Fuel supply guarantees to Australia from Asian countries will go out the window when a “bidding war” breaks out for dwindling supply later this month, a defence expert warns.
Assistant Foreign Affairs and Trade Minister Matt Thistlethwaite said on Sunday he had received pledges from Japan, South Korea and Singapore that shipments of fuel to Australia would continue, amid concern they might curb exports in order to look after domestic supply.
Prime Minister Anthony Albanese has also confirmed he will head to Singapore on Thursday to meet with his counterpart Lawrence Wong in an effort to further shore up fuel supply.
But the government’s efforts were cold comfort for Strategic Analysis Australia Director Michael Shoebridge, who argued that in an acute shortage, “countries always meet their own needs first”.
“It’s helpful to have those discussions, but the practical reality of the energy market is going to be that the supplies go to the highest bidder, and it doesn’t seem to me that government assurances will change that,” Mr Shoebridge told news.com.au.
“As the energy supplies that have come out of the Gulf before the war get consumed — which will happen from about April 20 — price will go up, and government assurances won’t change that we will be in a bidding war, along with many others, for more limited fossil fuel supplies.”
Japan has guaranteed that it will continue supplying Australia with fuel, according to the federal government (pictured Japanese Prime Minister Sanae Takaichi). Picture: Kazuhiro Nogi/AFP
Mr Shoebridge pointed out that Japan, in particular, had a highly fuel-intensive manufacturing industry that it would prioritise.
The other problem was the limited ability of governments to intervene in the energy market.
“Mr Thistlethwaite is making it sound like the Australian federal government is able to dictate what our companies do, and he’s assuming the same is true for Singapore and Japan – that their governments have absolute control over their refineries and who they sell their product to,” he said.
“I don’t think that’s true; it’s still not true in Australia. We’ve had a very arm’s length government to corporate relationship, including around energy. So there’s a level of magical thinking about all this.”
In the end, the federal government could only do so much to secure fuel supply, with the system largely driven by the private sector.
“Governments telling each other that they’ve got each other’s back is interesting, but what real levers and control do they have over the real actors here, which are the companies?”
Michael Shoebridge said in an acute shortage “countries always meet their own needs first”.
Mr Thistlethaite said the government was “engaging with trading partners including the Republic of Korea, Malaysia, Singapore, China, India and Japan” in response to “this unprecedented shock to the global economy”.
“Australia and Singapore have agreed to a joint statement to strengthen energy supply chain resilience and to help ensure the continued flow of essential fuels,” he told news.com.au in a statement.
“The government is focused on ensuring Australia gets the supplies we need, including petrol, diesel and fertiliser and that those supplies can get where they’re needed.
“The Albanese Government will continue to work with our partners to ensure we’re doing everything we can to shield Australians from the worst of the challenges coming from the Middle East.”
Trump calls out Australia for ‘not helping’
Australia’s scramble for Asian fuel came after US President Donald Trump took another swipe at the nation on Tuesday, for refusing to aid his war effort in Iran.
Trump made the remarks about Australia during a White House press conference, where he directly called out a number of allies who he claimed “didn’t help”.
“Japan didn’t help us, Australia didn’t help us, South Korea didn’t help us, and then you get to NATO. NATO didn’t help us,” the president said.
Mr Shoebridge said Trump’s statements indicated that America was now a “unipolar actor” which viewed its allies as “problems rather than advantages”.
Australia should respond, he believed, by deepening ties with other US allies like Japan and South Korea as “rapidly and broadly as possible, as a way of hedging against this changed America”.
“We now have a problem at the core of Australia’s security policy and strategy – the foundations that have been secure for decades are not secure now,” he said.
Mr Shoebridge argued oil shipments will go to the “highest bidder” as supply dwindles later this month.
What the war means for China and Taiwan
Although China was deeply reliant on the Strait of Hormuz, with about half of its oil imports passing through the chokepoint, Mr Shoebridge said Beijing was much better-placed to handle the oil shock than Australia.
China held about 200 days’ worth of reserves (compared with Australia’s 39 days’ worth of petrol), produced about 25 per cent of its oil domestically, and was continuing to buy oil from Iran, albeit in smaller amounts.
It was also buying large quantities of oil from Russia – where sanctions enforcement has temporarily eased – evading US restrictions with “shadow fleets” in both cases.
The analyst argued China was “not a net loser” as a result of the war in the Middle East and in fact, “I think they’re a winner”.
He worried that the amount of ordnance that America had expended in the Iran war had “undercut their ability to deter China in our part of the world”.
In other words, China was now better-positioned to move on Taiwan, because the sheer number of missiles launched by the US in the Iran war had resulted in a “military material deficit” that would persist for 10 years or more.
“China can take all the time that needs to act a moment of its choosing, because American military power has been weakened by this war, and it will not recover for at least a decade,” Mr Shoebridge said.
