said.

"Do Australians want us to remain compliant [with the IEA obligation]?"

The Government's energy white paper, released today by the Industry Minister, promises a "decision on how to address this compliance issue" this year.

Last year, Al Qaeda warned it was targeting oil supplies as part of its continuing campaign of global terrorism.

Analysis

If you search through this report, you will find only one reference to climate change, writes environment reporter Jake Sturmer.



For a document supposed to be setting out the long and short term future for Australia's energy industry, this is at least a little surprising.



The Energy Supply Association of Australia considers the report incomplete because it does not address the impact of climate change policy.



Given energy use is the largest single contributor to the nation's greenhouse gas emissions, which ultimately lead to global warming, the Association makes a reasonable point.



The white paper points to potential for Australia's LNG, coal and uranium to meet the International Energy Agency's prediction of a one-third increase in global energy demand by 2040.



What the white paper does not mention is, if that same IEA forecast is met, long term average temperatures will increase by 3.6 degrees Celsius – well above the level considered by scientists to trigger dangerous climate change.



In 2010 governments, including Australia's, agreed that global temperature increases needed to stay below 2 degrees Celsius.



The white paper sheds no light on whether the government remains committed to that goal.

The report prompted former Air Vice Marshall John Blackburn to warn of catastrophic consequences of an interrupted oil supply.

"You'd start to see society collapse," he told the ABC in November.

Elsewhere, the white paper stepped up the Government's argument against renewable energy subsidies such as the renewable energy target (RET) and solar feed-in tariffs, saying they "distort" the market and push up average prices.

It said an increase in peak power charges from traditional generators would send a "price signal" that would dampen peak demand, delaying the need for investment in network infrastructure and lowering prices during non-peak periods.

It also revealed recent analysis suggesting rooftop solar subsidies cost the average non-solar household $117 per year.

The Government is currently attempting to reduce the renewable energy target through negotiations with the green energy sector.

The report noted rules brought in by the previous government, designed to reduce so-called "gold plating" by power companies, were "starting to deliver results" resulting in "modest declines or stable retail prices".

Arguing "further privatisation of energy" assets would further reduce prices, the carbon tax "inflated prices" before the current Government removed it.

The report blamed rising natural gas prices on "unnecessary" state moratoriums on coal-seam gas developments, while noting higher prices were "inevitable" even with increased supply due to international demand.

Warning against "prematurely forcing new technologies in the energy market", the report argued science funding should be directed at mining and energy resources technologies "so the community sees stronger commercial returns".

Topics: oil-and-gas, industry, government-and-politics, australia

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