Chapter 1: What are the implications of the US blockading Iran's ports?
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The idea of regime change being affected from the air, it's got no precedent. Netanyahu and Trump's theories. that Iranians will see the weakness of the regime and rush to replace it. I'm sceptical of all of that. I really am.
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This time, the US has stuck to its deadline, with its navy now blockading Iran's ports, further limiting the flow of energy from the crucial Gulf region.
Chapter 2: Why is Australia being urged to tap into its own energy reserves?
With that supply curbed, there's been calls for Australia to tap its own reserves of energy to make the country less reliant on foreign oil. But is there actually oil to tap? And does it make any economic sense? There's been a lot of questions, so let's try and bring you some of the answers. Welcome to ABC Business Daily. I'm Carrington Clark.
And I'm the ABC's Chief Business Correspondent, Ian Verder.
Ian, always a pleasure. Now, we have seen certain countries like the United States up their oil production in the face of this fuel crisis, which was obviously started by the Israeli and American strikes on Iran. Here in Australia, there have been calls for more domestic oil drilling as a way of easing our dependence on imports.
Chapter 3: Is there actually oil to tap in Australia?
There has been a lot of questions to the ABC and to our own inbox for this podcast about some seemingly obvious options we could be exploring to fix this locally. You've spent some time looking into this issue. So why is it that Australia just can't drill for more oil? Well...
Short answer is we don't have it. We've got some oil there, but we don't have a lot. And I mean, look, I really do understand the thinking and why people would automatically go to that, because you've seen America with Donald Trump saying drill, baby, drill. Suddenly they've become the world's biggest oil producer and the world's biggest oil exporter.
And it wasn't that long ago that Australia actually was a net exporter of oil. We had more than enough to cover our own supplies. But unfortunately, that's all gone. But the thinking from most Australians is, I think, we're a mineral and energy and agricultural rich nation.
We've got a whole continent to ourselves. Seemingly, we're rich in most commodities. Surely, we've got enough oil.
Iron ore, we've got more than anybody else. Coal, yep. LNG. And then suddenly that all starts to fade and there's a new electrification. Oh, we need lithium.
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Chapter 4: What economic factors influence Australia's oil drilling decisions?
Oh, yeah, we've got the world's biggest supply of lithium cobalt. Yeah, we've got that too. Rare earths. Yeah, plenty of them, you know. And so suddenly people, let's just get the oil out of the ground.
But unfortunately, while we are an energy superpower in many ways because we're one of the world, well, we are the world's biggest seaborne exporter of coal and both steaming and metallurgical coal. And we're also what we've been vying for top spot in liquefied natural gas exports as well.
But when it comes to oil, you know, Bass Strait was kind of it, you know, and there's a couple of big fields off the north coast of Western Australia and a few little ones scattered through the, you know, the basins through the middle of the country where This is where all our gas deposits are. So there's some oil there, but not a lot.
And at current levels, when we're looking at proven and probable reserves, we've got about 1.3 billion barrels. And Geoscience Australia, which is a government department, essentially says that we're using more of our resources than we are finding new ones. And so at this rate, we'll run out in seven years. And that is... after considering that we're importing 80% of our needs.
So we don't have a lot there. Now there's another category of oil reserves called contingent. And we've got about 2.2 billion barrels there. But this is stuff that is really not economic to basically extract.
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Chapter 5: Why can't Australia drill for more oil despite being resource-rich?
It's cost too much to get it out of the ground. Now, look, prices have risen dramatically in the last little while. And that means that some of those might actually be economic now.
But even if we got all of that out of the ground and combined it with the proven and probable and then we stopped importing any fuel at all, if we had the refineries to be able to do it, we'd have enough for about nine years.
What about this question? You speak about the American revolution when it comes to energy, and that is in large part because of the shale oil, shale gas revolution, accessing non-traditional forms of crude. Is that an option here in Australia? Does that make economic sense?
We do have shale deposits where you can extract oil and other petrochemicals. But look, I'm not up to speed. None of them have ever been developed. And Geoscience Australia makes that point that while it technically exists, none of them are developed and they're not considered to be contingent assets because they're not, I guess, traditional forms of oil. It's this
non-conventional oil that's there but i mean you could do it but you get down to the point well how much is this going to cost you to do it now in america it's quite an interesting phenomenon really the whole shale gas and shale oil thing it's more expensive there than you know traditional wells that they drill oil for um but what normally happens is when oil prices go up the
a lot of those shale deposits actually become quite economic and all the infrastructure is there to actually extract the oil. And so they kick into gear and then you get a big increase in supply and then suddenly prices drop and then they drop. So it's almost like the- They've become the swing producer for the world. Yeah.
Which is a role previously that was taken by Gulf states.
Yeah, that's right.
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Chapter 6: What is the current state of Australia's oil reserves?
But I mean, you know, the Gulf of Mexico or the Gulf of America, it's still the major, you know, oil production area in the US.
