As tensions unsettle the global oil and energy sectors again, causing a rise in prices for essential goods, Australia faces a fundamental reality – energy safety equals economic stability.
Even if the Strait of Hormuz is reopened tomorrow, the effects will linger in global markets for months to come.
Stocks of oil and gas and strategic reserves are depleting more swiftly than they can be restocked, with experts cautioning about a possible decline of at least 10 percent in worldwide oil supply, resulting in sustained high prices.
In Australia, this will lead to increased costs for imported items and household expenses, with alerts of potential job losses in sectors like construction due to soaring diesel prices.
Amidst the ongoing US blockade, reports indicate Iran is experiencing a lack of oil storage capacity and may need to start decreasing production or limiting output at oil wells.
Should this occur, resuming production later could be an expensive and prolonged endeavor, potentially requiring many months to mend damaged reservoirs and wells.
Australians have witnessed similar situations previously. The energy crisis in 2022, following Russia’s invasion of Ukraine, caused significant hikes in petrol, gas, and electricity prices. Global supply chains faced immense pressure, resulting in elevated costs impacting our economy.
This illustrates the hidden price of reliance, and initiatives to invest billions in boosting long-term fuel reserves fail to tackle the core issue.
Australia remains highly susceptible to international fuel markets and lengthy, intricate supply chains for everything from refined oil to manufactured products. An economy dependent on imported energy and goods inherently relies on geopolitical peace.
This is an increasingly vulnerable base.
The current crisis highlights a structural truth: Energy security has evolved beyond just access to fuels – it now includes control over the mechanisms that energize the economy.
Australia possesses a significant, yet largely untapped, advantage in this aspect.
We have access to some of the finest solar and wind resources globally. Furthermore, modeling from Beyond Zero Emissions revealed that securing just 30 to 40 percent of crucial supply chains for key clean energy technologies through local manufacturing could generate over $215 billion in revenue and create 53,000 jobs by 2035.
Manufacturing hub
Australia has the opportunity to reclaim its status as a manufacturing hub by producing essential components for the clean economy – such as batteries, wind turbine and solar panel parts, heat pumps, and electric public transport.
Crucially for investors and policymakers, these industries are not mere hypotheticals; they are scaling up globally and fundamentally change the risk landscape of our energy system.
In contrast to fossil fuels, renewable energy does not depend on ongoing global supplies. Once the necessary infrastructure is established, the “fuel” – sunlight and wind – is domestic, plentiful, and resilient against global geopolitical disturbances.
Energy represents a major expense for heavy industries, and lower, stable energy prices are crucial for competitive manufacturing on a global scale. In this scenario, shifting to renewable energy goes beyond just reducing carbon emissions; it is also aimed at guaranteeing energy security and restoring national industrial capabilities.
Manufacturing locally with renewable energy not only tightens and secures our supply chains but also highlights the risks associated with heavily depending on imported components for our energy infrastructure.
We already have the means to create independent, eco-friendly industrial hubs; the challenge lies in political will and the assurance of investments.
Support from the federal government, such as the $5 billion Net Zero Fund and the $22.7 billion Future Made in Australia initiative, reflects its commitment and will provide the certainty necessary for industries to make the needed investments to transition to electrification.
Nevertheless, enhancing and developing local manufacturing capabilities requires time. Ongoing financial backing in the budget, along with more robust guidance from both federal and state authorities, is essential. This includes accelerating important transmission initiatives and developing clean industrial zones.
The opportunity is evident. In an environment where unhindered access to fuel and goods can no longer be assumed, we face a choice: to reinforce fragile global supply chains or to energize a new wave of Australian industries using dependable, plentiful, and locally sourced renewable energy.
For those in policy-making and business, this decision is familiar but increasingly pressing.
Australia possesses the necessary resources, technologies, and funding to proceed.
What is needed at this moment is decisive action to prepare for the forthcoming global energy challenges.
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