Australia's Oil Refining Capacity Plummets Amid Global Supply Chain Risks

Australia's oil refining capacity has declined dramatically over the past few decades, leaving the country vulnerable to supply chain disruptions. According to Stephen Wilson, IPA Visiting Fellow in Energy Security, Australia's refining capacity is now barely a quarter of what it was in 1995.

The country's reliance on imports has increased significantly since then, with net fuel imports ballooning this century. Despite being a major oil producer, Australia's domestic crude oil production has fallen to less than half its peak level.

Wilson pointed out that countries like Japan, Korea, China, and Singapore have refining capacity far exceeding their own oil production, yet they continue to import refined products. He argued that it makes sense for Australia to refine oil, even if it doesn't produce enough locally.

The IPA has welcomed the announcement of a private company's plan to study the development of a new refinery in Western Australia, with both state and federal governments supportive of the project. However, Wilson emphasized the need for policy settings that would allow new refineries in Western Australia to compete with modern refineries in the Asia-Pacific and Middle East.

Australia's vulnerability was highlighted by the recent Hormuz crisis, which revealed the country's reliance on imports through major choke points such as the Strait of Hormuz, the Strait of Malacca, and the Taiwan Strait. Wilson challenged the commonly-held view that it makes no sense for Australia to refine oil, pointing out that investing in energy security would be a better use of taxpayers' money than propping up sub-viable projects.