- Australian liquid fuel markets are functioning efficiently and effectively and are well placed to meet future needs.
- Projected reductions in our crude oil production and refining capacity will mean that demand will increasingly be met by imports of crude oil and refined product.
- This is not considered to affect our liquid fuel security because we have ready access to mature, diverse and reliable international supply chains and robust market governance and emergency response arrangements. Announced refinery closures will occur on the basis of an orderly transition to increase import capacity to ensure continuity of supply.
- A number of challenges need to be addressed to ensure that Australia remains well positioned to meet future liquid fuel needs. They include:
- ensuring the timely development of new import terminal capacity and securing further investment to maintain the efficiency and reliability of existing refineries
- addressing any regulatory or policy barriers that impede the efficient market-based development of alternative fuels or technologies to complement conventional products
- improving our understanding of the liquid fuels sector, including production and consumption balances in the economy, the potential for alternative fuel development and any critical dependencies in downstream activities that rely on specialised locally made fuel products.
Liquid fuels will remain a major component of Australia’s energy system, supplying almost half of the nation’s final energy needs over the next two decades (BREE 2011c).
During that time, the sector is expected to undergo further change with the announced closure of two refineries and the possibility of further capacity rationalisation as Australian operations face continued competitive pressure from Asian mega-refineries. These changes are manageable.
Global production of liquid fuels is not expected to be resource constrained: there is sufficient conventional and alternative supply available to meet projected demand to at least 2035. While currently a small fraction of the market, alternative fuels will continue to be developed and will increasingly enter the market over the longer term. This will contribute to a more diverse market. While overall demand for fuels is expected to increase, environmental performance and fuel efficiency will improve as transport and engine technologies evolve.
Meeting future demand will require the right balance in policy settings to ensure that we attract investment in new supply infrastructure and in the development of efficient and sustainable alternative fuel products that can compete in the market. The best way to ensure our long-term liquid fuel security is to remain firmly embedded in open, diverse global supply chains supported by stable long-term fiscal and regulatory frameworks. Those frameworks should allow the market to respond efficiently to price and policy signals.
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