tag:theconversation.com,2011:/au/topics/oil-refining-3486/articlesOil refining – The Conversation2022-07-14T20:02:00Ztag:theconversation.com,2011:article/1866442022-07-14T20:02:00Z2022-07-14T20:02:00ZBreakthrough in gas separation and storage could fast-track shift to green hydrogen and significantly cut global energy use<figure><img src="https://images.theconversation.com/files/474051/original/file-20220714-9155-2h5fff.jpg?ixlib=rb-1.1.0&rect=5%2C11%2C3556%2C2095&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>In 2016, experts writing in <em>Nature</em> listed <a href="https://www.nature.com/articles/532435a">seven breakthroughs</a> in how we process chemicals that could change the world for the better. We believe we’ve just ticked one of those off the list. </p>
<p>We found a <a href="https://www.sciencedirect.com/science/article/abs/pii/S1369702122001614?via%3Dihub">highly efficient</a> and entirely novel way to separate, purify, store and transport huge amounts of gas safely, with no waste. </p>
<p>Why is this breakthrough so important? We believe it will help overcome the key challenge of hydrogen storage by allowing us to safely store and transport huge quantities of green hydrogen as a solid at a fraction of the energy cost. This will allow us to accelerate uptake of green hydrogen, as well as allow oil refineries to use much, much less energy, and make processing many other gases easier. </p>
<p>Right now, breaking crude oil into petrol and other gases in oil refineries relies on the hugely energy intensive process of cryogenic distillation. This accounts for <a href="https://www.nature.com/articles/532435a">up to 15%</a> of the world’s energy use. By contrast, we estimate our new method would cut this energy use by up to 90%. </p>
<p>This method offers the world a solid storage method for gases with a far higher capacity than any previous material. The absorbed gases can be recovered via a simple heating process leaving both the gases and the powder unchanged, allowing for immediate use or re-use.</p>
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<a href="https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Night scene of refinery" src="https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/474037/original/file-20220714-17678-ktt0iy.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Oil refineries use vast amounts of energy to turn crude oil into gas, petrol and diesel.</span>
<span class="attribution"><span class="source">Getty</span></span>
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<h2>What did we find?</h2>
<p>The breakthrough is so significant – and such a departure from accepted wisdom on gas separation and storage – that our research team repeated our experiment 20 to 30 times before we could truly believe it ourselves. </p>
<p>So how does it work? Our new approach uses a new method called “ball milling” to store gas in a special nanomaterial at room temperature. This method relies on mechanochemical reactions, meaning machinery is used to produce unusual reactions. </p>
<p>The special ingredient in the process is boron nitride powder, which is great for absorbing substances because it is so small yet has a large amount of surface area for absorption. </p>
<p>To make this work, boron nitride powder is placed into a ball mill – a grinder containing small stainless-steel balls in a chamber – along with the gases that need to be separated. As the chamber spins at progressively higher speeds, the collision of the balls with the powder and the wall of the chamber triggers a special mechanochemical reaction, resulting in gas being absorbed into the powder. </p>
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<img src="https://cdn.theconversation.com/static_files/files/2182/gas.gif?1657772575" width="100%">
<figcaption>In this process, steel balls spun at high speed work to separate gases.</figcaption>
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<p>Better, one type of gas is always absorbed more quickly, separating it out from the others, and allowing it to be easily removed from the mill. You can repeated this process over several stages to separate out the gases you want, one by one. You can store the gases in the powder for transport, and separate them back into gas. And better still, boron nitride powder can be used to carry out the same gas separation and storage process up to 50 times.</p>
<p>The process requires no harsh chemicals and creates no by-products. It doesn’t require energy-intensive settings like high pressure or low temperatures, offering a much cheaper and safer way to develop things like hydrogen powered vehicles. </p>
<p>This ball-milling gas absorption process uses around 77 kilojoules per second to store and separate 1,000 litres of gases. That’s roughly the energy needed to drive the average electric vehicle 320 kilometres. It’s at least 90% less energy than the cryogenic distillation method used in oil refineries. </p>
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Read more:
<a href="https://theconversation.com/oil-companies-are-going-all-in-on-petrochemicals-and-green-chemistry-needs-help-to-compete-153598">Oil companies are going all-in on petrochemicals – and green chemistry needs help to compete</a>
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<p>That’s why we believe this breakthrough may tick off one of the seven chemical separation method improvements which could change the world – specifically, improving separation of olefin-paraffin, a key part of the petrochemical industry. </p>
<p>This is the culmination of 30 years work in nanomaterials and mechanochemistry by researchers at Deakin University’s Institute for Frontier Materials. </p>
<h2>How will this help us switch to clean energy?</h2>
<p>The gas crisis facing Australia’s east coast has drawn attention to our reliance on these fuels. In response, there have been growing calls to hasten the switch to cleaner gas fuels such as green hydrogen. </p>
<p>The problem is storage. Storing enormous quantities of hydrogen for practical use is very challenging. At present, we store hydrogen in a high-pressure tank or by cooling the gas down to a liquid form. Both require large amounts of energy, as well as dangerous processes and chemicals. </p>
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<a href="https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Hydrogen filling station korea" src="https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/474036/original/file-20220714-9357-9akftr.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">While nations like Korea have pursued hydrogen, the challenges of storage have slowed down uptake.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
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<p>That’s where this method could help accelerate uptake of hydrogen, by enabling safe and efficient solid-state storage technology on a large scale. When stored as a powder, hydrogen is extremely safe. To retrieve the gas, you simply heat the powder in a vacuum. </p>
<p>This new process can achieve unprecedented gas storage capability, well above any known porous materials. For instance, our new process can store 18 times more acetylene than the highest uptake achieved by metal-organic frameworks, another approach using porous materials. </p>
<p>The remarkably high gas storage capability is due to the novel way gas molecules stick to the powder during the ball milling process, which does not break the gas molecules. </p>
<p>For this process to be able to scale, however, we have to perfect the milling process. There’s a sweet spot in milling which creates the weaker chemical reactions we want – without producing stronger reactions which can destroy the gas molecules. We will also have to figure out how to get the best storage rate for each material based on milling intensity and pressure of the gases. </p>
<p>With industry support, our novel process can be scaled rapidly to provide practical solutions to ensure we never have to face another gas crisis – and can speed up decarbonisation. </p>
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Read more:
<a href="https://theconversation.com/green-hydrogen-is-coming-and-these-australian-regions-are-well-placed-to-build-our-new-export-industry-174466">Green hydrogen is coming – and these Australian regions are well placed to build our new export industry</a>
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<p class="fine-print"><em><span>Ying Ian Chen receives funding from the Australian Research Council. </span></em></p><p class="fine-print"><em><span>Srikanth Mateti receives funding from Australian Research Council</span></em></p>Our new approach lets us separate, store and transport tricky gases like hydrogen as a solid - and for a fraction of the energy.Ying Ian Chen, Director, ARC Research Hub for Safe and Reliable Energy, Deakin UniversitySrikanth Mateti, Research fellow, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1788682022-03-09T13:17:29Z2022-03-09T13:17:29ZThe US is banning Russian oil imports, but an embargo that includes European allies would have more impact<figure><img src="https://images.theconversation.com/files/450822/original/file-20220308-21-1i9qtqe.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4672%2C2921&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Moscow headquarters of Rosneft, Russia's state-owned oil company.</span> <span class="attribution"><a class="source" href="https://newsroom.ap.org/detail/UkraineInvasion-BP/738e04f6cd0a416ea069e67229a8bd40/photo">AP Photo/Mikhail Metzel</a></span></figcaption></figure><p><em>President Joe Biden announced on March 8, 2022, that the U.S. will <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2022/03/08/fact-sheet-united-states-bans-imports-of-russian-oil-liquefied-natural-gas-and-coal/">ban imports of oil from Russia</a>, along with refined petroleum products, natural gas and coal. The ban is the latest U.S. action designed to punish Russia for its invasion of Ukraine. Global energy policy expert <a href="https://fletcher.tufts.edu/people/amy-myers-jaffe">Amy Myers Jaffe</a> explains how this step is likely to affect oil prices – and Russia.</em></p>
<h2>How important is Russia as a US oil supplier?</h2>
<p>Russia produces <a href="https://www.eia.gov/international/overview/country/RUS">close to 11 million barrels per day of crude oil</a>. It uses roughly half of this output for its own internal demand, which presumably has increased due to higher military fuel requirements, and it exports 5 million to 6 million barrels per day. </p>
<p>Today, Russia is the second largest crude oil producer in the world, behind the U.S. and ahead of Saudi Arabia, but sometimes that order shifts. <a href="https://www.reuters.com/markets/europe/russias-oil-gas-revenue-windfall-2022-01-21/">Russia earned over US$110 billion in 2021 from oil exports</a>, twice as much as its earnings from natural gas exports. </p>
<p>For the U.S., Russia is a relatively small oil source. In 2021 it provided <a href="https://www.wsj.com/articles/why-does-the-u-s-still-buy-russian-oil-11646151935">8% of U.S. imports of crude oil and petroleum products</a>. At times in recent years that share has increased, after events such as sanctions on Venezuela and storms that disrupted offshore production last year in the U.S. Gulf of Mexico. </p>
<p>But Russian crude oil is not really a baseload staple for U.S. refiners. Purchases were <a href="https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/oil/030622-us-european-allies-considering-coordinated-ban-on-russian-oil-imports-blinken">down to 84,000 barrels per day</a> when the Biden Administration formally announced the import ban. It will be a minor inconvenience for U.S. refiners to avoid Russian oil. </p>
<p>And the reverse is also true: U.S. <a href="https://www.eia.gov/international/content/analysis/countries_long/Russia/russia.pdf">purchases barely register on Russia’s massive oil earnings</a>. To be effective, individual country bans must be aggregated across many countries to produce consequences that actually affect the Russian purse. </p>
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<iframe width="440" height="260" src="https://www.youtube.com/embed/PXQXNovyIoo?wmode=transparent&start=0" frameborder="0" allowfullscreen=""></iframe>
<figcaption><span class="caption">President Joe Biden announced on March 8, 2022, that the U.S. would ban imports of Russian oil.</span></figcaption>
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<h2>What about other countries that buy Russian oil?</h2>
<p>The challenge to institute similar bans is much harder for Europe. The United Kingdom, which is an oil producer, is also <a href="https://www.wsj.com/articles/u-s-planning-to-ban-russian-oil-imports-11646746787">banning Russian oil imports</a>, but getting other G-7 nations like Germany, Italy and Japan to join will be a hard diplomatic lift. It’s not impossible, but Germany – the largest economy in Europe – currently <a href="https://www.bloomberg.com/news/articles/2022-03-07/germany-signals-opposition-to-cutting-essential-russian-energy?sref=Hjm5biAW">is holding off</a>, though it is making plans to find alternatives. </p>