The question about whether or not Australia should be drill baby drilling in American parlance, or particularly Donald Trump parlance, the issue in Australia is not about some sort of environmental concerns, is it? Primarily, it's more about the economics making the finance work for these individual.
I think some people think it's about, oh, well, people just don't want to go and find fossil fuel reserves. But this isn't a case of that we're choosing to turn a blind eye to them because we're concerned about climate change. It's about the finance and the economics of actually making this stack up.
That's a political argument that gets put forward. But if that was the case, then we wouldn't be exporting LNG, would we? That's a fossil fuel and it's usually found in conjunction with oil. We wouldn't be the world's biggest seaborne exporter of coal, would we?
I mean, it's a ludicrous argument to suggest that we have got so many environmental controls that we can't drill for oil in this country. And yet we can, you know, dig coal out of the ground. We can tap LNG and the LNG export market that we've developed in the past 10 to 15 years. Yeah, it's 10 to 15 years old. So this is a fairly new development.
If there was oil anywhere near those LNG deposits or those natural gas deposits, then they would be tapped as well and they would be used.
What do you make of the energy minister, Chris Bowen's argument that eventually the debate about whether or not Australia should have bigger reserves of oil and bigger reserves of petrol, diesel, will be a moot argument with electrification. That we will eventually move to a situation where we have such electrification that we don't need
to be so concerned about our vulnerability to oil price shocks and potentially being cut off if that were to happen.
Look, that's obviously the way things are going to go, but it takes, you know, the question is how long is it going to take to get there?
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Chapter 7: How does shale oil production compare to traditional oil drilling in Australia?
And in the meantime, I mean, storing oil and storing fuel, liquid fuel is a very expensive option. It's cheaper to store oil than it is to store refined fuel. Refined fuel by its very nature is very volatile. You know, you can't stick oil into a car and expect it to go. It's got to go through this process where the volatile elements are there to be able to combust.
because they run in internal combustion engines, whereas oil is rather, you know, is really, you know, quite cheap and easy to store. In America, I think a lot of oil is stored in these caverns, these salt caves. So, you know, I mean, oil exists in the ground and has done for millions of years. So, you know, and we're tapping that and then we're refining it into a highly volatile fuel.
And it would have to be kept under extraordinarily high guess, you know, really highly regulated and scientifically kept storage facilities. And bear in mind, too, that refined fuel actually does deteriorate. So, you know, you can't keep it for an extended period of time. So the longer you do that and the more reserves you have, the more expensive it becomes.
I think the early estimates from the government when this war first kicked off and there were concerns about Australia's vulnerability to the oil price shock was about $20 billion. But of course, $20 billion is a lot of money. But the question becomes, is that an adequate insurance policy for the economy if you feel like you're vulnerable? Since we last spoke, we have seen the government
undertake this petrol diplomacy, travelling around Asia in order to shore up supplies. What's your view on how effective these type of trips actually are?
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Chapter 8: What are the economic implications of Australia's reliance on imported fuel?
And will it assure Australia that we will be receiving the deliveries of petrol that we depend upon?
Look, I think we've actually been a little fortunate because we do have this LNG export industry and the countries that supply us with liquid fuels need that gas. So it's a very convenient arrangement. Symbiotic somehow.
Yeah, I mean, if we didn't have that leverage over those countries, then they would be going, well, look, yeah, we understand where you're coming from here, but we've got our own needs and we have to divert our liquid fuels for our own economies. And plus, we've got much bigger and more important customers to deal with than you.
Whereas when you sit down and go, we actually need the gas that you've got and we know you need the liquid fuel. So how about we just make sure that we're all operating in syndication here?
One of the things Donald Trump has repeatedly said when people bring up how impactful the closing of the Strait of Hormuz has been is that, well, if you want oil, come and buy it from America. We've got plenty. Now, I've been looking into some of the numbers on this issue. So America is, as you point out, the biggest producer of oil now, the biggest exporter of oil.
Usually in a kind of peacetime, they were shipping about 4 million barrels a day. They've upped that to about 5 million, exporting about 5 million barrels of oil each day. But they also have a limitation on how much they can be that swing producer into the global economy.
And although Donald Trump suggests that we'll just come and buy us, America can solve all your energy needs, that just simply isn't true, is it? And although American oil producing companies might be making a huge amount of money during this crisis with elevated prices, American consumers are also paying the elevated prices that people around the world are facing.
That's right. I mean, American motorists have seen prices rise at the quickest pace in history. I think they're up around 30 to 40 percent. So, you know, a similar kind of pain to what we're experiencing. And the other thing, too, is I've heard Donald Trump say, we don't use the Stratiform as, you know, America doesn't import any oil out of the Middle East. That is incorrect.
America imports quite a substantial amount of oil out of the Middle East. I think it's around about 10% of their consumption. And that's because Middle East oil is relatively heavy. It's got a lot of sulfur in it. And the thing is, a lot of American refineries are geared towards that kind of oil.
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