A new fuel refinery is a start. But Australia is still vulnerable to shipping disruptions without a clear strategy
- Written by: Weekend Times
The Australian government announced this week it would study whether to build a major oil refinery in Western Australia to help shore up the country’s energy security.
If approved, it would
be Australia’s third oil refinery, following the closure of several facilities over the past 25 years.
The US–Iran war and the sharp reduction in shipping through the Strait of Hormuz have been visceral reminders of how much fuel security matters to a country like Australia. Exploring additional refining capacity is therefore a sensible step.
But fuel is not the only critical thing Australia imports by sea. There’s a broader lesson from the Middle East crisis: Australia needs greater resilience across the entire maritime trading system on which its economy depends.
Fuel security and domestic industrial capacity are part of that task, but there is much more we need to focus on.
Read more: New research shows how vulnerable Australia would be to attacks on shipping in the Indian Ocean
How did we get here?
Addressing one vulnerability at a time risks becoming a game of whack-a-mole. Australia does not just need another fuel security measure; it needs the government to treat maritime resilience as a national priority.
So what does this mean, practically speaking?
First, let’s address how we got here. For decades, successive Australian governments have operated under the same assumption. Freedom of navigation will be respected on the world’s oceans and seas, and the ships carrying 99% of Australia’s international trade (by volume) will continue to reach our shores.
This assumption, in part, led to decades of de-industrialisation in Australia as the country became increasingly dependent on imports from other countries. Australia sold off the Australian National Line – its national shipping fleet – and under-resourced its Navy.
This assumption of freedom of navigation and open seas became even more deeply embedded after the Cold War, when economic interdependence was widely expected to make major conflict less likely.
This assumption no longer holds. The maritime domain is becoming more contested, not less.
The disruption to fuel flows through the Strait of Hormuz is part of a wider pattern. Countries are increasingly using force and coercion to pursue their foreign policy objectives at sea.
We can see this in Russian attacks on commercial shipping in the Black Sea and Houthi strikes on Saudi ships in the Red Sea. Undersea cables are increasingly at risk of attack by Russia and China.
China, too, has spent a decade building bases and asserting control within other countries’ maritime domains in the South China Sea – a violation of the UN Convention on the Law of the Sea. Chinese Coast Guard vessels have also expanded their presence in the Pacific Ocean east of Taiwan, potentially threatening international shipping.
China’s increased naval operations around Australia also demonstrate that it could interfere with Australia’s maritime trade, should it choose to do so.
Given this, Australia must rethink the base assumptions on which its economic and defence policy have long rested.
What can be done
Additional oil refining capacity is a start. There are a number of benefits if Australia builds a third refinery on the west coast:
it could reduce Australia’s reliance on refined fuel imported from Asian refining hubs
it could allow crude oil to be sourced through a wider range of shipping routes across the Indian and Pacific oceans, and
it could provide greater flexibility, as crude oil can be stored for much longer periods than refined oil.
But Australia would still remain dependent on maritime supplies of both refined and crude oil – and many more critical things for the economy.
A 2021 Productivity Commission report highlighted some of these critical imports by sea: pharmaceuticals, chemicals, machinery, electrical equipment, vehicles and parts.
Some of the least visible imports can also be among the most consequential, such as the chemicals used in water treatment, medicine production and refining.
The report also found Australia is not just vulnerable to disruptions to ships on the open sea. The entire maritime system can be disrupted.
This could include shortages of shipping containers and ship pilots, constrained port capacity, reduced trade routes, and a lack of access to the fuel, lubricants and spare parts needed to keep the system operating.
Addressing these challenges properly will require structural reform. And this depends on government action.
Japan has created a model to follow on this. It has established a cabinet-level office focused on ocean policy, which is led by the prime minister.
Australia should follow suit, establishing a committee backed by a new permanent maritime strategy branch in the Department of the Prime Minister and Cabinet. This office could coordinate action on industry, shipping, ports, stockpiles and defence capability.
Australia has so far taken a piecemeal approach to its maritime challenges, assuming access to trade will continue. Individual measures may help, but they will not materially reduce Australia’s vulnerability unless they are brought together through a coherent maritime strategy.
That requires the right structures in government, and it requires them now.
Jennifer Parker is a non-resident fellow at the Lowy Institute and served for more than 20 years as a warfare officer in the Royal Australian Navy.