<p>About half of Russia’s exported oil is shipped to European countries, including Germany, Italy, the Netherlands, Poland, Finland, Lithuania, Greece, Romania and Bulgaria. China is another large buyer: It imports <a href="https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/oil/030122-factbox-a-look-at-key-russia-china-crude-oil-ties-as-ukraine-crisis-rages">1.6 million barrels per day</a> of Russian crude oil.</p>
<p>It remains to be seen whether China will take any extra Russian oil, which is likely to be highly discounted, and swap it out by releasing other barrels that could be scooped up by European refiners. India has already bought <a href="https://www.bloomberg.com/news/articles/2022-02-25/indian-refiners-are-snapping-up-cheap-russian-oil">Russian crude cargoes at a sharp discount</a>. </p>
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<p>Since oil is a relatively fungible global commodity, at least some of Russia’s crude exports to Europe and other countries that may choose to join the U.S. and U.K. in imposing oil sanctions may wind up being sent somewhere else. That would free up other supplies from sources such as Norway, Angola and Saudi Arabia to be redirected back to Europe. </p>
<p>Russia’s oil has high sulfur and other impurities, so refining it requires specialized equipment – it can’t be sold just anywhere. But other Asian buyers can take it, including India and Thailand. </p>
<h2>Can European nations get oil from other sources?</h2>
<p>Europe and the U.S. could simultaneously increase crude oil sales from their national strategic stocks to lessen the blow of any further restrictions on Russian crude oil imports to the G-7. The U.S. is already selling 1.3 million barrels per day from its <a href="https://theconversation.com/biden-taps-the-strategic-petroleum-reserve-what-is-it-where-did-it-come-from-and-does-the-us-still-need-it-172473">Strategic Petroleum Reserve</a> and has said it will increase these flows. China has also <a href="https://money.usnews.com/investing/news/articles/2022-01-14/exclusive-china-agreed-with-u-s-on-oil-reserves-release-near-lunar-new-year-sources">released oil from its national strategic stocks</a> to help ease oil prices. </p>
<p>Still, determining how much strategic oil to release at once depends on perceptions about the duration of the conflict and whether it could escalate beyond Ukraine. Those are both unknowns.</p>
<p>The U.S. and other G-7 members also could ask Middle East countries to relax <a href="https://www.bakerinstitute.org/media/files/Research/878ae010/the-future-of-saudi-price-discrimination-the-effect-of-russian-production.pdf">destination restrictions</a> on their crude oil shipments, and press countries like China and India to redirect other oils of similar quality to Russian oil back to Europe if and when they increase their purchases from Moscow. Such steps would help ameliorate additional upward price impact of any future G-7 restrictions on Russian oil imports. </p>
<p>It’s not certain that China and India would cooperate, but it would be in their interests to do so. They are major oil importers and would not want to see higher crude oil prices.</p>
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<span class="caption">A panoramic drone view of the Novokuibyshevsk Refinery in Russia’s Samara region.</span>
<span class="attribution"><a class="source" href="https://www.gettyimages.com/detail/news-photo/panoramic-drone-view-of-the-premises-of-the-novokuibyshevsk-news-photo/1238834584">Yegor Aleyev\TASS via Getty Images</a></span>
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<h2>How are reduced oil purchases from Russia likely to affect world oil prices?</h2>
<p>One effect is already clear: Markets have anticipated possible energy sanctions on Russia by discounting Russian crude. Refiners who aren’t obligated by firm legal contracts to take delivery of it are <a href="https://www.spglobal.com/commodity-insights/en/market-insights/latest-news/shipping/030422-russian-refineries-start-to-feel-impact-of-buyers-shunning-oil-products">shunning spot, or non-contract, cargoes exiting Russian ports</a>. </p>
<p>One trade publication estimates that this has resulted in <a href="https://www.energyintel.com/0000017f-4cb2-d78a-af7f-efb6b0b70000#:%7E:text=An%20already%20tight%20oil%20market,fallen%201%20million%20b%2Fd.">roughly 1.6 million barrels per day of Russian oil failing to find buyers</a> The result is a large-scale disruption in global oil supplies that is already boosting prices, even though the physical oil is still available in principle. </p>
<p>There’s a limit to how much oil is available to replace lost Russian crude exports. Most exporters are <a href="https://www.nytimes.com/2022/01/14/business/energy-environment/oil-prices-opec.html">maxed out in terms of crude oil production</a>, but a few of the largest Middle East producers could surge their output in the short term to put an extra 1 million barrels per day or more onto the market. </p>
<p>The Biden administration has been continuing talks with Iran to <a href="https://www.bloomberg.com/news/articles/2022-03-07/how-an-iran-nuclear-deal-could-affect-oil-trade-and-security?sref=Hjm5biAW">restart the nuclear deal</a> suspended by President Trump in 2018. If that happens, Iranian oil exports might rise from 800,000 barrels per day now to about 1.5 million barrels per day within three months or so. </p>
<p>But Russia is a party to the nuclear deal and has demanded guarantees that its economic trade with Iran will be <a href="https://www.theguardian.com/world/2022/mar/06/iran-nuclear-talks-rocked-by-russian-demand-for-sanctions-exemption">exempt from any sanctions associated with Russia’s invasion of Ukraine</a>. That demand has slowed diplomatic progress. </p>
<p>Saudi Arabia has access to large stores of crude oil in its vast global tank system and its tankers that float at sea. In 2014, when Russia invaded Crimea, U.S. allies in the Persian Gulf held over 70 million barrels in storage near <a href="https://oilprice.com/Energy/Energy-General/UAE-Expands-Strategic-Oil-Hub-To-Counter-Iranian-Threat.html">Fujairah</a> in the United Arab Emirates. They did this as a threat to Russia that a price war would ensue if Russian troops moved beyond that peninsula. Russia stayed in Crimea, so the oil was not released. </p>
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<p>The Saudis have launched price wars that hurt Russia’s economy before, in <a href="https://www.rbth.com/history/331825-saudi-arabia-oil-crisis-ussr-collapse">1986</a>, <a href="https://money.cnn.com/1998/11/30/economy/oilprices/">1998</a>, 2009 and again briefly in <a href="https://www.washingtonpost.com/politics/2020/03/23/saudi-arabia-is-launching-an-oil-price-war-thats-risky/">2020</a>. But today’s oil market conditions make a price war an unlikely outcome, given the existing tight balance between supply and demand. The only scenario that could trigger a price war now would be if global demand were to contract suddenly because of a recession.</p>
<p><em>This is an update of an <a href="https://theconversation.com/can-wealthy-nations-stop-buying-russian-oil-178008">article</a> originally published on March 1, 2022.</em></p><img src="https://counter.theconversation.com/content/178868/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Amy Myers Jaffe does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Oil revenues are crucial to Russia’s economy. The US only accounts for a small fraction of them, so banning Russian oil imports has mainly symbolic value.Amy Myers Jaffe, Research professor, Fletcher School of Law and Diplomacy, Tufts UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1696902021-11-02T14:13:23Z2021-11-02T14:13:23ZOil companies are ploughing money into fossil-fuelled plastics production at a record rate – new research<p>Visiting a modern petrochemical plant makes you feel incredibly small. Enormous compressors roar incessantly, distillation columns tower high above your head, large pipelines full of oil and gas criss-cross the site. Heat radiates from inspection hatches in the furnaces in which the hydrocarbons are heated to 850°C to make the molecules <a href="https://en.wikipedia.org/wiki/Steam_cracking">crack</a>. It’s easy to get lost in alleys of ducts and pipes, which to an untrained eye, all look the same. </p>
<p>Large tankers moor at the quay to unload cargoes of oil and gas and trucks leave at the other end, filled with plastic pellets. Tall chimneys release large plumes of flue gases from burning gas and unwanted by-products, using the energy to run the processes at the plant. At night a flare watches over the plant like a bright eye. This is where gases are combusted in case of an emergency or unexpected shutdown of parts of the plant. It’s always burning with a small flame.</p>
<p>Around the world, around the clock, the plastics we use every day are produced at facilities such as these on an almost incomprehensible scale. A scale so large that some suggest we now live in an era best labelled <a href="https://doi.org/10.2138/gselements.14.5.291">the plasticene</a>.</p>
<p>And as the climate crisis worsens, plastics production at plants like these is <a href="https://www.statista.com/statistics/282732/global-production-of-plastics-since-1950/">ballooning</a>. Modern lifestyles and practices are intimately entwined with the use of plastics. Our phones, computers, food packaging, clothes and even renewable energy technologies, such as wind turbine blades and the cables that connect them to the power grid, are all, to a large extent, made from plastics.</p>
<p>This means plastic demand is likely to grow for decades to come – not least in developing countries, which will account for the bulk of future demand growth. In 1950, the global production of plastic was estimated to be a mere 2 Mt (million tonnes). In 2015 this had grown to 380 Mt, and along a business-as-usual trajectory it will reach <a href="https://www.nature.com/articles/s41558-019-0459-z">1,606 Mt by 2050</a>. </p>
<p>Unless mitigated, this growth will also incur a <a href="https://www.nature.com/articles/s41558-019-0459-z">substantial increase</a> in global greenhouse gas emissions – from 1.7 Gt (billion tonnes) of CO₂-equivalent (CO₂e) in 2015, to 6.5 GtCO₂e by 2050. It has been forecast that plastics and other petrochemicals, such as fertilisers and solvents (plastics make up close to 45% of the output of the sector) will become the largest driver of oil demand, accounting for almost 50% of the growth in oil demand by 2050, according to <a href="https://www.iea.org/reports/the-future-of-petrochemicals">estimates</a> by the International Energy Agency (IEA). </p>
<p>Why? Because the raw materials behind plastics and other petrochemicals are fossil fuels. As traditional demands for oil – vehicle fuels – are declining as the transport sector is increasingly electrified, the oil industry is seeing plastics as a key output that can make up for losses in other markets. Investing in plastics has therefore become a key strategy for fossil fuel firms. </p>
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<img alt="COP26: the world's biggest climate talks" src="https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/424739/original/file-20211005-17-cgrf2z.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><strong>This story is part of The Conversation’s coverage on COP26, the Glasgow climate conference, by experts from around the world.</strong>
<br><em>Amid a rising tide of climate news and stories, The Conversation is here to clear the air and make sure you get information you can trust. This story was commissioned by The Conversation’s <a href="https://theconversation.com/uk/topics/insights-series-71218">Insights</a> team. <a href="https://page.theconversation.com/cop26-glasgow-2021-climate-change-summit/"><strong>More.</strong></a></em></p>
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<p>We have researched <a href="https://steps-mistra.se/">sustainable plastics</a> for several years. And we have long argued that the climate impacts of plastics and petrochemicals production are being neglected, as the debate so far has mainly focused on later stages of <a href="https://doi.org/10.1002/wene.360">plastic life-cycles</a>. This resulted in a <a href="https://www.ivl.se/projektwebbar/petrochemicals.html">research project</a> in which we mapped and analysed the fossil lock-ins of plastics and petrochemicals. </p>
