Scenes of thick smoke rising from a Geelong oil refinery signal more than just a localised emergency. Australia is drifting dangerously close to the largest energy shock in its history, and the flames raise one immediate question: just how bad will this be for the already-precarious state of the nation’s fuel security?
Refineries, by nature, are volatile environments. They are sprawling industrial hubs processing highly flammable hydrocarbons under intense pressure. Fires are an ever-present occupational hazard, but the timing of this blaze is uniquely worrying.
Owned by fuel giant Viva Energy, the plant on the shores of Corio Bay is one of just two local oil refineries left, following a decade-long exodus of other plants that is leaving Australia with limited ability to produce its own fuel and reliant on imports for 90 per cent of its needs, just as the war in the Middle East chokes off global supplies.
What is immediately clear, is that it could have been much more catastrophic.
The blaze has forced the Geelong refinery to temporarily cut its output of petrol, diesel and jet fuel down to “minimum rates” – and that’s clearly bad news in a market that is operating on a knife’s edge.
Fuel companies and the Albanese government are already locked in a race against time, as they attempt to bolster domestic reserves, keep up with a rush on demand from worried motorists across the country, and ensure enough supplies flowing to far-flung service stations and businesses, and head off the worsening risk of shortages in coming months.
For Australia, analysts are warning the hit to the refinery marks a deterioration of the national fuel security position and raises the likelihood of the government moving to more heavy-handed fuel-conservation measures, including directing fuel for priority uses and more-forceful demand-reduction rules.
“Australia carries the unenviable distinction of being one of the most import-dependent nations in the world for refined fuel products, while simultaneously holding some of the lowest strategic reserves of any developed economy”, said Gero Farrugio, head of Australian research at Rystad Energy. “You can be heavily reliant on imports, or you can hold minimal reserves — but you cannot be both.”
Internal reports from the refinery confirmed that two of the plant’s petrol-production units have been hit by fire damage impacting the refining operations, which will compromise overall production volumes.
On Thursday morning, personnel from Viva Energy were yet to conduct a full damage assessment.
But what is immediately clear, is that it could have been much more catastrophic.
Since the war in Iran began on February 28, the refinery has been pushed to its absolute limit. Running at maximum capacity and processing 120,000 barrels of crude oil a day, it has been reliably supplying enough petrol, diesel and jet fuel to cover 50 per cent of Victoria’s demand, and 10 per cent of Australia’s.
Thankfully, much of the facility continues to operate, and Viva Energy’s management is privately confident it will have “options to restore production” volumes once the extent of the losses are known.
The site also has strong flows of fuel imports arriving well into May, and strong flows of crude oil deliveries heading into June.
“Clearly we have lost a couple of units,” said a company source who asked not to be named while the incident was still unfolding. “There will be some impact. But we are still running and we can still make what we can.”
The impact on prices from all this will also be negligible.
While Australian petrol prices have risen 30 per cent since the war began, and are currently averaging $2.24 for regular unleaded, those increases have not been driven by any local fuel supply crunch; rather, by higher global prices of crude oil. So far, Australian supplies have remained steady, and the industry remains confident in the outlook until at least mid-year.
Fuel importers including Viva have been diversifying supply chains to secure fuel from other parts of the world, while the Albanese government is holding bilateral talks with Asian neighbours to shore up future deliveries. The 10 per cent of national fuel typically supplied by Geelong will also not disappear entirely.
“The one big unknown now is how long this war goes on for,” another fuel industry executive said.
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Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.
