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While American shale production isn’t…

Australia Look to Free Market Economics for their Energy Security

The general energy objective in the US is to achieve energy independence, because they believe it will ensure energy security. In Obamas State of the Union speech he proclaimed that “with only 2% of the world’s oil reserves, oil isn’t enough. This country needs an all-out, all-of-the-above strategy that develops every available source of American energy.” Mitt Romney showed his agreement that energy independence is linked to energy security when he said “it doesn't make sense to me to send $1 billion a day out of our country. We can be energy independent and should be.” In fact a recent poll found that 89% of Americans want more US energy projects; whether this means more drilling or more renewable energy is unclear.

But maybe there is another way to achieving energy security.

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Australia has taken a completely different approach. The Australian Ministry for Natural Resources, Energy and Tourism released a paper which shows “that energy security does not depend on energy independence or the ability to be self-sufficient.”

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America take note.

Australia has decided to pursue a policy that does not depend on energy independence, but on an interconnected globalised energy market. They believe that, “pursuing self-sufficiency in energy resources such as liquid fuels can impose unnecessary higher costs on consumers without necessarily providing a material economic or strategic benefit.”

Currently Australia imports over 75 percent of its daily oil requirements and this figure is expected to increase as domestic mines uncompetitive with Asian equivalents are likely to shut down. Also, unlike other IEA member countries, Australia does not hold government owned reserve stocks, nor is it planning to purchase them. Australia is hoping to rely upon the open markets to manage their fuel supply without the need for government intervention, expecting the changes in oil supply to affect the oil price and therefore the countries demand.

They are placing all their faith in the basic principles of free market economics; the problem being that if they are wrong the consequences could be dire for their economy.

By. Joao Peixe of Oilprice.com



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  • Fred Banks on February 21 2012 said:
    My comment here is simple: Australia is one of the richest countries in the world. Moreover, I have taught at 5 or 6 universities in that country, which means that I spent at least 3 years there, which gave me plenty of time to study the Australian energy economy.

    My conclusion is that the Australians do not need to practice or for that matter think about energy independence - unless of course they want to. By that I mean that if the energy background should change to their disadvantage, they have enough domestic resources to roll with the punch, and figure out how to deal with a worsening energy situation. Among other things that may mean some investments in nuclear, although they have sufficient coal and gas to buy the time they need while they argue about what to do.

    Australia also has a brilliant energy economist - Professor Tony Owen - and it would be interesting to find out how he feels about the above.

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