Australia’s fuel security is becoming an increasingly imminent challenge for the country as another refinery closes in Melbourne. With the country’s already high import bill climbing, experts are beginning to question the future of Australian fuel.
ExxonMobil has taken the decision to close its 80,000 bpd refinery in Melbourne, leaving the country with just two plants to meet its fuel needs. The plant will be transformed into a fuel import terminal.
This follows BP’s decision to close its 146,000 bpd Kwinana plant in October 2020. Concerns have also been raised over the viability of Australian energy company Ampol’s Brisbane refinery. Canberra has offered A$2.3 billion in funding to keep the plant running, but no final decision has been made.
A decrease in oil demand and the growth in oil imports from the Middle East and Asia have reduced the number of refineries in Australia from seven to just two over the last decade. Mega-refineries across Asia have made it hard for Australia to compete in production.
The closure of Australia’s oil refineries makes it significantly more dependent on refined oil imports. While the government has assured the public that the closure will not have a negative impact on Australia’s fuel stocks, it is clear to see that a national fuel strategy is needed.
Many are putting pressure on the government to adopt more hydrogen and bioenergy projects as well as encouraging the switch to electric vehicles (EVs). However, the government’s current approach to EVs is pushing people towards fossil fuels.
The national Future Fuels Strategy misinforms the public, suggesting that hybrid cars are more environmentally friendly than EVs. It also does nothing to incentivize the uptake of EVs through subsidies or the phasing out of traditional fuel vehicles. This adds to an already troubling situation in Australia; as international EV uptake increases, national figures are low. EV sales in Europe went from 3.3% in 2019 to 10.2% in 2020, while Australia’s sales increased only slightly from 0.6% to 0.75%.
Prior to recent refinery closures, Australia already imported around 90 percent of its oil needs, a figure that is now expected to rise. In 2019-20, Australia imported a total of $22.4 billion worth of refined petroleum products. This import figure shows the extent of change that has taken place in Australia’s oil industry over the last half a century, as the country was a net exporter of oil when it joined the International Energy Agency in 1979.
Australia is putting safeguards in place, with the government investing A$94 million in low-price oil during the global price fall in April 2020, to build a strategic fuel reserve. The national stockpile of crude oil goes towards Australia’s 90-day emergency threshold, established to tackle any problems with the supply chain.
However, to date, the government has failed to meet this stockpile quota, having just 63 days’ worth of oil reserves in November 2020, or 86 days if counting oil already en-route to the country.
The current import situation relies on geopolitical stability in multiple regions. While Australia relies on the USA and the Middle East to supply its oil, it also depends on Singapore or South Korea to manage the refining process of the crude product.
The question is how long can the government continue its laissez-faire approach to oil supplies before fuel insecurity becomes too big a threat? Only time will tell if the country’s remaining two refineries can maintain Australia’s small-scale national production or whether the country will, at some point, depend on 100 percent oil imports.
By Felicity Bradstock for Oilprice.com
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