Viva Energy Refinery Recovery and Fuel Supply Stability
Viva Energy, the owner of one of Australia’s only two oil refineries, is on track to resume operations at over 90% of its maximum capacity within weeks. This comes as the company recovers from a significant fire that disrupted key production units, raising concerns about Australia’s vulnerability to global fuel supply issues.
The recovery timeline is faster than initially expected, providing reassurance for domestic fuel security amidst ongoing tensions in the Middle East. Petrol prices have already started to decrease, with some service stations offering regular unleaded at as low as $1.90 per litre, down from $2.50. This drop coincides with growing optimism about a potential peace deal in the region.
Federal Treasurer Jim Chalmers has indicated that the government is considering an extension of its 26¢-a-litre fuel excise cut, which was set to expire mid-year. This measure, along with state-level GST reductions, has helped lower fuel costs by 32¢ per litre.
Fire Damage Assessment and Operational Recovery
In a statement released on Monday, Viva Energy confirmed that the fire at its Geelong refinery, located on Corio Bay, was contained to the alkylation unit, which converts gases into components needed for petrol. Other major processing units remained unaffected.
The fire, caused by an equipment fault, forced Viva Energy to reduce operations to minimum levels during a challenging time. Prior to the incident, the Geelong refinery operated at full capacity, supplying up to 50% of Victoria’s fuel needs and 10% of the national total. The company had been working to maximize output to mitigate global supply pressures linked to the conflict in the Middle East.
Despite the timing, Viva Energy asserts that the impact of the fire will be limited, and it will not significantly affect fuel availability for Australian motorists and businesses.
Production Capacity and Fuel Stock Levels
The refinery has already restored most of its production capacity, reaching 60% of petrol volumes and 80% of diesel and jet fuel. It aims to return to 90% capacity over the next few weeks. Viva Energy claims it has sufficient fuel stocks to manage the reduced production and expects to maintain normal fuel supply to customers following the incident.
Chief Executive Scott Wyatt stated that any further reduction in refinery output could be offset by increased imports from overseas suppliers. “I think there will be no impact to what we supply into the Victorian market as a result of this incident,” he said.
Viva Energy also relies on its network of shipping terminals and partnerships with global oil traders like Vitol to bolster deliveries. Together, these operations supply approximately 30% of Australia’s fuel needs.
Government Response and Fuel Price Trends
Speaking to reporters on Monday, Chalmers did not rule out extending the fuel excise cut. “We keep all those policies under review,” he said. The halving of the fuel excise, reducing it by 26¢ per litre, began in April. Combined with state cuts to GST, this has led to a 32¢ per litre reduction at the pump.
Crude oil prices have risen since the first US-Israeli attacks on Iran on February 28, driving up fuel costs globally. However, oil prices have eased following a ceasefire deal involving US President Donald Trump. In Melbourne and Sydney, the average price for unleaded petrol dropped below $2.10 per litre for the first time since the Iran war began.
Chalmers noted that diesel prices have not mirrored the recent declines in petrol prices. Diesel currently averages around $2.90 per litre in Sydney and Melbourne. “What we’ve seen a little bit over the last couple of weeks is really good progress on petrol prices not reflected necessarily in diesel prices,” he said.
Fuel Supply Confidence and Long-Term Concerns
With more than a month of fuel reserves stored in facilities and numerous tankers carrying crude oil and refined fuels scheduled to arrive in the coming weeks, the fuel industry and federal government are confident in maintaining steady supplies until mid-year. However, prolonged conflict in the Middle East could pose risks to future fuel availability.
Some experts have criticized the government’s fuel excise cuts for potentially masking the price signal to motorists to reduce fuel consumption. Chalmers acknowledged this concern but stated that the cuts do not fully shield motorists from price increases. “We’re still seeing price signals in the markets,” he said. “We have taken some of the sting out of that, but we haven’t in both cases been able to totally remove that price signal.”
