End Of The Line

Australia and New Zealand are discovering how being on the far end of a supply chain is uncomfortable.

There is a certain irony in the headlines that tell of TechBros buying up real-estate in New Zealand as a “safe haven” in the event of global upheaval. That said, Silicon Valley has never really understood the importance of energy.

Should have read Pandreco’s Substack

The invention of the Davy Safety Lamp in the early nineteenth century marked a turning point in mine safety, replacing the effective but somewhat crude reliance on canaries¹ which were carried underground to warn of invisible danger. For generations, miners had depended on these birds as living detectors of toxic gases, a fragile but effective safeguard in a dangerous environment. The great danger was carbon monoxide which is colourless and odourless but highly poisonous.

The Davy lamp brought a measure of control and technological assurance, yet it did not change the underlying reality that danger manifests first in the most vulnerable.

The canary died before the miners even knew there was a problem, which was great for the miners - not so great for the canaries.

In the fast changing energy landscape, New Zealand and Australia appear to be modern canaries - they sit at the wrong end of long hydrocarbon supply chains. This is true at least for oil and refined products. NZ used to have a lot of natural gas and Australia still has lots of coal and natural gas, but these are unfortunately coupled with equal amounts of terrible energy policy. Whilst oil and refined products are generally fungible, the extreme distances for shipping fuels means that most will originate in the Middle East, typically on the “wrong side” of the Strait of Hormuz, and then be refined in SE Asia - Malaysia being one example - with onward shipments of refined products. The transit time is important as we will see below

As noted in my piece 10 days ago “Unrefined Behaviour” - New Zealand has zero refineries (Marsden Point closed in 2022) and Australia is down to its last two - from 8 not so long ago. Thus, imports are critical - and given the lack of local production and local refining, not to mention the relative isolation of Aus and NZ, you would be forgiven for thinking that they would have massive Strategic Reserves…

Under the IEA’s emergency response framework, all member countries are required to hold oil stocks equivalent to at least 90 days of net oil imports. This obligation dates back to the aftermath of the 1973 oil crisis, when energy security became a formal policy priority across advanced economies. Australia and New Zealand have, for years, optimised for cost and efficiency over redundancy. A long-standing policy preference for lowest-cost supply via global markets rather than maintaining domestic redundancy. In addition, the idea of being Net Zero by 20XX led to the dangerous thinking that oil was not really important, and certainly not wanted. Don’t even get me started on nuclear.

In 2013, a retired Air Vice-Marshal named John Blackburn wrote a report for the NRMA warning that Australia had adopted a “she’ll be right” approach to fuel security.
He warned that a conflict in the Middle East would disrupt supply chains and leave Australia exposed within weeks.
He warned that without adequate liquid fuel, food production and distribution would be severely curtailed, most businesses could not operate, and our Defence Forces could not function
He warned that Australia was the only IEA member noncompliant on the 90 day reserve requirement, and that actual usable supply was closer to 23 days.

(X.com,@van00sa)

Of course, nobody listened - too busy giving Greta an audience.

On the 12th March our friends at New Zealand Energy noted that NZ had 52 days of cover - but they also noted that this includes oil products “on the water” or “in transit”. In theory, these are contracted in and should arrive - but just as we saw with LNG destined for Pakistan in the 2022 gas crisis, contracts can be broken if someone is willing to pay for the cargo and the break fee.

Guess what….

“bumps ahead”

Which leads back to the idea of transit times:

Normally a diesel, mogas or jet cargo takes only 14 days to sail from Singapore to Botany Bay, 15 days if from Ulsan, South Korea.
Now if Singapore refineries are not running enough crude and South Korea is imposing mandatory product export caps, Australia needs to find supply elsewhere as the country is 90% reliant on imports with only 2 refineries online domestically.

USGC² is generally long products. So the supply from USGC is kind of a no-brainer in the current climate. But the time taken for the voyage from Houston to Botany Bay is 32 days. So existing stock inventories need to hold till resupply comes.

(X.com, @JuneGoh_Sparta)

It is not considered polite to watch a train-wreck unfold in real time, and it is generally even less polite to stand nearby and say “I told you so”. Good manners would suggest looking away, or at least remaining silent. Yet there are moments when the data makes you look, and the implications too important, to ignore³.

This is a real time view of fuel cover in Australia and New Zealand, for those who prefer to watch the numbers as they move and draw their own conclusions.

NZ Fuel Reserves Monitor (you can check Aus also by the click of a button.)

Just wish it had a canary-yellow colour palette, not doomsday black,

but then again….

NZ Fuel Reserves Monitor

1. Canaries were especially sensitive to carbon monoxide, which is colourless and odourless but highly poisonous. Because of their fast metabolism, they would show distress or die quickly when exposed, providing an early warning before levels became lethal to miners.

2. United States Gulf Coast ( and “long” means they have export surplus)

3. And yes, “we told you so”