01 December 2011
Strategic Insights 54 - Keeping the home fires burning: Australia's energy security
By Andrew Davies and Edward Mortimer
In this paper, Andrew Davies and Edward Mortimer look at Australia's energy security. Energy is the lifeblood of modern economies. The correlation between energy consumption and prosperity is strong—and that's unlikely to change. Those simple observations have some profound implications.
Australia, like all modern economies, needs an assured supply of energy to function effectively. As a net exporter of energy, Australia is well placed in most respects. But we are still reliant on external sources of oil. The first part of this report examines Australia's vulnerability to interruptions in the oil supply over the next few years.
Over the next couple of decades, externalities will reshape the world market for energy. In particular, the sources of oil will be increasingly concentrated in the hands of OPEC producers. At the same time, greatly increased consumption of energy by the developing economies of India and China will increasingly concentrate consumption in non-OECD countries. So the mechanisms for managing world energy markets—such as the International Energy Agency—will increasingly reflect a historic view of energy production and consumption. The second part of the paper looks at mechanisms by which Australia and other developed economies can adjust to the new realities.
The last part of the paper looks at the potential for renewable energy to meet a substantial proportion of Australian and global energy requirements. The conclusion is that current technologies are unlikely to meet demand.