Australia faces mounting challenges in securing its fuel supply amid rising international pressures and a historically diminished domestic refining sector. With escalating petrol prices impacting consumers nationwide, attention has turned to the country’s long-term fuel security and the capacity limitations of existing refineries and storage facilities.

The Albanese government has launched a $14.8 billion Fuel Security and Resilience Package aimed at accelerating the development of sovereign fuel production capabilities. While the package is intended to shield Australia from future global fuel shocks, details on how these funds will translate into expanded refining and storage remain largely unspecified. Currently, Australia relies on just two operational refineries: Viva Energy’s Geelong refinery in Victoria and Ampol’s Lytton facility in Brisbane. Together, they supply approximately 10 percent of the nation’s liquid fuel requirements, with the remainder dependent on imported fuel delivered by tanker.

To address vulnerabilities, the government recently amended the Export Finance and Insurance Corporation Act to support additional fuel imports and strategic reserve shipments, a move made in response to disruptions following the US-Israeli strikes on Tehran earlier this year. The package also includes plans to establish a $3.2 billion Australian Fuel Security Reserve and to increase the Minimum Stockholding Obligation, measures intended to bolster national fuel stockpiles and ensure refinery operations continue beyond 2030.

At the same time, the federal and Western Australian governments have committed $4 million toward a feasibility study for a new large-scale refinery in Karratha, which, if realized, would be the first new refinery built domestically since the 1960s. Viva Energy has indicated it will need significant investment to upgrade its Geelong facility to maintain production levels into the next decade, particularly after a major fire in April at its Alkylation Unit, which is not expected to resume operations until at least 2027.

In the political arena, the opposition Liberal Party under leader Angus Taylor has proposed a Fuel Price Shield policy that would temporarily halve the fuel excise tax when Brent crude oil prices exceed $100 a barrel, potentially reducing fuel costs by about 27 cents per litre. While this policy aims to provide short-term relief to consumers, experts emphasize that such intermittent tax reductions do not address Australia’s underlying structural issues relating to fuel supply.

Both major parties have faced criticism for permitting the domestic refining sector to contract sharply—from eight refineries in 2000 down to two today—heightening Australia’s reliance on imports. Analysts argue that expanding domestic refining and storage capacity, alongside fostering production of lower-carbon fuels such as those derived from biogenic feedstocks, is critical to mitigating inflationary pressures that currently impact not only household transport costs but also commercial transport, manufacturing, and food supply chains.

As Australia grapples with these challenges, fuel security is increasingly viewed as an essential component of the country’s broader sovereign capacity strategy, which also includes energy, defence, pharmaceuticals, electronics, and other critical industries. With the nation's manufacturing self-sufficiency among the lowest in the OECD, experts and policymakers alike call for more comprehensive and sustained investment to strengthen Australia’s resilience against global supply disruptions.