Unlucky coincidence? One of Australia's only two oil refineries up in flames during fuel crisis

You have to admit it looks suspicious when one of Australia’s only two remaining oil refineries goes up in flames in the middle of a fuel crisis.

It is the eleventh oil refinery globally to suffer a fire or explosion since the beginning of the Iran War.

The unprecedented fire at Viva Energy refinery at Geelong, Victoria, broke out on Wednesday night and was extinguished by lunch time Thursday and is believed to have been caused by a gas leak from a faulty mechanical part.

The plant, which supplies around 10 percent of Australia’s fuel and more than 50 percent of fuel in Victoria, can process up to 120,000 barrels of oil per day but will operate below capacity until it is deemed safe to ramp up production again.

No one was injured in the blaze and the government says there was no evidence of sabotage, although journalists at the government’s press conference questioned how this ‘coincidence’ could have occurred.

Experts have predicted a price shock at bowsers in Victoria and the possibility that Australia will move to level three of the national fuel security plan, just one level short of fuel rationing.

From the Sydney Morning Herald,

Rystad Energy, a global research firm, says it raises the likelihood of the government moving to the next stage of its fuel-saving strategy, including directing fuel to priority areas, promoting voluntary measures like car-pooling or working for home, and further releases from strategic reserves.

“Australia carries the unenviable distinction of being one of the most import-dependent nations in the world for refined fuel products, while simultaneously holding some of the lowest strategic reserves of any developed economy,” it said. “You can be heavily reliant on imports, or you can hold minimal reserves — but you cannot be both.”

Energy Minister Chris Bowen said in a press conference yesterday that while the fire was “not great timing” and was “not a positive development,” any shortfall can be made up by imports.

That’s well and good for now while stocks are available and as we have leverage with LNG exports (Australia is currently the second highest exporter of LNG globally), but it’s betting on this being a short-term crisis. Prediction market traders are betting at long odds that this will be the case.

Bowen denied that the incident alone would trigger a move from level two to level three of the national fuel plan, but did not rule out moving to level three on the balance of circumstances — including the Strait of Hormuz blockade and Australia’s ability to secure further imports — which Bowen will discuss in a meeting with state and territory energy ministers next week.

We’re currently at level two of the plan: the government is shoring up fuel supplies and Aussies are to carry on as normal while being mindful to conserve fuel where possible.

Prime Minister Anthony Albanese announced on Thursday that the Australian government had secured two shipments of diesel from Brunei and South Korea totalling 100 million litres.

That’s just over a day’s supply to add to Australia’s roughly one month’s supply of petrol (38 days), diesel (31 days) and jet fuel (28 days) reserves — well under the 90 day minimum required by the International Energy Agency (IEA).

Source: Department of Climate Change, Energy, the Environment and Water.

In the past few weeks, the government has bent over backwards to communicate to Australians that everything’s fine and no one should panic.

A new $20 million ad campaign suggests that Aussies can take the pressure off fuel demand by removing roof racks, inflating their tyres and driving smoothly.

The PM was ripped for a heavily stage-managed three-minute national address on April 1st that “should’ve been an email” in which he stopped the nation to tell us to stay calm and catch the bus. Previously, PMs have only used national addresses in times of war or national emergency.

However, this English major couldn’t help noticing the subtle warnings delivered in Albo’s reassuring tone:

“Economic shocks caused by this war will be with us for months.”

“The months ahead may not be easy.”

“No government can promise to eliminate the pressures that this war is causing.”

“Working together – and looking after each other.”

It’s all very Covid-esque.

Albo and other government ministers have stayed on message, assuring that fuel rationing is “not around the corner” and that “we are not going down the path of Covid-style mandated demand management measures,” despite calls for ‘Covid-style measures’ if the rubber hits the road.

Some of us remember that the last time a PM assured us there would be no mandates, mandates were enforced soon after.

Given the tenor of messaging, it looks as though our politicians are being advised that heavy-handed restrictions would be very unpopular at this point.

That’s why if energy lockdowns, rations or mandates are implemented, it will be because they had no other choice. You know, like if shipments stop coming, fires break out at refineries, that sort of thing.

Or, it will be state and territory Premiers acting under their own steam, as they did during Covid.

Or, none of these measures will be necessary, because the rising price and increasing scarcity of oil will make driving or flying long distances a luxury ticket item, and anyway everyone will be preoccupied with the downstream problem of food scarcity.

Is it just the Covid trauma talking?

I don’t suppose I’d place a bet, but I used to get straight A’s for this kind of stuff.

Edit 17 April: This article was updated to add that the Viva refinery was the eleventh oil refinery globally to suffer a fire or explosion since the beginning of the Iran War.