<p>More recently, we <a href="https://doi.org/10.1016/j.enpol.2021.112418">investigated</a> major plastics producers and the investments they are making which are likely to increase the production of fossil-based virgin plastics around the world. We discovered that the 12 largest petrochemical companies have cumulatively announced 88 new projects for production capacity increase and infrastructure expansion between 2012 and 2019. This is indicative of a global trend of increasing investments in the chemical industry, with <a href="https://www.vci.de/services/publikationen/broschueren-faltblaetter/chemiewirtschaft-in-zahlen.jsp">available data for key regions</a> showing that total investments more than doubled from 2007 to 2019, reaching levels we estimate have not been seen before. </p>
<p>These new and expanded facilities will operate for decades once they are opened, adding to the current greenhouse gas emissions of the chemical industry – which are already the <a href="https://www.iea.org/reports/tracking-industry-2020">third largest</a> of all industries.</p>
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Read more:
<a href="https://theconversation.com/oil-companies-are-going-all-in-on-petrochemicals-and-green-chemistry-needs-help-to-compete-153598">Oil companies are going all-in on petrochemicals – and green chemistry needs help to compete</a>
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<img alt="Aerial view of a chemical plant." src="https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=337&fit=crop&dpr=1 600w, https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=337&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=337&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/426923/original/file-20211018-19-1ao649c.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Petrochemical plant at dusk, Bangkok, Thailand.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-oil-gas-industry-refinery-697570333">Travel mania/Shutterstock.com</a></span>
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<h2>Petrochemical plants of the future</h2>
<p>On the small island of Yushan outside Zhoushan, a coastal city in the eastern Chinese province of Zhejiang, one such new mega-plant is currently being built. The mountain peaks on the island have been flattened and the island itself has been expanded into the sea by so much that on satellite images available on <a href="https://www.google.se/maps/@30.3316445,121.9432962,16437m/data=!3m1!1e3">Google maps</a> you can no longer recognise its shape. All of this to make way for a gigantic industrial site: Zhejiang Petrochemical Company’s somewhat perversely named <a href="https://www.nsenergybusiness.com/projects/zhoushan-green-petrochemical-base/">Green Petrochemical Base</a>.</p>
<p>The brand new site, which is in the final stage of its second development phase, is a fully integrated petroleum refinery and petrochemical production facility. Previously, these processes have typically been located in separate facilities and sometimes on different continents. The new facility will have the capacity to process <a href="https://www.ogj.com/refining-processing/petrochemicals/article/14177840/zpc-progresses-on-phase-2-of-zhoushan-integrated-refining-petchem-complex">800,000 barrels</a> of crude oil per day (enough to fill 50 Olympic-size swimming pools) making it one of the <a href="https://www.statista.com/statistics/981799/largest-oil-refineries-worldwide/">largest refineries in the world</a>. Most of its chemical products will be common plastics, such as polyethylene for flexible packaging and key petrochemical building block molecules for the production of polyester fibres for textiles.</p>
<p>The Zhejiang project is indicative of a trend as oil and gas companies increasingly look to plastics and other petrochemicals as progressively important markets for their product. “The future of oil is in chemicals, not fuels,” as a headline in a trade press journal <a href="https://pubs.acs.org/doi/10.1021/cen-09708-feature2">describes it</a>. Our investigations indicate that this future is fast approaching.</p>
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<p>Information about the industry and its growth is scarce in international statistical databases, such as those hosted by the UN Industrial Development Organisation, and only extremely aggregated data is available from trade organisations. So we spent the last year collecting data about recent projects from trade press as well as information released by the firms themselves, cross-referencing to identify unique projects. Two key trends emerged in our analysis: the move towards primarily <a href="https://theconversation.com/oil-companies-are-going-all-in-on-petrochemicals-and-green-chemistry-needs-help-to-compete-153598">using oil</a> for plastics and chemicals rather than petrol, and the explosive growth in demand for <a href="https://doi.org/10.1016/j.erss.2020.101479">US ethane</a>, a byproduct from shale gas produced through fracking.</p>
<p>The first trend is most manifest in China and the Asia-Pacific region, where industry experts <a href="https://www.bloomberg.com/news/articles/2020-08-25/global-oil-refining-faces-shake-up-from-asia-petrochemicals-boom">estimate</a> that 70-80% of new refining capacity in the next five years will be plastics focused. The large oil firms are therefore strategically partnering with chemicals and plastics producers in the region – in the Zhejiang case described above, for example, Saudi Aramco has <a href="https://www.nsenergybusiness.com/news/saudi-aramco-zhejiang-petrochemical-project/">signed an agreement</a> to buy shares in the firm and become a main supplier of crude oil. </p>
<p>The almost insatiable demand for plastics in the Chinese manufacturing industry – producing plastic car parts, cell phones, and textiles for use both domestically and abroad – has also spurred Western chemical firms to make record investments. The world’s largest chemicals company BASF, for example, is investing <a href="https://www.plasticsnews.com/article/20190521/NEWS/190529988/basf-making-10b-investment-in-china">US$10 billion</a> in a new site in China – the largest investment ever for the company. </p>
<p>The second trend has mainly materialised along the coast of the Gulf of Mexico, from Corpus Christi and Houston (the petrochemical capital of the world) in Texas to Baton Rouge and New Orleans in Louisiana. The expansion of fracking in the US has created a plentiful supply of ethane, a by-product of fracking for oil and natural gas. While ethane cannot be used as natural gas in most applications, it is an excellent feedstock for the production of common plastics – and is very cheap. As ethane production in the US has soared following the shale gas boom, so have the investments in <a href="https://theconversation.com/fossil-fuel-industry-sees-the-future-in-hard-to-recycle-plastic-123631">ethane-based plastics</a> production facilities as well as other <a href="https://www.americanchemistry.com/better-policy-regulation/energy/resources/shale-gas-is-driving-new-chemical-industry-investment-in-the-u.s">chemicals produced from shale gas</a>. </p>
<p>With new technology being developed for exporting ethane overseas, this trend quickly diffused <a href="https://www.eia.gov/todayinenergy/detail.php?id=28052">to Europe</a>. Adding new export terminals in the US has also recently allowed the export to reach both India and China.</p>
<h2>The first plastics</h2>
<p>To understand the modern plastics and petrochemical industries of today, we must look to the past. The modern chemical industry (including plastics) has a long tradition of close connections to the fossil fuel industry. It goes all the way back to the mid 19th century when the first synthetic dyestuffs and other early industrial chemicals were <a href="https://www.theatlantic.com/science/archive/2017/10/benzene-tree-organic-compounds/530655/">produced from coal tars</a>, abundantly available from the gas works in which coal was used to produce gas for use in the quickly growing cities. </p>
<p>The industry emerged and developed in regions with coal resources and rapid industrialisation, such as the UK. But it was in Germany, where chemistry was a strong academic tradition and collaboration with industrialists common, that key developments were made. This led to the foundation of successful companies such as Bayer (in 1863) and BASF (in 1865) – companies that are still among the <a href="https://cen.acs.org/business/finance/CENs-Global-Top-50-2021/99/i27">top firms</a> in the industry. Coal remained the main source of raw materials and energy for chemicals for a century, and also for the <a href="https://www.acs.org/content/acs/en/education/whatischemistry/landmarks/bakelite.html">first synthetic plastics</a>, such as Bakelite.</p>
<figure class="align-center ">
<img alt="Old advertisement for bakelite, showing nine coloured squares." src="https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=601&fit=crop&dpr=1 600w, https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=601&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=601&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=755&fit=crop&dpr=1 754w, https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=755&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/426940/original/file-20211018-15-1vpywcz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=755&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Colour chart for Bakelite ‘jewel’ quality colours, 1924. Bakelite was the first plastic made from synthetic components.</span>
<span class="attribution"><a class="source" href="https://en.wikipedia.org/wiki/File:Bakelite_color_chart_1924_Gifts_to_Treasure_Embed_Art_Company_Jewel_only.tif#/media/File:Bakelite_color_chart_1924_Gifts_to_Treasure_Embed_Art_Company_Jewel_only.tif">Wikimedia Commons</a></span>
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<p>In the mid 20th century, it was clear that change was coming, but in the years following world war two the direction remained uncertain – in 1949, the economist Egon Glesinger of the Food and Agriculture Organization of the UN published his book <a href="https://books.google.se/books?id=V_U4AAAAMAAJ&q=the+coming+age+of+wood&dq=the+coming+age+of+wood&hl=sv&sa=X&redir_esc=y">The Coming Age of Wood</a>, in which he forecast a chemicals industry that used wood to produce its products instead of coal. </p>
<p>Reading this book today, it is difficult to understand that it is 70 years old: the topic is close to today’s debate about how to mitigate climate change by using renewable resources. But in the 1950s, the industry sadly went a different way, as the breakthroughs US firms had made in petroleum processing during the war quickly spread <a href="https://newleftreview.org/issues/ii130/articles/petrochemical-empire">around the globe</a> with the help of re-industrialisation aid schemes such as the Marshall plan. </p>
<p>This led to the era of petrochemicals, with the industry recording double digit growth during the 1960s and 1970s. Since then, the industry has expanded into using natural gas, leading to the recent turn towards using gas condensates, such as ethane from fracking. For more than 150 years, the chemical and fossil fuel industries have fostered a particularly <a href="https://www.chemistryworld.com/features/chemistrys-special-relationship/3004540.article">special relationship</a>.</p>
<p>Plastics and other chemicals are today almost exclusively produced from oil and gas (and in China still coal to some degree). The largest companies producing plastics are often subsidiaries of international oil and gas companies, such as Shell (Netherlands/UK) and ExxonMobil (US), or of national oil companies, such as Sinopec (China) or SABIC (Saudi Arabia). Other firms in the industry have started by producing plastics and chemicals before acquiring oil and gas infrastructure, such as INEOS (UK) and Reliance (India).</p>
<p>The firms in the industry rely on licensing technologies developed by global technology suppliers, such as Honeywell, who see chemicals production as a cornerstone for developing the “<a href="https://www.hydrocarbonprocessing.com/magazine/2019/march-2019/columns/executive-viewpoint-introducing-the-refinery-of-the-future">refinery of the future</a>” – further cementing the connection to fossil fuels.</p>
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<p>Although several bio-based plastics have been developed, they still make up less than <a href="https://www.european-bioplastics.org/market/">1%</a> of the market, which is still completely dominated by the fossil-based plastics.</p>
<h2>Carbon lock-in</h2>
<p>Plastics therefore suffer from a severe case of “<a href="https://www.wri.org/insights/carbon-lock-in-definition">carbon lock-in</a>” – a dependence on fossil fuel resources which is continually reinforced through technology, infrastructure, institutions and behaviour. </p>
