First Boost to Secure Emergency Oil Stockpiles in Australia

Steel pipes carry crude oil in a factory. (tomas/Adobe Stock)

The Australian government has delivered its first payment to local oil refineries as part of a pledge to raise the nation’s worryingly-low stockpile levels and maintain domestic oil production.

Australia is estimated to have 68 days of crude oil in reserve—the only country with less than the 90 days recommended by the International Energy Agency to avoid fuel security issues in the case of global oil supply disruption.

The first payment will see Viva Energy Geelong Refinery in Victoria receive $12.45 million for the first quarter of 2021-22, part of a $2.3 billion commitment to keep the nation’s last two oil refineries running.

Minister for Industry, Energy and Emissions Reduction Angus Taylor explained the payments will help secure the ongoing operations of Viva Energy along with Queensland’s Ampol Lytton Refinery.

“Our comprehensive fuel security package will ensure we are prepared for any emergency, see an increase in our onshore diesel stockholdings and lock in jobs of our fuel dependent industries, such as our truckies, farmers, miners and tradies,” Taylor said.

Minister for Energy Angus Taylor at Parliament House in Canberra, Australia, on May 14, 2020. (Photo by Sam Mooy/Getty Images)

Ampol Lytton did not receive funding for the first quarter, with Taylor explaining that the grants only served to keep the refineries afloat when needed.

“The results demonstrate the Fuel Security Services Payment is working as intended, with refiners only receiving support from the Government when refinery market conditions are poor,” he said.

“In the case of Ampol, their margins have rallied to such an extent they do not need any support. Viva’s margins are also improving, with the payment well below the maximum available.”

The Decline of Australia’s Domestic Oil Industry

Once a net exporter of fuel in the past, Australia had extensive capabilities to extract and refine petrol, diesel, and jet fuel across 10 refineries in 2000.

However, Australia now imports around 85 percent of its fuel after eight of these closed down by 2021 after it became uneconomical to keep them running.

Following the closures of ExxonMobil’s Altona in 2021 and BP’s Kwinana in 2020 oil refineries, the government pledged $2.3 billion as part of the Fuel Security Bill, which establishes a minimum stockpile obligation and seeks to keep the remaining refineries going until at least 2027.

Fuel supply chains to Australia (Screenshot: NRMA 2013 report)

Hunter Laidlaw of the Australian Parliamentary Library pointed to competition from Asia as one of the primary factors leading many refineries to shut down indefinitely.

“The existing Australian refineries are relatively small and old and have to compete against larger and more efficient refineries in the Asian region,” Laidlaw wrote.

Daniel Wild, director of research at free-market think tank Institute of Public Affairs, further explained that heavy burdens on the domestic oil industry and a lack of government support had whittled down the remainder of the nation’s oil-refining fleet.

“A key factor behind the decline of Australia’s oil refinery industry is over-regulation, red tape, and environmental activism, which has deterred investment,” Wild told The Epoch Times in June 2021.

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Director of Defence Michael Shoebridge at the Australian Strategic Policy Institute instead suggested that Australia should speed up the transition away from carbon dioxide-emitting fuels.

“Any support to loss-making local refineries will not solve all of Australia’s fuel security issues—only a larger economic transition away from fossil fuels to energy sources that are available at scale locally will do that,” Shoebridge told The Epoch Times in June 2021.

Daniel Teng contributed to this report.