Australian Oil Industry and Petrol Demand and Supply

AUSTRALIAN OIL INDUSTRY AND PETROL DEMAND AND SUPPLY 1
AUSTRALIAN OIL INDUSTRY AND PETROL DEMAND AND SUPPLY
Student Name
Institutional Affiliation
Facilitator
Course
Date

AUSTRALIAN OIL INDUSTRY AND PETROL DEMAND AND SUPPLY 2
Introduction
Australia has numerous natural resources and its oil industry has been contributing a greater
percentage towards economic growth for decades. The oil industry accounts for 37 percent of the
Australian total energy consumption and oil demand has been on the rise for the past period
actually decades. The rising demand has been contributed by the Australian expanding transport
sector which highly relies on the derivatives of crude oil accumulating to 95 percent of its total
energy consumption. Centrally to this, the crude oil production in Australia has been on the
decline for the past years. For instance, from the year 1994 to 2018, an average of 475000 daily
barrels (bpd) have been recorded. The highest productivity was recorded in the year 2000 which
was 781000 daily barrels and lowest productivity was recorded in 2018 January which was
240000 daily barrels. The Bass Straight has shielded Australia from the price of oil shocks due to
its considerable large amounts of domestic oil production which totaled to more than 4 billion
barrels as from the 1960s (Davies et al 2014, p.239). from the year 1985, the Australian Bass
Straight has been on the decline which has not to be been able to be countered by other fields’ oil
production and this has made Australia rely much on oil importation. Australia is blessed with
large oil deposits, especially in Queensland and Northern Territory. However, oil production
from these areas has not been possible due to their geographical challenges and concerns related
to the environment as well as economic issues. There are various issues affecting the operations
of the Australian oil industry and the demand and supply for the nation’s petrol as discussed
below.
Issues affecting the Australian Oil Industry

AUSTRALIAN OIL INDUSTRY AND PETROL DEMAND AND SUPPLY 3
Despite the fact that the Australian oil industry accounts for a greater percentage in the nation’s
energy consumption and economic growth, there are various issues which pose great challenges
towards this industry’s operations. They include Environmental costs, Regulatory Uncertainties,
Operational Social Licenses, Declining prices and exploration as well as commoditization and
Commercialization and domestic innovation challenges among others.
High environmental costs: The Australian oil industry has been facing higher production and
exploration costs (Limkriangkrai, Koh and Durand 2017, p.461). For example, comparing the
onshore exploration drilling costs between Australia and the United States, Australia incurs twice
the cost incurred by the US. Offshore North West shelf has also experienced an increase in
exploration costs in the past years. Also, Australian multibillion-dollar oil projects have been
experiencing increased construction costs. The Greenfield East African LNG project also has an
estimated cost which ranges between 20 to 30 percent lesser than costs experienced in Australia.
Higher costs in production and exploration mean that the Australian Oil Industry has its
competition based on cost as compared to other nations which produce oil, gas, and petrol
cheaply like East Africa and the United States. This means that Australia has to struggle in order
to develop its resources which are unconventional and this would affect the LNG infrastructure
in the East Coast and future unlocks of the shale gas resources in the nation. Hence higher
environmental costs have made Australia lose its competitive advantage in the international oil
market.
The Australian oil industry has also faced regulatory uncertainties (Ford, Steen and Verreynne
2014, p.204). Previous the Australian oil industry was highly attracting investors into the
industry as the nation’s economy remained stable and democracy prevailed in the nation.

AUSTRALIAN OIL INDUSTRY AND PETROL DEMAND AND SUPPLY 4
Democracy has deteriorated of late and companies are uncertain about investing in Australian
industry inclusive of the oil industry. Australian unconventional resources have been deterred
from development by the onshore exploration constraints put in place. Restrictions on onshore
exploration have already been put in place in Tasmania, Northern Territory, New South Wales,
and Victoria and are anticipated to be extended to cover South and Western Australia. Policies
and regulations have been established in the past to control climate change in Australia and there
is uncertainty about future policies. Previous environmental policies have decreased investment
in Australian industries including the oil and gas sectors. The regulatory system of Australia has
also been complex as 50 agencies regulate the oil industry and this has undermined operations in
the sector and created future uncertainty.
The Australian oil industry has been faced with the problem of establishing operational social
licenses. Obtaining a social license for operations of both offshore and onshore explorations has
not been easy and this has led to delayed investments in the industry and even some projects end
up being canceled. This has negatively impacted the Australian economic growth as many
investors view the nation as unattractive in as much as the oil industry is concerned.
LNG commoditization and the decline in global oil prices have highly impacted the Australian
oil industry by decreasing oil and gas exploration in the nation (Byrne 2014, p.523). Since the
year 2008, estimates show that offshore exploration of petroleum products has declined by
almost 90 percent. Exploration expenditure has also declined by almost 27 percent in
Queensland. This means that Australian unconventional resources will face underdevelopment
due to decline in exploration in the oil industry.