<p>The IPCC <a href="https://www.ipcc.ch/2021/08/09/ar6-wg1-20210809-pr/">recently warned</a> that irreversible effects of intensifying climate change are imminent and that the agreed targets of limiting global warming to 1.5 or 2 degrees are soon beyond reach. At this point in time, all sectors of the global economy ought to be on track to reduce their use of fossil fuel resources, especially the most energy and emissions-intensive industries, which include cement, steel and chemicals. </p>
<p>From energy efficiency improvements and switching to renewable energy to improving circularity and recycling, there are plenty of opportunities for the industry to invest in solutions for a cleaner environment, as <a href="https://www.iea.org/reports/energy-technology-perspectives-2020/technology-needs-for-heavy-industries">identified by the IEA</a>. Yet <a href="https://sciencebasedtargets.org/companies-taking-action?status=Targets%20Set&sector=Chemicals#table">only very few</a> of the plastics and chemical firms have set emission reductions targets aligned with the Paris agreement. </p>
<p>Many countries also continue to <a href="https://www.imf.org/en/Publications/WP/Issues/2021/09/23/Still-Not-Getting-Energy-Prices-Right-A-Global-and-Country-Update-of-Fossil-Fuel-Subsidies-466004">subsidise fossil fuels</a>, which filters into plastics and petrochemicals production through reduced costs for fossil building blocks and energy. Addressing these discrepancies between climate targets and real-world actions in the emissions-intensive industries must therefore be a central aim of the <a href="https://theconversation.com/uk/topics/cop26-80762">COP26 negotiations</a>. </p>
<p>There is increasing awareness of the dangers of plastic pollution. Countries, civil society and <a href="https://www.plasticpollutiontreaty.org/">businesses</a> are all calling for a global treaty to end marine plastic pollution. And many would like to see a more <a href="https://ellenmacarthurfoundation.org/topics/plastics/overview">circular economy for plastics</a>. It’s particularly worrying, then, that these petrochemical firms are seemingly so sure their enormous new investments will pay off. It indicates that they see no sign of a slowdown in the production of plastics.</p>
<p>Over the past two decades, there has been growing pressure to regulate plastics around the world. Plastic objects and marine plastic pollution have helped elevate plastics to the top of the political agenda in many regions. The fact that we can find plastic literally everywhere and gloomy prospects, such as the prediction there will be more plastic than fish (by weight) in the ocean <a href="https://ellenmacarthurfoundation.org/the-new-plastics-economy-rethinking-the-future-of-plastics">by 2050</a>, make it clear that policy responses are needed urgently. </p>
<p>We have identified an <a href="https://doi.org/10.1016/j.wasman.2019.02.025">increasing number</a> of public policies on plastics. But most are aimed at preventing specific objects, such as plastic bags, plastic bottles, microbeads, and single use plastic, from ending up in natural environments – not addressing the fundamentals of plastics value chains. </p>
<p>Addressing plastic waste and particular objects is necessary, but it is not enough. The plastic pollution prevention policies now in place will not <a href="https://www.pewtrusts.org/en/research-and-analysis/articles/2020/07/23/breaking-the-plastic-wave-top-findings">break the wave</a> of plastic waste, let alone alter the fundamental structure of the sector. <a href="https://doi.org/10.1080/09644016.2021.1915020">Our research shows</a> what drastic changes to the ways we use plastics are required to reach a meaningful form of circular economy.</p>
<h2>The anti-plastic movement</h2>
<p>Resistance against the industry is growing. In <a href="https://globalpetrochemicalmap.communitymaps.org.uk/welcome">several locations</a> around the world there are loud, local protests against expanding production of plastics and other petrochemicals.</p>
<p>In the US, protesters have successfully litigated against petrochemical production facilities. In Point Comfort, Texas, Diane Wilson, a former shrimp boat captain, led clean-up efforts of plastic pellets near a petrochemical production facility owned by Formosa Plastics. The plastic pellets, gathered over several years, were used as evidence in a lawsuit she and others filed against the company. In 2019, Formosa Plastics <a href="https://www.texastribune.org/2019/12/03/texas-judge-approves-settlement-agreement-water-pollution-formosa/">agreed to pay</a> US$50 million to settle the lawsuit, in which a judge approved the settlement of the claim that the company illegally dumped billions of plastic pellets and other pollutants. In addition to the financial settlement, the company agreed to comply with “zero discharge” of all plastics in the future and to clean up existing pollution. </p>
<p>The outcome has encouraged another lawsuit <a href="https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fopen.spotify.com%2Fepisode%2F4B6GKonN4MqNvULgHZSuN9%3Fsi%3D26fbf43af60c46b4&data=04%7C01%7C%7C8e3bd93976a94dc46e0d08d955ef6ffe%7Cdf0082c6bebd421aab11b005632d0b9f%7C0%7C0%7C637635309154536024%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=z%2B%2BqEdoWVl%2FfUEuSQzezqtbaPv%2BFwj8LJDT%2B8mG%2BarM%3D&reserved=0">against Formosa Plastics</a> in Louisiana, where protesters have fought the building of new petrochemical facilities. The planned facility could roughly double toxic emissions in its local area and, according to environmentalists, release up to <a href="https://www.theguardian.com/us-news/2021/aug/18/louisiana-plastics-plant-toxic-emissions-cancer-alley">13m tonnes</a> of greenhouse gases a year. This is the equivalent of three coal-fired power plants, which would make it one of the largest pollution-causing plastics facilities in the world. </p>
<p>The lawsuit has for now <a href="https://www.washingtonpost.com/climate-environment/2021/04/19/huge-plastics-plant-faces-calls-environmental-justice-stiff-economic-headwinds/">halted the building of the new facilities</a>. But this plant would be located in a heavily industrialised region between New Orleans and Baton Rouge, an area recognised by the UN as <a href="https://www.ohchr.org/EN/NewsEvents/Pages/DisplayNews.aspx?NewsID=26824&LangID=E">Cancer Alley</a> due to the <a href="https://www.propublica.org/article/welcome-to-cancer-alley-where-toxic-air-is-about-to-get-worse">toxic chemical emissions</a> that have affected it for decades. Toxic emissions from chemical plants have affected generations of local residents in <a href="https://aeon.co/essays/plastics-run-in-my-family-but-their-inheritance-is-in-us-all">other locations as well</a>.</p>
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<p>Plans for expanding plastics and petrochemicals production have also been met by local opposition elsewhere. In the Netherlands, the <a href="https://www.plasticsoupfoundation.org/en/2020/01/plastic-soup-foundation-takes-legal-action-against-structural-plastic-pollution/">Plastic Soup Foundation</a> took legal steps to try and stop plastic pellet pollution from the chemical clusters in Rotterdam and Antwerp. </p>
<p>In Taiwan, where petrochemicals have been a key contributor to economic development, several protests against petrochemical site have made it <a href="https://topics.amcham.com.tw/2017/04/uncertain-future-taiwans-petrochemicals/">nearly impossible to expand</a>. </p>
<p>Even in China, which has seen the most rapid expansion of the industry in recent years, protests have been organised in many cities (such as <a href="https://www.tandfonline.com/doi/full/10.1080/24694452.2019.1574551">Dalian, Xiamen and Ningbo</a>) where plans for PX (paraxylene – a platform chemical for producing PET/polyester fiber) production have been revealed. These so-called <a href="https://www.forbes.com/sites/forbesasia/2015/06/22/environmental-protests-expose-weakness-in-chinas-leadership/">PX-protests</a> have primarily focused on local environmental pollutants and the negative effects on neighbouring communities, which tend to be impoverished and minority communities, rather than the climate impact and fossil fuel connection of the industry.</p>
<p>A different story is heard in Scotland, where Extinction Rebellion protesters in 2020 <a href="https://www.bbc.com/news/uk-scotland-tayside-central-54656480">blocked the entrance</a> to the integrated petrochemical production and oil refinery complex in Grangemouth, owned by INEOS. XR protesters accused the petrochemical manufacturer of being Scotland’s largest contributor to climate change and a major hurdle for the net zero carbon emissions target set by the government. INEOS <a href="https://www.dailymail.co.uk/news/article-8871539/Scotlands-Extinction-Rebellion-mob-use-two-yachts-block-gates-Ineos-oil-refinery.html">responded</a> saying that emissions from the production in the UK were lower than elsewhere, and that the company explores ways of reducing emissions further. </p>
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<p>The local union, Unite, has a <a href="https://www.theguardian.com/uk-news/2013/oct/16/grangemouth-refinery-closes-dispute-ineos-unite">long history of conflicts</a> with the owner, including on the topic of fracking. INEOS already imports <a href="https://www.bbc.com/news/uk-scotland-37474396">ethane from US shale gas</a> and <a href="https://www.theguardian.com/environment/2017/apr/03/ineos-leads-lobbying-effort-to-get-out-of-paying-green-tax">has pursued fracking in the UK</a>, whereas Unite has campaigned <a href="https://journals.sagepub.com/doi/full/10.1177/10242589211041216">against fracking</a>. Striking a balance between securing jobs for the communities around petrochemical clusters such as Grangemouth and shutting down emissions-intensive production remains difficult, a point also recognised by the Scottish <a href="https://www.gov.scot/publications/just-transition-commission-meeting-papers-january-2020/">Just Transition Commission</a>.</p>
<p>So local pressure on petrochemicals has, in some cases, resulted in individual plants being forced to change their practices. But they have not led to a systemic change of the sector, which continues to be locked in to fossil-based and greenhouse emissions intensive technologies and processes. Every week we spend researching the topic we seem to read more news about plans for new fossil-based production facilities somewhere in the world.</p>
<h2>Looking forward</h2>
<p>The industry is not doing enough. Only a few of the large companies have <a href="https://sciencebasedtargets.org/companies-taking-action?status=Targets%20Set&sector=Chemicals#table">set proper targets</a> for reducing their greenhouse gas emissions. And plans for how they will do so remain sketchy and light on detail. </p>
<p>Several <a href="https://www.mdpi.com/1996-1073/14/13/3772">scenarios</a> show that deep cuts to emissions within the industry are (theoretically) possible – but rely heavily on niche and future technologies that in turn would require an unprecedented technology scale-up and renewable energy deployment. Some large firms are <a href="https://www.euractiv.com/section/energy-environment/news/basf-starts-building-its-own-offshore-wind-farms/">strategically acquiring</a> renewable energy assets, such as offshore wind farms, to supply energy to their plants, but not yet at anywhere near the scale needed to replace all their fossil energy use. And industry trade associations <a href="https://influencemap.org/report/Industry-Associations-and-European-Climate-Ambition-fdaeeb57dc404c90aaf2f82bbd729733">continue to lobby</a> against tougher regulations aimed at accelerating the transition.</p>
<p>At the same time, large firms continue to announce plans for new plants that will be larger than ever and continue to use fossil fuel resources. These facilities will remain productive for decades, emitting CO₂ far beyond 2050. </p>
<p>There is a great need to move beyond words and small incremental changes, and take larger steps towards <a href="https://doi.org/10.1126/science.abg9853">low-carbon and sustainable plastics</a>. Working seriously on how to get there entails many different changes. The industry must trust and plan for a future in which the majority of plastics will be produced from recycled rather than virgin material. As for the virgin materials used, they should come from sustainably sourced biomass and other alternative feedstocks, and all energy used must be low-carbon. Carbon capture could be a solution for the remaining fossil-based production and emissions which cannot be mitigated soon enough – including from chemical recycling plants. </p>
<p>At the top of their list should be collaborating with partners throughout the industry as well as researchers, decision-makers, consumers, and civil society to produce reliable roadmaps and strategies on how to transition towards a sustainable plastic system. A convention on plastic pollution is emerging, but global meetings on climate change, such as COP26, need to focus more attention on the somewhat overseen issue of petrochemicals.</p>
