Anthony Albanese will launch plans on Tuesday for a new oil refinery in Western Australia in recognition of the fragility of the nation’s liquid fuel supplies, as exposed by Donald Trump’s war against Iran.
After flagging the move in April, the prime minister will dedicate $4 million towards a feasibility study into constructing the facility when he visits Karratha.
If feasible, the refinery would be built at a yet to be decided location in WA by industrial manufacturer Perdaman. The company is already building a urea plant in Karratha that will help ease anxiety over fertiliser supply, also exposed by the war in the Persian Gulf.
Australia has not built an oil refinery since the 1960s and today has just two in operation – the Ampol refinery in Queensland and the Viva Energy facility in Victoria.
Twenty years ago, the nation had eight refineries.
Since the war in the Middle East erupted on February 28, Australia has had to go cap in hand to fuel and fertiliser suppliers in the region to ensure ongoing shipments of petrol and diesel. A key reason the government has been eschewing calls for a gas tax is to not annoy the likes of Japan, South Korea, Singapore and Malaysia, which invest in Australian gas but also supply it with fuel.
“My government’s working to advance Australia’s interests – not just in this crisis but going forward as well to ensure we can meet future challenges,” Albanese said in a statement.
In Adelaide on Monday, Deputy Prime Minister Richard Marles, Foreign Minister Penny Wong and Trade Minister Don Farrell and their Singaporean counterparts signed a protocol to strengthen co-operation on economic resilience and essential supplies, in what was described as a “very significant milestone” under the Singapore-Australia Free Trade Agreement.
Singapore is Australia’s largest single supplier of refined petroleum.
It accounts for roughly 55 per cent of Australia’s petrol imports, 23 per cent of jet fuel and 15 per cent of diesel. Singapore is also a major buyer of Australian LNG.
Singaporean Trade Minister Tan See Leng and Farrell said the Middle East crisis had given urgent momentum to the negotiations.
Added urgency
“The urgency about this particular discussion was, of course, the troubles in the Middle East and through the Strait [of Hormuz], and of course Australian farmers, Australian miners, Australian consumers all need to have petrol or diesel – or if you’re an airline, airline fuel,” Farrell said.
In a speech to the National Press Club in April, Albanese hinted at the need for Australia to expand its refining capacity, saying the free market approach of past decades had left Australia dangerously vulnerable to shocks such as the oil crisis.
“That [mindset] said it was OK to cut TAFE and training, to dare manufacturing and industry to go offshore, to put multinational firms ahead of Australian gas users, to close our refineries, store our fuel reserves in Texas and run the national energy grid into the ground,” he said.
“And that Australia could get away with this because there would always be someone else, somewhere else, who would sell us what we needed cheaper than we could make it ourselves.”
Perdaman chairman Vikas Rambal spruiked Australia’s potential as a global leader in manufacturing.
“The fuel security challenge made it clear that Australia needs its own sovereign refining capability,” he said.
“Perdaman has the experience, capability and determination to deliver this project and help secure Australia’s fuel future.”
On Monday, Treasurer Jim Chalmers was warned that oil prices were likely to remain elevated because of the conflict in the Middle East and could rise further if it remained unresolved.
Prices have already risen 28 per cent since the Trump administration and Iran signed a memorandum of understanding to reopen the Strait of Hormuz on July 8, an agreement that has since collapsed.
Market exposed
“The breakdown of the memorandum of understanding has shown that the underlying dispute over control of the Strait of Hormuz remains unresolved, leaving the market exposed to repeated cycles of escalation and de-escalation,” Treasury wrote in a submission, released by Chalmers’ office.
“This could include additional attacks on gulf energy infrastructure or disruptions to alternative export routes like the Red Sea.”
Treasury said the oil market was increasingly vulnerable to future supply shocks because releases from strategic oil reserves had reduced emergency buffers, Houthi attacks had disrupted Red Sea shipping routes and Ukrainian drone strikes on Russian refineries had further tightened the diesel market.
It warned that if disruptions to oil supply continued, prices could rise further over coming months as stockpiles were depleted.
Treasury said global oil inventories had declined since the conflict began and that any shortages would likely emerge intermittently across supply chains and storage facilities.
Chalmers said the recent escalation of tensions in the Middle East posed a substantial threat to global inflation.
“The longer this drags out the more serious the consequences for inflation and growth here and around the world,” he said.
Extracted in full from: https://www.afr.com/politics/federal/pm-launches-plan-for-new-oil-refinery-as-fuel-crisis-bites-20260727-p60iz2
