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May 06th 2015 print

David Archibald

Running on Empty, Hoping for the Best

The simple fact, one lawmakers choose to ignore, is that Australia's security is threatened by meagre domestic oil reserves and shipping lanes' vulnerability . We could easily convert coal into liquid fuels, but only if we tap a vast reserve of shamefully squandered cash

coal to oilHeinz Guderian, the inspired tank commander of World War II, once remarked that “The engine of the panzer is just as much a weapon as the main gun.”  Well, if the engine is a weapon, so is the fuel tank.  And Australia’s fuel tank is near empty.  We are importing 90% of the transport fuels we consume.  The net effect after adding back the little bit of oil we export is still parlous and deteriorating yearly. 

What to do?  What we should do is not deny ourselves what China is having.  China is installing near one million barrels per day of coal-to-liquids (CTL) capacity.  That is about what we need — and we would be safe and secure until the coal runs out sometime next century.

CTL is the only solution to our liquid-fuel security problem.  Nothing else works – not biofuels, not sunbeams.  Not natural gas – the three giant refrigerators to liquefy the gas being completed in Gladstone will suck every spare methane molecule out of the east coast.  Electric vehicles require the burning of coal to produce the power in the first place.  Coal will take a vehicle further converted to liquid fuel than the power the same amount of coal would produce through a power plant.  Diesel and petrol are storable.  Electric power isn’t.

The next step is to determine the cost.  That is a big number.  The capital cost of building a plant is $250,000 per daily barrel of capacity.  To back out 800,000 barrels per day of fuel imports means a capital outlay of $200 billion.  To put that in perspective, the average car might consume 12 barrels a year, which in turn would require a capital investment of about $8,000.  This would be perhaps a third of the cost of the car and would last for decades longer.  Another way of looking at it: in 2013, average Australian household wealth was $728,000, so it would take just over 1% of average wealth to pay to keep the wheels of commerce and national security turning.

Now that we know the cost, how to pay for it?  Well, just as we could double defence spending if we re-allocated the growth in social security spending last decade, there is another large lump of money that be reapplied to a higher purpose.  For starters, building the CTL industry we need means Australia would increase its carbon dioxide emissions by 30%.  Current government policy is to reduce emissions by 5% at a cost of $4.3 billion per annum.  We would be going the other way, so that is a saving of $4.3 billion per annum straight up.

But there is a far larger lump of money available.  Australian governments, state and federal, spend over $30 billion per annum on Aboriginal welfare.  That is more money than we spend on defence.  Over ten years it would amount to an astounding $300 billion – enough to pay for the CTL industry we need.

Spending on Aboriginal welfare could probably be cut to $5 billion per annum without affecting the quality of life of anybody who genuinely is entitled to be regarded as disadvantaged. I speak as someone who is Aboriginal, as per the lights of Justice Bromberg’s ruling in the Bolt case, and I regard it as racist to suggest that even a small amount of Aboriginality has such a deleterious effect that it must be compensated by funds from the public purse — like these Australia Council grants, for example –  in the manner of a disability scheme.

As Albert Einstein said, insanity is doing the same thing over and over again and expecting different results.  Aboriginal welfare to date has not had an effect on outcomes and there is nothing to suggest that any amount of spending will change that. The country’s spending on Aboriginal welfare is insane.  If it is never going to have an effect, we might as well stop doing it and reallocate the funds to something that is vitally important: to wit our very necessary synthetic fuels industry.

David Archibald, a visiting fellow at the Institute of World Politics in Washington, D.C., is the author of Twilight of Abundance (Regnery, 2014)