<p>Meanwhile, at Yushan island, tankers with crude oil from Saudi Arabia will dock regularly and pump their cargo into steam crackers that will run 24/7 for decades. Naming it the Green Petrochemical Base does nothing to change the fundamentals of the industry and its modus operandi. Plastics are locked into fossil resources and this connection continues to grow stronger by the day.</p>
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<img alt="" src="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=112&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=112&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=112&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=140&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=140&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=140&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em>For you: more from our <a href="https://theconversation.com/uk/topics/insights-series-71218?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK">Insights series</a>:</em></p>
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<li><p><em><a href="https://theconversation.com/climate-crisis-how-science-fictions-hopes-and-fears-can-inspire-humanitys-response-167092?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK">Climate crisis: how science fiction’s hopes and fears can inspire humanity’s response</a></em></p></li>
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<p><em>To hear about new Insights articles, join the hundreds of thousands of people who value The Conversation’s evidence-based news. <a href="https://theconversation.com/uk/newsletters/the-daily-newsletter-2?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKengagement&utm_content=InsightsUK"><strong>Subscribe to our newsletter</strong></a>.</em></p><img src="https://counter.theconversation.com/content/169690/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Fredric Bauer receives funding from the V. Kann Rasmussen Foundation (VKRF) and the Swedish Foundation for Strategic Environmental Research (Mistra). </span></em></p><p class="fine-print"><em><span>Tobias Dan Nielsen receives funding from the V. Kann Rasmussen Foundation (VKRF) and the Swedish Foundation for Strategic Environmental Research (Mistra).</span></em></p>We discovered that the 12 largest petrochemical companies announced 88 new projects between 2012 and 2019: new and expanded facilities that will likely operate for decades, ramping up carbon emissions.Fredric Bauer, Associate Senior Lecturer in Technology and Society, Lund UniversityTobias Dan Nielsen, Researcher, IVL Swedish Environmental Research InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1007082018-08-10T10:40:17Z2018-08-10T10:40:17ZWhy Trump shouldn’t leverage the government’s emergency oil supply to bolster the GOP<figure><img src="https://images.theconversation.com/files/231134/original/file-20180808-191044-hwvwdc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">President Gerald Ford discussing plans for a Strategic Petroleum Reserve with workers in California in 1975</span> <span class="attribution"><a class="source" href="https://www.fordlibrarymuseum.gov/library/whphotos/A3883_NLGRF.jpg">Gerald R. Ford Presidential Library & Museum</a></span></figcaption></figure><p><a href="https://twitter.com/realDonaldTrump/status/1014611307427966976">President Donald Trump</a> has publicly griped about the <a href="https://www.eia.gov/dnav/pet/hist/RWTCD.htm">prices of oil</a> and <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMM_EPM0_PTE_NUS_DPG&f=W">gasoline</a>, which are at their highest levels in four years.</p>
<p>If oil supplies were to suddenly grow, those prices might well decline. That is why, according to unnamed sources, his administration is reportedly considering selling some of the oil stowed in the nation’s <a href="https://www.cnbc.com/2018/07/24/what-happens-if-president-trump-taps-the-strategic-petroleum-reserve.html">Strategic Petroleum Reserve</a> and urging U.S. allies like Saudi Arabia to <a href="https://www.washingtonpost.com/business/economy/trump-is-angry-at-opec-over-oil-prices-experts-say-trump-shares-the-blame/2018/07/05/7c1cae18-8059-11e8-b0ef-fffcabeff946_story.html?utm_term=.549a44c1f4e6">pump more oil</a>.</p>
<p>Should Trump attempt to lower gas prices to gain favor with voters, it wouldn’t be the first time a president has tapped the strategic reserve in advance of an election. But it would be the first time such a move was made solely for political reasons. And I believe it would be a particularly cavalier action in light of <a href="https://www.eia.gov/todayinenergy/detail.php?id=35032">Congress’ recent moves to sharply reduce the amount of oil in the reserve</a> and the energy insurance it’s provided for over three decades.</p>
<p>Based on what <a href="https://scholar.google.com/citations?user=kQdHRewAAAAJ&hl=en&authuser=1">I’ve learned</a> from researching <a href="https://jhupbooks.press.jhu.edu/content/coal-and-empire">the links between energy and national security</a> since the 19th century, I see in these moves a strategic shift that ought to worry Americans.</p>
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<h2>Energy independence</h2>
<p>Congress and President Gerald Ford’s administration created the Strategic Petroleum Reserve in the mid-1970s to insulate the country from <a href="https://us.macmillan.com/books/9780809075072">oil supply interruptions</a>.</p>
<p>At the time, the U.S. had become much more <a href="http://americanhistory.si.edu/american-enterprise-exhibition/consumer-era/energy-crisis">reliant on imported oil</a>. And there were deep concerns about supply interruptions because in 1973, the Arab members of the OPEC oil cartel imposed an embargo on countries, including the U.S., that were supporting Israel in the Yom Kippur War.</p>
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<p>Crude oil prices out of the Middle East <a href="https://www.npr.org/news/specials/oil/gasprices.chronology.html">quadrupled in just a few months</a>, pushing up prices at American gas pumps.</p>
<p>Since that energy crisis, the federal government has made achieving U.S. “<a href="https://www.thedailybeast.com/donald-trump-doesnt-understand-what-it-means-to-make-america-energy-independent">energy independence</a>,” or at least resilience, a top priority.</p>
<p>Over the decade following 1975, the government <a href="https://doi.org/10.1093/ahr/121.5.1705">built the reserve</a> in roughly 60 caverns hollowed out of underground salt domes at four sites in Texas and Louisiana. The U.S. also has become <a href="https://www.iea.org/about/history/">one of about 30</a> industrialized, oil-consuming countries that maintain emergency oil supplies around the globe and coordinate responses to future disruptions, like those following the <a href="https://www.energy.gov/fe/services/petroleum-reserves/strategic-petroleum-reserve/releasing-oil-spr#2011-IEA-Coordinated-Release">revolution in Libya in 2011</a>.</p>
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<h2>Political expediency</h2>
<p>But the release that the Trump team is reportedly mulling appears to be timed not for a petroleum shortfall but to <a href="https://www.usatoday.com/story/money/energy/2018/06/29/can-president-trump-counter-soaring-gas-prices-tapping-reserves/744528002/">make voters feel less pinched</a> when they fill their tanks – or fill out their ballots.</p>
<p>If that happens, without any verifiable supply bottlenecks, it would mark an unprecedented attempt to benefit the party in power by <a href="https://oilprice.com/Energy/Energy-General/Can-Trump-Counter-Soaring-Gasoline-Prices.html">temporarily cutting gasoline prices</a> – or at least to persuade voters that the administration is trying to make that happen.</p>
<p>The closest parallel of a contested election-year release happened in 2000, <a href="https://www.energy.gov/fe/services/petroleum-reserves/strategic-petroleum-reserve/releasing-oil-spr#2000HOExchange">when then-President Bill Clinton</a> released 2.7 million barrels of reserve crude – and later 30 million additional barrels – to relieve a shortage of residential heating oil in the northeast. </p>
<p><a href="https://www.theglobeandmail.com/report-on-business/rob-commentary/gores-move-to-release-oil-serves-only-to-grease-votes/article770226/">Critics decried</a> the moves as ploys to aid the presidential campaign of then-Vice President Al Gore, <a href="https://money.cnn.com/2000/09/22/news/oil_spr/">who had called for such a release</a>. But, unlike the situation today, a <a href="https://archive.bangordailynews.com/2000/09/14/collins-asks-clinton-to-tap-into-petroleum-reserve/">bipartisan group of lawmakers from oil-consuming states</a> had demanded it and <a href="https://news.gallup.com/poll/2449/american-public-supports-decision-tap-oil-reserves.aspx">public support was solidly behind it</a>.</p>
<p>Among those who criticized Clinton’s move was then-presidential candidate and <a href="https://money.cnn.com/2000/09/21/economy/gore_oil/">former oilman George W. Bush</a>. After assuming office in 2001, the second President Bush sought to fill the reserve to full capacity for the first time and only release oil during emergencies when refineries could not buy crude, and not simply because of high prices, no matter how much of an economic hardship these prices imposed. </p>
<p>On his watch, that meant selling some of the oil after <a href="https://money.cnn.com/2005/09/26/news/economy/bush/">Hurricane Katrina</a> interfered with refining along the Gulf Coast. In <a href="http://www.presidency.ucsb.edu/ws/index.php?pid=24446">Bush’s 2007 State of the Union address</a>, he called for the reserve to be doubled to 1.5 billion barrels, but <a href="https://www.reuters.com/article/us-congress-oil/senate-rejects-bush-policy-of-boosting-oil-reserve-idUSWBT00897920080513">Congress rejected even smaller increases almost unanimously as uneconomical</a>.</p>
<p>Another difference from past emergency reserve releases, should there be a sale soon, is that domestic oil production has risen sharply in recent years due to technological innovations like <a href="https://www.reuters.com/article/us-usa-oil-record-shale-analysis/u-s-oil-industry-set-to-break-record-upend-global-trade-idUSKBN1F50HV">hydraulic fracturing and horizontal drilling</a>. </p>
<p>That growth – which brought the <a href="https://www.eia.gov/tools/faqs/faq.php?id=32&t=6">country’s dependence on imported oil</a> to a 50-year low in 2017 – has made many politicians believe that maintaining more than 700 million barrels of oil has become an unnecessary extravagance.</p>
<p>In fact, Congress has already mandated the gradual sale of some <a href="https://www.oilandgas360.com/congress-readies-to-sell-off-empty-space-in-strategic-petroleum-reserve/">300 million barrels</a> of this oil over the coming decade. The proceeds would fund either unrelated spending, deferred maintenance on the reserves themselves, or pay for <a href="https://www.eia.gov/todayinenergy/detail.php?id=35032">revenue lost from the assorted tax cuts</a> that took effect in 2018. These reductions may make the country less prepared to deal with real supply disruptions in the future, like a catastrophic Iranian-Saudi Arabian war. </p>
<p>Anticipating these reductions, in July, House Republicans began discussing <a href="https://energycommerce.house.gov/hearings/doe-modernization-legislation-to-authorize-a-pilot-project-to-commercialize-the-strategic-petroleum-reserve/">plans to lease or even sell storage space in the reserve to private companies</a>.</p>
<p>Further distinguishing a fall release from previous ones, <a href="https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MOCIDUS2&f=M">U.S. refineries are currently running at nearly full capacity</a>, raising questions of how selling this oil would even benefit consumers.</p>
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<p>It is possible – and in the context of global warming, desirable – that someday, the U.S. economy will no longer rely on petroleum and therefore will have no need for a Strategic Petroleum Reserve. Until then, I do not see how it can make sense for political opportunism to influence the nation’s energy strategy.</p><img src="https://counter.theconversation.com/content/100708/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Shulman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>There’s no precedent for selling oil from the Strategic Petroleum Reserve at a time when there’s no market-driven reason for doing that.Peter Shulman, Associate Professor of History, Case Western Reserve UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/962712018-05-08T20:12:02Z2018-05-08T20:12:02ZAustralia’s fuel stockpile is perilously low, and it may be too late for a refill<figure><img src="https://images.theconversation.com/files/218033/original/file-20180508-46335-1i3mq3t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia currently keeps only a fraction of the fuel it needs in reserve.</span> </figcaption></figure><p>Australia is an island nation that depends heavily on imported fuel – and our stockpile is critically low. According to <a href="http://www.news.com.au/finance/economy/australian-economy/government-launches-urgent-fuel-security-review-as-reserves-dip-below-50-days/news-story/90a4e47c776fb505b9e14408d243705d">recent reports</a>, we have just 22 days’ worth of crude oil, 59 days of liquefied petroleum gas (LPG), 20 days of petrol, 19 days of aviation fuel, and 21 days of diesel in reserve.</p>
