Australia considers first new oil refinery in decades amid fuel security crisis

Consensus Summary

Australia is exploring the construction of its first new oil refinery in 60 years or more, with the federal and Western Australian governments jointly funding a $4 million pre-feasibility study. The proposal, led by Perth-based Perdaman, aims to address critical fuel security concerns exacerbated by the ongoing Middle East war, which has disrupted global oil supplies and sent prices surging. Both governments emphasize the need to reduce Australia’s heavy reliance on imported fuels—currently around 90%—and shield the economy from future shocks. The project would revive refining capacity that has dwindled over decades, with only two refineries remaining in Brisbane and Geelong after six others closed since 2003, including BP’s Kwinana facility in 2021.

The push for a new refinery stems from Australia’s vulnerability to global oil market disruptions, particularly since the Middle East conflict escalated in February. The ABC reports that Australia’s fuel reserves—42 days of petrol, 38 days of diesel, and 32 days of jet fuel—are insufficient to weather prolonged supply chain disruptions. Meanwhile, the Guardian highlights how the conflict has already driven up petrol and diesel prices by 25 cents and 50 cents per litre, respectively, while increasing inflationary pressures. The federal government’s response includes emergency measures, such as forcing fuel companies to share supply data and allocating resources to high-need regions, alongside a $15 billion package (per ABC) or a $10.7 billion package (per Guardian) to bolster fuel security.

Key figures in the announcement include Prime Minister Anthony Albanese and WA Premier Roger Cook, who framed the refinery study as a necessary step to ensure energy sovereignty. Albanese warned that the longer the Middle East war persists, the greater its impact on Australia, while Cook supported Perdaman’s proposal to rebuild WA’s fuel production capacity. The Guardian notes that Treasurer Jim Chalmers has also flagged inflation risks from high oil prices, with financial markets anticipating potential interest rate hikes in August. Perdaman, which operates a $4.5 billion fertiliser plant in the Pilbara, would privately fund the refinery but could seek government subsidies to remain competitive against larger Asian refineries.

While the articles agree on the core details of the proposal, they diverge on its economic viability and long-term feasibility. The ABC highlights the historical context of refinery closures, attributing them to economic unviability and competition with overseas facilities, while the Guardian leans on expert opinions suggesting the project would be uneconomic without heavy subsidies. Climate policy experts, cited by the Guardian, argue that investing in a new oil refinery—dubbed ‘dinosaur technology’—would undermine Australia’s clean energy transition and fail to address the root cause of fuel insecurity: declining domestic crude production. The Guardian also reports that Australia’s crude oil output is projected to cease within the next 7 years, meaning any new refinery would likely rely on imported oil, offering little true energy independence.

Despite the consensus on the study’s launch, unresolved questions remain about whether the project will proceed beyond the feasibility phase. The ABC notes skepticism from energy researchers, who argue that importing oil for refining would not reduce reliance on foreign supplies or protect against price spikes. The Guardian adds that environmentalists are likely to oppose the project, viewing it as a misguided investment in fossil fuels rather than a transition to renewable energy. Both outlets agree that the study’s findings—expected to take months—will be critical in determining the refinery’s fate, with financial and political hurdles looming large.