Australia Runs on 28 Days of Fuel and Two Subsidised Refineries. What Happens Next?

Australia Runs on 28 Days of Fuel and Two Subsidised Refineries. What Happens Next?

Here's something that should make every Australian motorist pause: the country that brought the world the Holden Commodore and built an economy on mining trucks now imports 90 per cent of its refined fuel. And we're holding barely a month's worth of reserves.

While drivers in Sydney and Melbourne debate whether to fill up on Tuesday or Thursday to save a few cents, there's a far bigger story playing out behind the scenes. Australia's fuel supply hinges on two ageing refineries, both kept alive by government subsidies that expire in 2027. Nobody seems quite sure what happens after that.

From Twelve Refineries to Two

Rewind to the 1970s and Australia operated a dozen oil refineries with substantial storage facilities across the country. Today? We're down to just two: Ampol's Lytton refinery in Brisbane and Viva Energy's Geelong plant outside Melbourne.

The decline has been swift and brutal. BP's Kwinana refinery in Perth and ExxonMobil's Altona facility in Melbourne both shut their doors in 2021, halving the country's refining capacity almost overnight. Where once we refined our own fuel, we now depend on tankers from Singapore, South Korea and Malaysia.

The numbers tell the story. In 2023, Australia imported 94.1 per cent of its net oil requirements at a cost of $59.9 billion, roughly 10 per cent of total imports. Refined petroleum alone accounted for $37.7 billion, making it our number one import by value. Not iron ore. Not coal. Petrol.

The 28 Day Problem

International Energy Agency members who are net oil importers hold an average of 141 days of import coverage. The IEA benchmark requires 90 days. Australia? We're sitting on about 28 days of petrol reserves, 23 days of diesel, and 21 days of jet fuel.

That makes us the only oil importing IEA country that doesn't meet its obligations. Not even close.

Maritime Union national secretary Paddy Crumlin put it bluntly: "We have barely a month's buffer before our transport networks grind to a halt. In any serious geopolitical disruption, Australia would be knocked flat."

This isn't theoretical. When Tropical Cyclone Fina tracked toward the Top End late last year, port authorities scrambled to bring in a fuel tanker early to beat an expected harbour shutdown. One cyclone, one potential port closure, and Darwin was staring at immediate supply constraints.

Why This Matters at the Bowser

You might wonder what refinery closures and stockholding obligations mean for the price you pay at Parramatta or Frankston. Quite a bit, actually.

When you're dependent on imported fuel, you're exposed to everything that happens between Asian refineries and Australian ports. Houthi attacks on tankers in the Red Sea push up shipping costs. Tensions around the Strait of Hormuz affect insurance premiums. Chinese economic slowdowns ripple through regional refining margins.

The Lytton refinery in Brisbane, Australia's largest, has been struggling precisely because global refining margins have deteriorated, partly driven by sluggish Chinese demand. When the economics don't work, refineries lose money. When refineries lose money in Australia, taxpayers pick up the tab or they shut down.

The $2.3 Billion Question

In 2021, the federal government struck a deal with Ampol and Viva Energy worth up to $2.3 billion to keep their refineries operating until June 2027. The package includes the Fuel Security Services Payment, which kicks in when refining margins drop below agreed levels, plus funding to upgrade plants for stricter fuel standards.

The logic was straightforward: some domestic refining capacity is worth preserving for security reasons, even if it doesn't make commercial sense. Former Energy Minister Angus Taylor described it as paying for "fuel security" rather than propping up uncompetitive businesses.

Both refineries have also received support through the Refinery Upgrades Program to produce the cleaner, lower sulphur fuel that came into effect in December 2025. That upgrade was necessary because Australian fuel quality standards had lagged behind most developed nations for decades.

But here's the thing. June 2027 is eighteen months away. The subsidy arrangements include provisions allowing either company to close earlier if conditions warrant it. And discussions about what happens after 2027 remain, to put it diplomatically, "ongoing."

The Strategic Blind Spot

Defence planners have been raising alarms for years. Northern Australia sits at the centre of our defence posture, yet relies on thin supply chains, single pipelines, and just in time logistics. During the 2024 Defence Fuel Symposium, experts warned that fuel supply vulnerabilities could become a strategic liability in any regional conflict.

The government has responded with measures beyond refinery subsidies. The Minimum Stockholding Obligation now requires fuel importers and refiners to hold baseline stock levels: 27 days of petrol for importers, 32 days of diesel. The Boosting Australia's Diesel Storage Program provided $227 million in matching grants for eight new storage facilities.

There's also an arrangement with the United States allowing Australia to store crude oil in American Strategic Petroleum Reserve facilities. Technically, this counts toward our IEA compliance obligations. Practically, oil sitting in Texas salt caverns takes time to reach Adelaide or Hobart.

What The Farmers Are Saying

The National Farmers Federation has been particularly vocal. President David Jochinke called on the federal government to take substantive action: "Australia's food security is only as strong as the supply chains that underpin it, and right now, we're heavily reliant on imported inputs like fuel and fertiliser."

He's not wrong. Modern agriculture runs on diesel. Tractors, harvesters, trucks to market. A fuel shortage doesn't just mean you can't drive to work. It means food doesn't get planted, harvested, or delivered to supermarkets.

The proposed Strategic Fleet, endorsed by government, unions, and industry, would create up to a dozen Australian flagged and crewed commercial vessels. These ships would operate commercially but could be requisitioned during national emergencies. It's one attempt to address the reality that most of our fuel arrives on foreign flagged vessels with no obligation to prioritise Australian needs during a crisis.

The Clock Is Ticking

Ampol CEO Matt Halliday has argued the government subsidies are justified because they preserve advanced manufacturing skills and assets that could eventually handle future fuels like hydrogen. Viva Energy talks about transitioning its Geelong site into an "Energy Hub" for the low carbon economy.

These are sensible long term visions. But they don't answer the medium term question: what keeps the lights on and trucks moving between now and whenever hydrogen infrastructure materialises?

Active discussions with the federal government are underway about improving the Fuel Security Services Payment for its remaining period and figuring out arrangements beyond 2027. But Ampol has been clear it retains flexibility to close Lytton earlier in specific circumstances, including persistently low margins, changes to the subsidy package, or force majeure events.

In other words, the two refineries keeping Australia from complete import dependence could close with relatively little notice.

What You Can Do About It

Individually? Not much. This is fundamentally a question of national policy, infrastructure investment, and geopolitical risk management. But there are things worth knowing.

First, fuel price apps matter more than ever. When you're 90 per cent import dependent, prices respond faster to international events. Knowing where to find cheaper fuel in Blacktown or Dandenong becomes genuinely useful.

Second, the push toward electric vehicles isn't just about emissions. It's about fuel security. Every EV on the road is one less vehicle dependent on imported petrol. The New Vehicle Efficiency Standard that commenced in January 2025 is partly driven by these considerations.

Third, stay informed. The ACCC's fuel monitoring role was just extended for another five years starting January 2026. Their quarterly reports track what's happening in the market and flag emerging issues. It's dry reading, but it matters.

Australia built an economy on cheap, reliable fuel. We assumed it would always be there. The question now is whether we're prepared for a future where it might not be.

*Keep an eye on this space. The fuel industry rarely makes headlines until something goes wrong, but understanding these dynamics now puts you ahead of the curve.*