RPT-BREAKINGVIEWS-Iran war shows up folly of slow energy transition

By Antony Currie

MELBOURNE, March 13 (Reuters Breakingviews) - If only there was a way to reduce the fat tail risks generated by the Strait of Hormuz. The effective closure of the roughly 100-mile-long passage due to the U.S.-Israel attacks on Iran has sent fuel prices soaring and prompted countries across Asia to restrict supplies to consumers or halt their exports - or both. There is an alternative: electrification. But the slow pace of the energy transition has kept countries in thrall to gasoline. Australia's lack of progress is particularly embarrassing.

Governments have known about the economic and societal impacts of climate change for decades, and 195 of them signed the Paris Agreement in 2015 pledging to speed up adoption of low-carbon resources. Almost all are woefully short of their targets.

On paper, the island Down Under ought to be leading the charge into renewables. It has plenty of sun and wind to harness. And rising temperatures aren't the only reason to act. Australia's vehicle fleet is incredibly energy insecure: imports account for 90% of all petrol and diesel burned, much of it coming from the Middle East. That in turn impacts food security: while the country grows what it needs, produce is transported by diesel-chugging trucks.

The lines of defence are pretty weak: Australia has just over 30 days' average imported supply of oil, Energy Minister Chris Bowen said last week. While the highest in more than a decade, it's far short of the 90-day requirement set by the International Energy Agency, whose end-2025 data put the country's tally at 49 days, the lowest of the OECD, a club of mostly rich countries. This week Bowen pledged to release around 20% of reserves and relaxed limits on sulphur content to get more fuel to market.

Unsurprisingly, even though cargo ships are still delivering fuel, the war has sparked a run on the pumps as drivers fear running out or having to pay more. That has pushed up prices and caused shortages, especially in regional agricultural areas. Encouraging faster adoption of electric vehicles like those sold by BYD 002594.SZ and Tesla TSLA.O would have reduced this pain. Yet fewer than 10% of new cars sold Down Under are purely battery powered. China's oil demand growth has slowed in the past couple of years in large part because almost half of new cars and, as of last year, 20% of trucks are electric.

The transition is an inherently slow process at the best of times. Electric vehicles have made up more than 90% of new car sales in Norway for a couple of years now, yet account for just a third of vehicles on the road. The Iran war shows up the folly of reducing the change to a crawl.

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CONTEXT NEWS

Australia will release up to 762 million litres of petrol and diesel from its domestic reserves, federal Minister for Climate Change and Energy Chris Bowen said on March 13.

A day earlier Bowen temporarily relaxed petrol quality standards for 60 days. It means 50 parts per million of sulphur will be permitted in the fuel, five times the current maximum level. That would add an extra 100 million litres of fuel a month to the country's supplies. The oil will come from domestic refiner and petrol station operator Ampol, which usually sends such dirtier fuel abroad for blending.

Bowen said on March 3 that Australia had 36 days of petrol, 34 days of diesel and 32 days of jet fuel in reserve, the highest level in more than a decade but well below the 90 days required by the International Energy Agency.