<p>This is clearly in contravention of Australia’s <a href="https://www.energy.gov/sites/prod/files/2016/08/f33/IEA%20Emergency%20Response%%2020of%20IEA%20Countries_2014.pdf">obligation</a> as a member of the International Energy Agency (IEA) to hold at least 90 days of supply.</p>
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Read more:
<a href="https://theconversation.com/running-on-empty-australias-risky-approach-to-oil-supplies-23619">Running on empty: Australia's risky approach to oil supplies</a>
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<p>Australia is the only import-dependent country in the IEA that has not imposed any stockholding obligation and which has no current bilateral obligation to stockpile in another country. This makes us highly vulnerable to international disruptions. These might include political instability and air strikes in OPEC countries, or transit difficulties in established routes such as the Straits of Hormuz and the Strait of Malacca – the latter a <a href="https://ctc.usma.edu/assessing-the-recent-terrorist-threat-to-the-malacca-strait/">known target for offshore terrorism</a>.</p>
<p>In response, the federal energy minister, Josh Frydenberg, has <a href="http://www.abc.net.au/news/2018-05-%2007/australia-has-limited-emergency-%20fuel-stocks-%20left/9734164">ordered a liquid fuel security review</a>, to be completed by the end of 2018. It will examine how fuel is supplied and used in Australia, and assess our capacity to withstand international disruption. </p>
<p>The expectation is that once the review is completed, we will be in a position to comply with our IEA obligations by 2026. But that is eight years away. If there is disruption before that, our low stockpiles may rapidly diminish and the review will be too little, too late.</p>
<h2>What are our obligations?</h2>
<p>Australia is one of 29 IEA countries. Twenty of them (including Australia) have minimum stockholding obligations, as IEA members, which require at least 90 days of supply. Members that are also within the European Union are subject to an even more stringent stockholding directive, introduced in 2009. This requires them to cover either 90 days of net imports or 61 days of consumption, whichever is greater. </p>
<p>This effectively means that net exporting countries such as Denmark, which are excluded from the IEA stockpiling obligations, are nevertheless required to hold 61 days of consumption in reserve.</p>
<p>There are three types of fuel stockpile that countries can use to ensure they meet the minimum requirements: industry stock, government stock, and specialist agency stock.</p>
<p><strong>Industry stock</strong> is (as the name suggests) held by industry, whether for commercial purposes or to comply with legislative requirements. Ordinarily, the obligation imposed is set in proportion to the company’s oil import share, or its share of sales in the domestic market. Twenty of the 29 IEA countries meet their obligations through legislative obligations on industry stock. </p>
<p><strong>Government stock</strong> is held exclusively for emergency purposes. Legislative mandates for emergency government stock exist in New Zealand and the United States. But Australia has no legislation that requires the government to
maintain an emergency fuel stockpile. </p>
<p><strong>Agency stocks</strong> are held by a separate agency that has the responsibility to stockpile in accordance with legislative requirements. Such agencies may be administered either by industry or by government. Such agencies exist in Spain and Ireland – but, again, Australia has no equivalent agency.</p>
<p>Depending on differences in oil market structure, geography and national policy, IEA-compliant countries may impose mandates upon one or more category of stockholders. Australia imposes no legislative mandate upon any category. This effectively means it has no rules at all about maintaining a proper fuel stockpile. </p>
<h2>Why is Australia non-compliant?</h2>
<p>Australia has reached this critical point for several reasons. </p>
<p>The first is simply a product of inertia. Unlike the fuel shocks suffered by the United States in the 1970s, for instance, Australia has never experienced strong fuel disruption. Having been used to having huge surpluses of coal, gas and uranium, energy security has never been a strong concern.</p>
<p>This also reflects our tendency as a nation to be reactive rather than proactive when it comes to energy security. Added to this is the lingering free market complacency that underpins our refusal to impose extra regulations on private industry in response to global security issues.</p>
<p>The second reason is economic. The IEA stockholding obligation does not determine whether the reserve must be in the form of crude or refined oil. This is a significant issue because storing refined products is more expensive than storing crude oil. Australia, with limited domestic refining capacity following the <a href="https://theconversation.com/security-in-doubt-as-australias-aging-oil-refineries-%20shut-down-5553">closure of ageing oil refineries</a>, will need to bear a greater storage burden than other countries because we need to stockpile refined products.</p>
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Read more:
<a href="https://theconversation.com/security-in-doubt-as-australias-aging-oil-refineries-shut-down-5553">Security in doubt as Australia's aging oil refineries shut down</a>
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<h2>The future</h2>
<p>The liquid fuel security review is long overdue. We have been aware of our fuel
vulnerabilities for many years. </p>
<p>Singapore provides us with most our refined petroleum and, in turn, relies on the Middle East for <a href="https://theconversation.com/australias-growing-oil-imports-are-an-energy-security-issue-7749">more than 80% of its crude oil supply</a>. There is no doubt that political instability in the Strait of Hormuz could <a href="https://theconversation.com/running-on-empty-australias-risky-approach-to-oil-supplies-23619">seriously hurt our energy security</a>. </p>
<p>Petrol, diesel and jet fuel together account for <a href="http://www.environment.gov.au/minister/frydenberg/media-releases/mr20180507.html">98% of our transport needs</a>. If conflict did break out, or crucial transport routes were blocked or subject to significant terrorism threats, Australia would face the real possibility of running out of fuel. </p>
<p>This is an unacceptable risk. We urgently need legislation that will give us a much bigger buffer against global energy uncertainty.</p><img src="https://counter.theconversation.com/content/96271/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Samantha Hepburn does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Australia depends on imported fuel to keep running. We never got around to setting up an official reserve, and that means we’re already at risk.Samantha Hepburn, Director of the Centre for Energy and Natural Resources Law, Deakin Law School, Deakin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/376442015-02-16T19:34:59Z2015-02-16T19:34:59ZShell chief calls for climate action, but what are the firm’s motives?<p>In a speech last Thursday at <a href="https://www.energyinst.org/events/ip-week">International Petroleum Week</a> – one of the biggest events on the industry’s calendar – Ben van Beurden, chief executive of Royal Dutch Shell, argued that big energy companies have not been assertive enough in the global warming debate and that they must advocate more strongly for climate action in the lead-up to the Paris Climate conference later this year. He <a href="http://www.theguardian.com/business/2015/feb/12/shell-boss-calls-fossil-fuel-critics-naive-but-admits-big-oil-has-credibility-issue">argued that</a>: </p>
<blockquote>
<p>The outcome of the political process is uncertain, but the trends behind it are unmistakable. Even more than the oil price, these trends will shape the future of the industry over the coming decades. For a sustainable energy future, we need a more balanced debate.</p>
</blockquote>
<p>The issue, Beurden argued, is “how to balance one moral obligation, energy access for all, against the other: fighting climate change. We still need fossil fuels for a lower carbon, higher energy future.”</p>
<p>His comments came as negotiators from more than 190 countries <a href="http://www.theguardian.com/environment/2015/feb/13/geneva-talks-countries-agree-draft-text-for-deal-to-fight-climate-change">met in Geneva</a> to agree on a draft climate agreement that diplomats will take to the Paris summit in search of a deal.</p>
<p>Beurden has a significant platform from which to speak. His words will be weighed and considered by politicians around the world. But while he seeks to position Shell as a leader on climate advocacy, it is important to consider what motivations underlie his speech.</p>
<p>Is he seeking to build industry momentum to come to terms with climate science? Is his speech a reflection of growing tendency for oil and gas companies publicly to point the finger at coal producers? Or is Shell positioning itself to tap into the lucrative business to be made from the deleterious effects of climate change? </p>
<h2>Context is crucial</h2>
<p>To answer this question, we need to put Beurden’s speech into context and consider Shell’s record on climate change. In his instructive book, <a href="http://www.mckenziefunk.com/book">Windfall</a>, US journalist McKenzie Funk notes that Shell was an early proponent of future <a href="http://en.wikipedia.org/wiki/Scenario_planning">scenario planning</a>. This involves envisaging multiple versions of what the future could look like, and making plans in preparation for each of those alternatives. </p>
<p>Using this practice, Shell was able to predict and position itself to benefit from the twin OPEC oil shocks, the fall of the Soviet Union, the uprising against the World Trade Organization in Seattle, and the rise of global environmentalism. </p>
<p>Shell has been thinking about climate change since the 1970s. Unlike <a href="http://www.theguardian.com/environment/2014/apr/03/exxon-mobil-climate-change-oil-gas-fossil-fuels">Exxonmobil</a>, Shell did not plough huge funds into climate denial, and between 1998-1999 it even implemented an in-house version of the Kyoto protocol. According to Funk, this initiative included: </p>
<blockquote>
<p>[p]lans to reduce the company’s own greenhouse-gas emissions by 10% by 2002, an internal cap-and-trade scheme, a shadow carbon price and a commitment to evaluate projects on the basis of not only the profit they would make but the carbon they would emit. </p>
</blockquote>
<p>Climate change became an even higher priority in 2005 when Beurden was appointed as chief executive. He wanted his futurists to rock the boat and ask questions that would be deeply inconvenient for an oil multinational, like: what does the emerging reality of climate change mean for Shell? </p>
<p>In 2008 Shell published its view of a future under climate change. The report, <a href="http://www.shell.com/global/future-energy/scenarios/2050.html">Shell Energy Scenarios to 2050</a>, describes two different scenarios, called Blueprints and Scramble. </p>
<p>Blueprints represents a future in which grassroots advocacy results in timely action on climate change. Governments legislate a price on carbon, shift energy toward natural gas, and deploy industry-developed technology for <a href="http://www.globalccsinstitute.com/content/what-ccs">carbon capture and storage</a>. </p>
<p>Scramble is the opposite scenario, in which industry becomes embroiled in a <a href="http://michaelklare.com/books/the-race-for-whats-left/">race for scarce resource</a>, while an energy crunch prevents governments from coming together on a climate deal. Politically, the United States and its allies point the finger at China, while China continues increasing its greenhouse emissions well into the 21st century. </p>
<p>While neither scenario was a completely accurate forecast of where we are now, we are certainly living in a Scramble world.</p>
<h2>The financial imperative</h2>
