NK MehtaMost Australians never think about where their petrol comes from. They pull into a servo, tap their card and drive away. Yet behind that simple routine sits one of the country’s most serious economic weak spots. Australia fuel security has quietly shifted from a niche policy topic to a national conversation, and 2026 has made the stakes impossible to ignore.
At the turn of the century, Australia ran eight oil refineries. Today, only two remain. As a result, the nation now relies on imports for roughly 80 per cent of its liquid fuel. That raises an uncomfortable question: what happens when a country gradually loses the ability to make the fuel it runs on?
From Eight Refineries to Two: How Australia Got Here
The decline did not happen overnight. Instead, it unfolded over two decades, one closure at a time. Each decision made commercial sense for the company involved. Together, however, they reshaped the nation’s energy map.
The core problem was scale. Giant refineries in Singapore, South Korea and other parts of Asia can process fuel far more cheaply. They also benefit from newer equipment and integrated petrochemical plants. Meanwhile, Australia’s ageing sites faced costly upgrades and tighter fuel standards. Consequently, importing finished fuel became cheaper than refining it locally.
The pandemic then delivered the final blow. Fuel demand collapsed in 2020, and refinery margins fell sharply. Soon after, BP shut Kwinana in Western Australia and ExxonMobil closed Altona in Melbourne. Both sites were later turned into import terminals.
| Refinery | Location | Operator | Status |
|---|---|---|---|
| Port Stanvac | Adelaide, SA | ExxonMobil | Mothballed 2003, closed 2009 |
| Clyde | Sydney, NSW | Shell | Closed 2012 |
| Kurnell | Sydney, NSW | Caltex (now Ampol) | Closed 2014 |
| Bulwer Island | Brisbane, QLD | BP | Closed 2015 |
| Kwinana | Perth, WA | BP | Closed 2021 |
| Altona | Melbourne, VIC | ExxonMobil | Closed 2021 |
| Geelong | Geelong, VIC | Viva Energy | Operating (about 120,000 barrels a day) |
| Lytton | Brisbane, QLD | Ampol | Operating (about 109,000 barrels a day) |
Why Losing Refining Capacity Matters
A refinery is more than a factory. It is also a store of knowledge. When a site closes, the engineers, operators and specialist trades who ran it move on. Rebuilding that expertise can take years, even if the money is available.
In addition, imported fuel depends on long and exposed supply chains. Tankers must cross busy sea lanes, and Australia sits at the far end of many of them. Any disruption overseas can therefore ripple into local prices within weeks.
The main risks include:
- Shipping disruption from conflict, blockades or extreme weather
- Price shocks when regional supply tightens
- Regional shortages, especially for diesel used in farming, mining and freight
- Defence exposure, since military operations rely heavily on jet fuel and diesel
How Much Fuel Does Australia Actually Hold?
This is where the numbers become sobering. As a member of the International Energy Agency, Australia is expected to hold the equivalent of 90 days of net imports. For years, however, it has fallen well short of that benchmark.
Under the current Minimum Stockholding Obligation, early November 2026 figures showed about 41 days of petrol, 31 days of diesel and 28 days of jet fuel. In other words, diesel and jet fuel, the two fuels that keep trucks, farms and aircraft moving, have the thinnest buffers. On top of that, domestic refineries supply only around a fifth of national demand.
What the Government Is Doing About It
The conflict involving Iran earlier this year pushed fuel security to the top of the political agenda. Australia moved to level 2 of its National Fuel Security Plan. Shortly afterwards, Canberra unveiled a broad package designed to rebuild resilience.
The key measures are:
- A $3.2 billion Australian Fuel Security Reserve, holding around one billion litres of diesel and jet fuel
- A 10-day lift to the Minimum Stockholding Obligation for petrol, diesel and jet fuel
- A $7.5 billion Fuel and Fertiliser Security Facility to secure extra supply from overseas
- A stronger Fuel Security Services Payment to keep Geelong and Lytton running beyond 2030
- $10 million for feasibility studies into new domestic refining capacity
Together, these steps aim to lift diesel and jet fuel reserves to about 50 days. That is a meaningful improvement. Even so, it remains well below the 90-day benchmark.
Could Australia Build a New Refinery?
Perhaps the most striking development is talk of building again. In July 2026, the federal and Western Australian governments announced a study into a refinery proposed by Perdaman. If it goes ahead, it could become the first large-scale refinery built in Australia since the 1960s.
The proposal makes particular sense for Western Australia. After Kwinana closed, the state was left with no refining capacity at all. A new plant could supply diesel to the Pilbara, where mining operations burn enormous volumes of fuel.
Still, a feasibility study is only a first step. Refineries cost billions and take years to build. They also need a skilled workforce, which brings the story full circle. Rebuilding capability is far harder than keeping it.
The Bigger Lesson for Australia Fuel Security
Australia’s experience offers a lesson for any nation. Efficiency and resilience are not the same thing. Importing fuel was cheaper for decades, and for most of that time the system worked. However, the risks were always there, sitting quietly in the background.
Ultimately, the challenge now is balance. Australia must protect its supply today while managing the long shift towards electric vehicles and cleaner fuels. Stockpiles, government support and possibly new refineries can all help. Yet the real test will be whether this renewed focus lasts once the headlines fade.
