Our war on fossil fuels is ending in a battle for energy

Australia has been waging a war against fossil fuels for nearly two decades. While Labor governments have fought this battle with the most aggression, Coalition governments have contributed as well. Recall here Morrison’s commitment to net zero 2050 made in 2021 on the eve of the COP climate meeting in Glasgow.

Working on the assumption that the net-zero transition is an economic prize – an assumption that is immediately refuted by dint of the necessary compulsion and large subsidies required to achieve it – Australia has put up multiple barriers to any fossil fuel-based developments.

Add in the false proposition that renewable energy is the cheapest form of energy and we have been led down a path of economic harm and insecurity.

We are now witnessing the consequences of our overdependence on imported fossil fuels – think petrol, diesel, aviation fuel, helium, fertilisers, plastics – and an inability to remedy the situation in an acceptable time frame.

There was always an astonishing naivety – nay, complete ignorance – about the consequences of blocking the use and development of fossil fuels. Far too much attention was given to the electricity grid and the scope for turbines and solar panels to generate electrons to replace ageing coal-fired plants.

The external environmental costs of turbines, solar panels and large-scale batteries have essentially been ignored. True environmentalists should hang their collective heads in shame. As a less dense form of power than coal/gas/nuclear, renewable energy would always require vastly larger land masses, with much larger environmental footprints.

The need for extraordinarily expensive transmission lines has simply added to the catastrophe. There is also the important point that the turbines, solar panels and batteries have relatively short lives relative to coal-fired and nuclear plants, with the associated need for expensive replacement. But here’s the thing: notwithstanding the billions of dollars expended to spur the expansion of renewable energy, there hasn’t been a significant decline in the overall use of fossil fuels here. According to the Department of Climate Change, Energy, the Environment and Water, “fossil fuels (coal, oil and gas) accounted for 91 per cent of Australia’s primary energy mix in 2023-24”. In energy terms, Australians consume twice as much in liquid fuels as in electricity.

The so-called “experts” simply didn’t accept the possibility renewable energy wouldn’t replace fossil fuels but would add to it. With the prospect of new data centres and their need for constant power (and water), there is a good chance that the proportion of our energy mix accounted for by fossil fuels could increase.

Far too much emphasis has been placed on the scope for electrification while ignoring the vital and largely uncontested role of fossil fuels in primary iron, cement, fertilisers and plastics. This naivety has been clearly demonstrated by recent events. It’s worth outlining how the war against fossil fuels has been waged by governments across many fronts to understand our current predicament.

To take a recent example, the mandate of the Export Finance and Insurance Corporation had been altered to prevent any investments in fossil fuels. To ensure ongoing oil delivery, however, the Albanese government has had to reverse this mandate.

Then there are the recent amendments to the Environmental Protection and Biosecurity Act, which explicitly exclude fossil fuel projects from using the streamlined assessment pathway.

They cannot obtain the benefit of being classified a “national interest proposal” or be granted an exemption from being a “restricted action” in a conservation zone. The likely effect is to thwart new fossil fuel developments, including drilling for oil.

The mandate of the Future Fund was changed in 2024 to include support for the energy transition as one of three priorities, effectively ruling out large-scale investment in fossil fuels. The federal government funds anti-fossil fuel groups such as the Environmental Defenders Office to pursue legal action against fossil fuel developments. The recently concluded Australia-EU Free Trade Agreement contains “a binding commitment to implement obligations under the Paris Agreement on climate change”.

The point is that the federal government executes its anti-fossil fuel stance in many ways in addition to the massive subsidies made available to the transition of the electricity grid. It is hardly surprising therefore that exploration for oil, for example, has effectively dried up, notwithstanding the fact that there are a number of highly prospective areas in this country.

It was only two decades ago that we were nearly self-sufficient in oil; we are now down to 20 per cent and falling. We no longer have a large-scale urea factory – the Gibson Island plant closed two years ago – and Qenos, the country’s largest producer of polyethylene and polymers, has also shut up shop. Mind you, state governments, including Coalition ones, have also demonstrated hostility to fossil fuels by facilitating the rollout of renewable energy and refusing to green-light any new or replacement coal-fired power plants. They have blocked or significantly delayed fossil fuel exploration and extraction. They have also wasted money on unachievable pipedreams – green hydrogen in South Australia, anyone?

It’s worth noting the economic effects of this intransigent opposition to fossil fuels. According to CBA Economics, “the closure of critical air and shipping routes, especially the Strait of Hormuz, is rupturing fragile global supply chains, slowing down the passage and pushing up prices of a variety of products, including oil, gas, chemicals, resins, fertilisers, cement and grains”.

The further point is that “the elongated supply chain disruption in the Middle East has exposed vulnerabilities in Australian fuel markets, with the country heavily reliant on importation of liquid fuels such as refined petroleum, diesel and jet fuel to power our domestic energy-intensive industries”. The industries singled out as being particularly vulnerable include agriculture, transport, construction and mining.

The idea of running a “just in time” economy has a certain appeal until consideration is given to the large adverse consequences of disruptions to vital supply chains. It might look cheaper at the time, but the real costs become apparent when the flows of vital inputs to economic activity are impeded and their price skyrockets. We should have learned that lesson from the Covid experience, but it was essentially ignored.

A reserve of petrol/diesel/aviation fuel of around 30 days was always insufficient. It also puts us at significant odds with many other countries. Australia needs to remove immediately the impediments to increasing the domestic availability of liquid fuels lest we find ourselves in this position time and time again.