<p>The important thing to understand from this is that for the most part, Shell is not transforming into a “green” company for the sake of it (<a href="http://www.cnbc.com/id/101975555">except perhaps in its PR department</a>). The company itself just wants to make money as best it can in the future, and if there is going to be a future price on carbon, that becomes something to factor into its strategy. </p>
<p>Shell may have wanted the Blueprints scenario to materialise because that made for a less volatile world – and because it has more natural gas than its rivals. But when Blueprints became unrealistic the company switched gears and said “if it’s a Scramble world, we’re going to Scramble too.” In fact, it was just after the collapse of the 2009 Copenhagen climate talks that Shell started to make big moves in search of Arctic oil. Shell <a href="http://www.theguardian.com/business/2015/jan/29/shell-determined-arctic-oil-drilling-summer">plans to drill for oil in the Arctic</a> this year.</p>
<p>In presenting this perspective, I want to make clear that Shell is not maniacally burning the Earth just to find a financial upside. Rather, the reality is that if governments are not going to act with sufficient urgency on climate change, figures like Beurden will attempt to use their influence to achieve certainty and satisfy their imperative for growth. </p>
<p>In the long term, anyone who looks seriously at climate change understands that this is only bad for society as a whole. As Naomi Klein argues in <a href="http://thischangeseverything.org/">This Changes Everything</a>, “the green billionaires won’t save us”. </p>
<p>We can add Beurden to the long list of chief executives, celebrities and media conglomerates who have promised an enlightened form of “green capitalism” but are also sticking closely to a path that leads to profit.</p><img src="https://counter.theconversation.com/content/37644/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Burdon is affiliated with the International Union for the Conservation of Nature.</span></em></p>In a speech last Thursday at International Petroleum Week – one of the biggest events on the industry’s calendar – Ben van Beurden, chief executive of Royal Dutch Shell, argued that big energy companies…Peter Burdon, Senior lecturer, University of AdelaideLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/236192014-02-26T02:58:59Z2014-02-26T02:58:59ZRunning on empty: Australia’s risky approach to oil supplies<figure><img src="https://images.theconversation.com/files/42523/original/2bq6yc4w-1393379139.jpg?ixlib=rb-1.1.0&rect=32%2C70%2C3571%2C2588&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia only keeps an estimated 23 days' worth of fuel in the country.</span> <span class="attribution"><span class="source">Bidgee/Wikimedia Commons</span></span></figcaption></figure><p>It might sound unlikely, but Australia’s fuel gauge is worryingly low. We’re one of the world’s top energy exporters, but our stocks of liquid fuels – such as the oil on which almost the whole transport sector depends – are far from healthy.</p>
<p>Australia’s worsening liquid fuel security problem was detailed this week in the latest instalment of a report prepared for the <a href="http://www.mynrma.com.au/images/About-PDF/Fuel-Security-Report-Pt2.pdf">National Roads and Motorists’ Association</a>.</p>
<p>A year after the issue was <a href="http://www.mynrma.com.au/media/Fuel_Security_Report.pdf">first raised</a>, there has been no action to address the growing risks, both logistical and financial, of keeping so little fuel in the tank.</p>
<h2>Lack of refinement</h2>
<p>According to the report, refinery closures coupled with growing demand for petroleum have increased Australia’s dependency on imported refined petroleum products. As a result, oil-dependent sectors such as transport, mining and agriculture are vulnerable to supply-chain interruptions or future oil-price spikes.</p>
<p>The situation is made worse by the fact that Australia is consistently the only International Energy Agency (IEA) member state that fails to maintain the mandated stockpile of 90 days’ worth of net oil imports. Australia’s stockpiles <a href="http://www.iea.org/netimports.asp">stood at 57 days</a> as of November 2013. The NRMA report estimates Australia’s in-country stockpile, which excludes shipments en route to Australia, at only 23 days.</p>
<p>With growing demand for liquid fuels and a continued “hands-off” approach from government, by 2030 Australia is on track to find itself with no refining capacity, less than 20 days’ worth of liquid fuel stocks, and entirely at the mercy of the international oil market.</p>
<p>The report’s author, retired Air Vice-Marshall John Blackburn, has called on the government to step in. This year’s National Energy Security Assessment and <a href="http://ewp.industry.gov.au/">Energy White Paper</a> both offer opportunities for public debate. The report also suggests making fuel stocks a matter of national security risk analysis.</p>
<h2>Hurting the hip pocket</h2>
<p>Relying on imported oil isn’t just risky – it’s expensive too. In 2012, Australia’s net oil imports were <a href="http://www.bp.com/content/dam/bp/pdf/statistical-review/statistical_review_of_world_energy_2013.pdf">561,000 barrels per day</a>. At an average of US$109.08 a barrel for that year, the bill was US$22.3 billion, or 1.7% of Australia’s gross domestic product.</p>
<p>At the same time, there are <a href="http://www.mining.com/australias-mining-slowdown-will-bring-wave-of-consolidation-67327/">fears of a slowdown</a> in Australia’s mineral export revenues as China’s economy loses pace.</p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/42524/original/rfjy4rvw-1393379534.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Are Australia’s LNG exports masking a problem with its oil imports?</span>
<span class="attribution"><span class="source">Ken Hodge/Wikimedia Commons</span>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>The government seems to be refusing to consider the potential threats to Australia’s coal, liquid natural gas (LNG) and other mineral exports. Australian LNG, for example, costs more than its competitors in North America and Africa – and Australia’s customers in Asia are <a href="http://www.mckinsey.com/global_locations/pacific/australia/en/latest_thinking/extending_the_lng_boom">increasingly critical of the prices they are being charged</a>. Without giving any consideration to potential threats to Australia’s market share in Asia, industry minister Ian MacFarlane has <a href="http://www.miningaustralia.com.au/news/mining-exports-set-to-surge-bree">hailed forecasts that assume a continued increase in energy export revenues</a>.</p>
<h2>The back story</h2>
<p>Australia’s complacency over oil imports can be traced back to the discovery in the mid-1960s of oil in <a href="http://www.bassoil.com.au">Bass Strait</a>. While not large by world standards, these reserves increased Australia’s oil self-sufficiency from 10% to 70% in the years leading up to the 1973 oil crisis, when world prices rose sharply.</p>
<p>Four decades later the picture is very different, although people don’t necessarily know it. Blinded by positive headlines about energy exports, only <a href="https://www.aspi.org.au/publications/the-cost-of-defence-aspi-defence-budget-brief-2013-2014/ASPI-CostDefence2013.pdf">1% of Australians</a> consider the energy crisis, petrol prices and fossil-fuel supplies to be our most pressing issue.</p>
<p>Perhaps Australia’s good fortune during the 1970s has helped to entrench a free-market approach to the oil market, while other nations that were more badly burned by OPEC’s price-gouging have taken stronger steps towards oil independence.</p>
<p>The Hawke government’s free-market attitude continued through the Howard years, as evidenced in Australia’s <a href="http://www.efa.com.au/Library/CthEnergyWhitePaper.pdf">first ever Energy White Paper</a>. Released in 2004, it openly acknowledged Australia’s oil deficit. But instead of raising the issue as a significant energy security threat, it sought to reassure by pointing to surpluses in gas, uranium and coal. The policy implication was clear: as long as Australia remained a net energy exporter, its liquid fuel balance was nothing to worry about.</p>
<p>None of this changed with Labor’s return to power. The <a href="http://www.aip.com.au/pdf/Energy_%20White_Paper_2012.pdf">2012 Energy White Paper</a> also struck a positive tone, based on Australia’s position as an energy producer and net exporter, which implied overall energy security. And now the Abbott government, in preparing this year’s Energy White Paper, seems to consider the international oil market so resilient that the supply of crude oil and refined petroleum to Australia is guaranteed. However, it is worth noting that its recent <a href="http://ewp.industry.gov.au/sites/ewp.industry.gov.au/files/energy-white-paper-issues-paper_0.pdf">issues paper</a> includes a reference to asking whether Australia needs to increase its stockpiles to meet international obligations.</p>
<h2>Real impacts</h2>
<p>Energy security issues may impact ordinary Australians directly through high consumer prices, fuel shortages and the environmental impacts associated with energy consumption. Given the importance of energy to the Australian economy, it is vital that the government reevaluates its approach to energy policy and engages in a systematic risk analysis regarding both Australia’s growing liquid fuel import dependency and potential threats to demand for its energy exports.</p>
<p>While Australia remains faithful to the basic principles of free-market economics, if they are wrong the consequences could be dire. A bipartisan “hands-off” approach and general public complacency regarding Australia’s energy future may not serve the nation’s best interest in the long term.</p>
<p>In terms of practical solutions to our growing liquid fuels import dependency, meeting the IEA’s mandated stockpile levels would be a first step in the right direction. The government should also consider measures aimed at curbing the demand for liquid fuels in Australia. These might include higher fuel-efficiency standards, improving public transport infrastructure, promoting carpooling, or introducing congestion charges in the CBDs of major cities.</p><img src="https://counter.theconversation.com/content/23619/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vlado Vivoda receives funding from the ARC.</span></em></p>It might sound unlikely, but Australia’s fuel gauge is worryingly low. We’re one of the world’s top energy exporters, but our stocks of liquid fuels – such as the oil on which almost the whole transport…Vlado Vivoda, Research Fellow, Griffith Asia Institute, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/159712013-07-11T13:27:47Z2013-07-11T13:27:47ZAfter Quebec, what’s the future for Keystone XL?<figure><img src="https://images.theconversation.com/files/27251/original/gzsjq9cj-1373472859.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Grangemouth refinery: keeping the home fire burning.</span> <span class="attribution"><span class="source">Andrew MillJigan/PA</span></span></figcaption></figure><p>The runaway train of 73 oil tankers that derailed and exploded in the small town of <a href="http://www.bbc.co.uk/news/world-us-canada-23250358">Lac-Megantic</a> in Quebec, Canada last week left 15 dead, around 50 missing, and shows how dangerous transporting oil can be.</p>
<p>An alternative to rail transport is the proposed, highly contested <a href="http://keystone-xl.com/">Keystone XL pipeline</a> which would transport oil derived from Canadian tar sands in Alberta to refineries along the US Gulf Coast. The Obama administration has yet to decide whether to approve it.</p>
<p>That pipeline could reduce US dependence on foreign oil. But tar sands are a particularly carbon-intensive source of fuel, with the potential for leaks and spills from the pipeline along its proposed route through the heart of the US. Any decision will create winners and losers – either in the oil industry or environmental interests.</p>
<p>This whole debate would be unnecessary under a carbon tax or cap-and-trade policy that put a proper price on carbon and other greenhouse gas emissions. If oil companies had to pay the true social costs of producing gasoline, then they would have to charge a price high enough to cover not only production but also environmental costs. Then if consumers are willing to pay for that gasoline, they’re welcome to it. Each ton of carbon dioxide emissions is estimated to impose about $20 of costs on the rest of society, which would raise the cost of conventional gasoline by about twenty US cents per gallon.</p>
