Government plan for storage, refineries to ease fuel pressure
The government is planning a subsidy to ease fears that Australia’s remaining four fuel refineries could be forced to shut down.
The Morrison government has acted to support the nation’s fuel and refining industries amid fears from major operators that Australia’s remaining four refineries could be forced to shut down operations.
With a fresh warning from the AWU that facilities face closure unless urgent action is taken, Prime Minister Scott Morrison plans to invest in new domestic diesel storage facilities, create a minimum onshore fuel stockholding and introduce measures to support local refineries.
The most closely watched move will likely be the introduction of a production payment that works by offering a minimum value of 1.15c per litre to refineries, based on their fuel security contribution to Australia. Refineries will only be eligible if they commit to stay in Australia.
The payment is premised on calculations that show if all refineries left the market, wholesale prices would jump by 1c a litre for Australian fuel users.
“The government recognises that the future refining sector in Australia will not look like the past. However, this framework will protect Australian families and businesses from higher prices and will secure jobs in the fuel sector and in fuel-dependent industries, such as our farmers, truckers, miners and tradies. Additional measures will also be introduced to reduce the burden on industry and improve fuel market information,” the government said.
The AWU-backed Australasian Refineries Operatives Committee commissioned a BIS Oxford Economics report that shows Australia has inadequate reserves of liquid fuel and its reliance on imports of both crude oil feedstock and refined products put the nation in danger.
The AWU had called for the federal government to underwrite storage capacity, to guarantee maintenance of its four remaining refineries, boost the production of diesel and lift the amount of local supplies used for crude production.
Energy giant ExxonMobil added to fears the nation’s refining sector could face collapse after revealing last week its Altona refinery in Victoria is trading at a loss and facing “unprecedented pressure” from the state’s tough lockdown measures.
Australia’s four remaining refinery operators and fuel suppliers are weighing the future of their plants amid soft margins, high costs and plunging demand due to COVID-19 lockdowns.
Three Australian refineries have shut since 2012 and the remaining plants now produce less than half of the country’s fuel needs, with most imported from bigger facilities in Singapore, South Korea and Japan.
Ampol will review the performance of its Lytton oil refinery in Brisbane, while Viva has said the longer-term outlook for the Geelong refinery remains “very challenging”.
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