Australia Doesn’t Make It’s Own Fuel Anymore
Australia now imports around 90 per cent of the fuel it relies on.
That fuel keeps everything moving — from freight and farming to aviation, mining, and everyday transport. When its price rises, the impact is immediate. When its supply is disrupted, the consequences are far more serious.
At the same time, Australia’s domestic refining capacity has collapsed. From eight operating refineries just a few decades ago, only two remain.
This didn’t happen suddenly. It wasn’t caused by a single policy failure or a single market shift. It was the result of decisions — and just as often, the absence of them — made consistently over decades.
Australia didn’t just begin importing more fuel. It gradually dismantled its ability to produce it.
A Global Shift That Australia Chose to Follow
To understand how this happened, you have to go back to the 1970s.
The global oil shocks of that decade forced governments to rethink energy security, industrial policy, and economic strategy. At the same time, a broader shift was underway — toward trade liberalisation and the idea that industries should be located where they were most economically efficient.
In 1975, developed nations, including Australia, signed the Lima Agreement through the United Nations Industrial Development Organization (UNIDO). Its goal was to support industrial development in emerging economies by shifting manufacturing capacity away from advanced economies over time.
Refining was one of the industries that followed that trajectory.
Across Asia, large-scale, highly efficient refineries began to emerge — particularly in Singapore, South Korea, and later China and India. These facilities were newer, larger, and designed to process higher volumes at lower cost. They were also closer to rapidly growing demand centres.
Australia, by contrast, was operating smaller, ageing refineries in a high-cost environment.
From that point on, the direction of travel was clear.
A Bipartisan Policy Direction — and a Lack of Intervention
From the 1980s onward, Australian governments — on both sides of politics — increasingly accepted the logic of globalised fuel supply.
The underlying assumption was straightforward:
it would be cheaper and more efficient to import refined fuel than to produce it domestically.
That assumption shaped policy settings over decades:
No long-term strategic protection for domestic refining
Limited incentives for major upgrades or modernisation
No comprehensive fuel security framework to guide decisions
Refinery closures were treated as commercial decisions, not national capability decisions.
Each closure, on its own, could be justified.
Taken together, they fundamentally changed the system.
What’s striking is not that governments actively chose to shut refineries — but that they chose not to intervene as capacity steadily disappeared.
The Economics That Drove Closure
By the 1990s and 2000s, the economic pressures on Australian refineries were becoming increasingly difficult to ignore.
Most facilities were built decades earlier and required significant capital investment to remain competitive. At the same time, global refining capacity was expanding rapidly, particularly in Asia, where new plants were being built at scale.
These mega-refineries had structural advantages:
lower operating costs
access to a wider range of crude types
integration with petrochemical industries
significantly higher throughput
Australian refineries, by comparison, were smaller, more expensive to run, and increasingly out of step with global standards.
Margins in refining — often referred to as the “crack spread” — are inherently volatile. For local operators, the returns were becoming less predictable while the cost of upgrades continued to rise.
In that environment, closure — or conversion into import terminals — became the commercially rational choice.
But that is only part of the story.
Economics explains why refineries closed.
It does not explain why no long-term capability was preserved.
The System That Replaced It
As domestic refining declined, a new system took its place.
Instead of producing fuel locally, Australia increasingly relied on importing refined fuel from overseas hubs. Tankers bring fuel into major ports, where it is stored and distributed through terminals and pipelines before moving into the broader economy.
In stable conditions, this system is efficient. It reduces costs and allows Australia to tap into global supply.
But it also introduces a new set of dependencies:
international refining capacity
global shipping networks
access to key maritime routes
exchange rates and global pricing
Australia moved from a system it controlled domestically to one it participates in globally.
That distinction matters.
The Slow Unwinding of Capability
The decline of refining capacity didn’t occur all at once. It unfolded gradually, over decades.
Refineries closed in stages:
Westernport (VIC) — 1984
Matraville (NSW) — 1985
Then a second wave:
Port Stanvac (SA) — 2003 (later fully decommissioned)
Then acceleration through the 2010s:
Clyde (NSW) — 2012
Kurnell (NSW) — 2014
Bulwer Island (QLD) — 2015
And finally, the most recent closures:
Kwinana (WA) — 2021
Altona (VIC) — ceased refining in 2020, fully closed 2021–2022
Today, only two refineries remain operational: Geelong (VIC) and Lytton (QLD).
At each stage, the impact seemed contained. Supply continued. Markets adjusted.
But the cumulative effect was significant.
Australia didn’t just reduce capacity — it removed redundancy, expertise, and flexibility from the system.
What Was Lost
Refining capacity is not just infrastructure. It is a combination of physical assets, technical expertise, supply chains, and industrial capability.
When refineries close, those things do not simply sit idle waiting to be restarted.
They disappear.
Skilled workforces disperse
Equipment is decommissioned or repurposed
Supply chains shift or dissolve
Investment moves elsewhere
Rebuilding that capability is not quick or straightforward. New refineries take years to plan, approve, finance, and construct — often a decade or more. Costs run into the billions.
In practical terms, once capacity is gone, it is gone.
The Risks That Come With Dependence
For many years, the risks associated with this shift were largely theoretical.
Global supply chains were stable. Shipping was reliable. Fuel was available.
But the system Australia now relies on is exposed in ways the previous one was not.
It depends on uninterrupted access to international markets.
It assumes shipping routes remain open and affordable.
It relies on surplus refining capacity existing elsewhere.
When those assumptions hold, the system works.
When they don’t, the vulnerabilities become clear.
Australia holds significantly less fuel in reserve than the 90-day benchmark set by the International Energy Agency (IEA), often sitting closer to 30–40 days of domestic stockholding depending on the measure used.¹
That leaves limited buffer in the event of disruption.
Fuel is not a discretionary input. It underpins freight, food distribution, emergency services, aviation, and large parts of the economy. Any sustained disruption flows quickly into broader economic and social impact.
What This Was — and Wasn’t
It is often said that Australia’s dependence on imported fuel is simply the result of global market forces.
That is only partly true.
Globalisation created the conditions for refining to move offshore.
But policy determined how far Australia allowed that shift to go — and what safeguards were put in place.
There was no single decision to become dependent.
There was a sequence of decisions that made dependence the outcome.
Refinery closures were treated individually.
Their cumulative impact was not.
Over time, the system changed.
Where That Leaves Australia
Australia did not run out of refining capacity overnight. It chose not to maintain it.
What exists today is a system that is efficient under normal conditions, but less resilient under stress. It is built on access — to markets, to shipping, to overseas infrastructure — rather than domestic capability.
For years, that trade-off was largely invisible.
It is becoming harder to ignore.
References
Australian Government, Department of Climate Change, Energy, the Environment and Water — Australia’s oil stockholding and IEA obligations
Australian Institute of Petroleum (AIP) — Downstream Petroleum Industry Statistics
International Energy Agency (IEA) — Oil Market Report and Emergency Stockholding Requirements
Parliament of Australia — Australia’s Liquid Fuel Security Review (2019 Interim Report)
UNIDO — Lima Declaration and Plan of Action on Industrial Development and Cooperation (1975)
ACCC — Petrol Monitoring Reports (various years)