<p>The Keystone project to transport tar sands oil by pipeline means overcoming three problems. Because it is thick and viscous, the tar sand oil must first be diluted to a liquid before it can be transported. This requires additional energy and generates about 12% more CO<sub>2</sub> emissions than conventional petrol. Second, this process generates huge amounts of semi-solid waste for which disposal is uncertain. Additionally, spills from the pipeline might damage ecosystems along its route - with particular concerns about pollution of Nebraska’s vast <a href="http://www.hpwd.com/aquifers/ogallala-aquifer">Ogallala Aquifer</a>, an important water source.</p>
<p>Without paying these pollution costs, oil companies can make huge profits if the Keystone pipeline is built; environmentalists get a windfall if the Keystone is cancelled. It’s “winner take all”. But if oil companies did have to pay environmental costs, then Obama could just leave it up to oil companies: make them pay for all that pollution and then let them choose whether and how to use the tar sands. But without those payments to cover the environmental costs, we can’t really know if it’s a good idea or not.</p>
<p>Three recent events have raised the stakes. President Obama’s “Climate Action Plan” <a href="http://www.slate.com/articles/health_and_science/science/2013/06/analysis_of_obama_s_climate_plan_carbon_dioxide_soot_coal_and_keystone_xl.html">speech</a> includes imposing emissions limits on power plants. Mentioning Keystone XL by name, Obama linked the pipeline not just to the environmental problems on its route but also to an increase in greenhouse gas emissions. But while <a href="http://www.whitehouse.gov/the-press-office/2013/06/25/remarks-president-climate-change">he stated</a> the project would not go ahead if it could be shown that greenhouse gas emissions would rise, he was vague about the “burden of proof” required.</p>
<p>Proponents say Obama’s requirement has already been met. Seeing, they argue, as tar sands will definitely be used one way or the other rather than left in the ground, pipeline transportation via Keystone will be the most carbon-effective method. Thus, according to them, the Keystone reduces emissions.</p>
<p>Just days after Obama’s speech came a decision in British Columbia on Canada’s west coast to reject the “<a href="http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/bc-says-no-to-northern-gateway-on-concerns-over-oil-spills/article12288098/">Northern Gateway</a>” pipeline, which would have provided an alternative to Keystone and brought tar sands oil from Alberta to the Pacific Ocean. That plan was scuttled by concerns about oil spills through the pristine British Columbian forests, the problems of building an oil tanker port on the beautiful Pacific coastline, and other subsequent problems.</p>
<p>The third event, of course, is the tragedy in Quebec. Railroad transport of oil hardly seems better than pipeline transport. Another alternative now drawing attention is to build a pipeline all the way <a href="http://atlantic.ctvnews.ca/alberta-premier-touts-west-east-pipeline-project-in-new-brunswick-1.1315319">from Alberta to the Atlantic</a>. You have to give those Alberta oil interests some credit for persistence.</p>
<p>Ultimately, those tar sands can stay in the ground. After all, one policy to reduce global warming is to “sequester” atmospheric carbon by locking it into growing trees, reducing deforestation, or using <a href="http://www.bgs.ac.uk/discoveringGeology/climateChange/CCS/home.html">carbon capture technology</a> to store it deep underground. A shortcut route to sequestering carbon deep underground is to leave it there in the first place. Technology may advance fast enough to provide cleaner alternative fuels anyway, and the future introduction of a carbon tax or permit system might make tar sands too expensive to be viable.</p>
<p>Until we price the true cost of carbon and pollutants into our economy with a carbon price-per-ton, we prevent the market from doing what it does best. Without that, we allow gross profiteering in the oil and gas industry while leaving taxpayers to foot the bill.</p><img src="https://counter.theconversation.com/content/15971/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Don Fullerton does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The runaway train of 73 oil tankers that derailed and exploded in the small town of Lac-Megantic in Quebec, Canada last week left 15 dead, around 50 missing, and shows how dangerous transporting oil can…Don Fullerton, Gutsgell Professor of Finance, University of Illinois at Urbana-ChampaignLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/85292012-07-30T20:40:44Z2012-07-30T20:40:44ZOil-slick politics: Canberra slippery on refinery shutdowns<figure><img src="https://images.theconversation.com/files/13611/original/88cbhcym-1343630993.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia's energy security will fall again after Caltex's decision to shut its Sydney plant at Kurnell (pictured), but the Federal Government is yet to have a coherent stance on domestic refining capacity.</span> <span class="attribution"><span class="source">AAP/Mick Tsikas</span></span></figcaption></figure><p>Last week, Caltex decided to close its Kurnell refinery in Sydney. This closure follows a recent decision by Shell to close its refinery at Clyde in Sydney and it will leave the city without any oil refineries.</p>
<p>Caltex’s decision reduces Australia to five operating refineries. Less than a decade ago, there were eight - at least one in every major capital city. As a consequence of a closure of three refineries in the past decade, Australia’s refining capacity <a href="https://theconversation.com/security-in-doubt-as-australias-aging-oil-refineries-shut-down-5553">dropped by over 37%</a> – from 861,500 barrels per day (bpd) to 537,000 bpd.</p>
<p>At the same time, the nation’s crude oil and refined petroleum product supply-demand balance has worsened, leading to higher net-oil import dependence. In fact, net-oil imports have increased from 12,000 bpd in 2000 to 519,000 bpd in 2011, <a href="https://theconversation.com/australias-growing-oil-imports-are-an-energy-security-issue-7749">the highest on record</a>.</p>
<h2>Impact on Australia’s energy security</h2>
<p>A combination of refinery closures and increased import dependence has left many worried about Australia’s energy security and, in particular, the security of crude oil and petroleum product supplies that are increasingly sourced from overseas.</p>
<p>The Federal Workplace Relations Minister, Bill Shorten, has warned that there is <a href="http://www.smh.com.au/nsw/energy-security-under-threat--shorten-20120726-22v66.html#ixzz223rTHzRR">now a long-term risk</a> to Australia’s energy security. Australian Workers Union national secretary Paul Howes said the situation was a “<a href="http://www.couriermail.com.au/news/national/caltexs-closure-a-threat-to-australia/story-fndo1uez-1226436178384">frightening scenario</a>” for motorists who were already paying a high price for fuel, and a “black day” for Australia’s energy security.</p>
<p>While the immediate effect of the Kurnell refinery closure on Australia’s energy security is minimal, refinery closures and increased import dependence leave Australia increasingly vulnerable to the risk of supply disruption during crises.</p>
<p>In the future, domestic refineries will have limited scope to increase production or divert export cargoes into the domestic market in the event of a breakdown. Replacing domestic production losses with imported product may take time to deliver due to the longer supply chains associated with imported petroleum products.</p>
<p>Domestic refineries provide a much greater degree of flexibility in the product supply chain in the event of an unexpected supply disruption. For example, as the major source of imported refined petroleum products to Australia, the loss of refining capacity in Singapore could be the source of significant product shortages in Australia.</p>
<h2>Impact on fuel prices</h2>
<p>According to Caltex Australia CEO Julian Segal the closure <a href="http://www.smh.com.au/nsw/energy-security-under-threat--shorten-20120726-22v66.html#ixzz223tRtbUO">will not affect fuel prices</a>, pointing to the strength of the Australian dollar, the price of crude oil and the Singapore refinery margin as affecting Australian prices.</p>
<p>Removing Kurnell’s refining capacity of 124,000 bpd can be compared to removing from the international market, the oil from a small oil-producing state such as Brunei or Chad. Kurnell’s refining capacity amounts to 0.4% of Asia’s total capacity. In 2011, <a href="http://www.bp.com/assets/bp_internet/globalbp/globalbp_uk_english/reports_and_publications/statistical_energy_review_2011/STAGING/local_assets/pdf/statistical_review_of_world_energy_full_report_2012.pdf">Asian fuel demand</a> increased by 2.7%, while regional refinery capacity increased by 2.6%. Unless lost capacity is replaced by adding new capacity elsewhere, or regional fuel demand growth slows down, fuel prices are likely to rise in the short term as a consequence of lower regional refining capacity relative to demand.</p>
<p>In fact, with Kurnell’s closure, Australia is set to become Asia’s biggest importer of fuels - opening up trading opportunities in one of the world’s most profitable energy markets. This has reverberated across energy markets, because Australia burns top-quality fuels, and a rise in imports means more competition for Europe – Asia’s top buyer of such grades.</p>
<p>Asia’s markets for diesel and top-quality gasoline could see higher pump prices, as Australia snaps up diesel and gasoline, while refiners maximise their profits. Recent purchases have tightened supply and increased premiums for diesel to a 15-month high in July. Cash premiums for diesel with 10 parts per million (ppm) sulphur, a grade used by Australia, have more than doubled to above $4 per barrel to Singapore quotes this month compared with $1.80-$2.40 a year ago, <a href="http://www.reuters.com/article/2012/07/26/us-australia-fuel-idUSBRE86P0FX20120726">boosting refinery margins</a>. Consequently, to suggest that fuel prices will not rise, short of a more detailed regional petroleum product supply-demand outlook, may be a touch premature.</p>
<h2>Government and opposition response</h2>
<p>As with broader energy policy, the Federal Government has adopted a laissez-faire approach to refining. It does not consider refinery closures as a threat to the security of the fuel supply.</p>
<p>According to Federal Resources Minister Martin Ferguson, the Kurnell decision would <a href="http://minister.ret.gov.au/mediacentre/mediareleases/pages/caltexclosekunellrefiningoperations.aspx">not affect Australia’s energy security</a>: “The closure will not jeopardise Australia’s energy security as Australia already imports large amounts of crude oil and finished petroleum products.”</p>
<p>Yet, the Federal Workplace Relations Minister Bill Shorten’s statement - that there is now a long-term risk to Australia’s energy security - contrasts with Minister Ferguson’s long-standing free-market views.</p>
<p>The fact that there is disagreement or a lack of policy coordination in Federal Cabinet on how to respond to, and assess the impact of, refinery closures on Australia’s energy security should ring alarm bells in Canberra. Contrasting comments by two Federal Ministers reveal that energy policy has been long relegated to the free functioning of the markets, with minimum government interference and policy debate.</p>
<p>The lack of debate on the impact of refinery closures and increased oil import dependence is not surprising given that the federal opposition subscribes to similar free market views. The Shadow Minister for Energy and Resources, Ian Macfarlane, did not publicly comment on Kurnell refinery closure, which is indicative of his likely response if he was in the Cabinet. The only voice from the opposition was that of Shadow Treasurer Joe Hockey, who <a href="http://www.abc.net.au/worldtoday/content/2012/s3554021.htm">linked the refinery closure to the carbon price</a>, when Caltex made it clear that the carbon price had no material impact on the Kurnell decision.</p>
<p>Both the Government and the Opposition have the responsibility to ensure that there is adequate account taken of the impact of refinery closures and increased oil import dependence on Australia’s future energy security for the long-term benefit of consumers and the Australian economy.</p>
<p><em>Comments welcome below.</em></p><img src="https://counter.theconversation.com/content/8529/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Vlado Vivoda receives funding from the ARC.</span></em></p>Last week, Caltex decided to close its Kurnell refinery in Sydney. This closure follows a recent decision by Shell to close its refinery at Clyde in Sydney and it will leave the city without any oil refineries…Vlado Vivoda, Research Fellow, Griffith Asia Institute, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.