Does Albanese's idea for more Australian oil supplies stack up?

The federal government will spend $4 million on a study to see if it can build a new oil refinery in Western Australia, which could be the nation's first such new facility in six decades.

The study is aimed at buffering the nation to global oil shocks as the US-Israeli war on Iran continues to impact supply and fuel costs.

Prime Minister Anthony Albanese is due to visit Karratha to announce the jointly funded pre-feasibility study for the potential refinery on Tuesday, which his government says could help provide future fuel security.

The project has been proposed by fertiliser producer Perdaman, which currently has a $6.4 billion fertiliser manufacturing facility being built in Karratha.

If the refinery goes ahead, it would be Australia's first since 1960 and would make it the nation's third, along with facilities in Brisbane and Geelong. Those two facilities supply roughly 10 to 20 per cent of the country's fuel.

Australia relies heavily on imported refined fuels. Almost 90 per cent of Australia's daily fuel consumption is imported, much of it brought in as refined product from South Korea, Japan, Singapore, Malaysia and Taiwan.

It used to have more domestic oil refineries, but six of eight facilities closed between 2003 and 2021, after newer, more economical mega-refineries were built across Asia in the 1990s.

Earlier this year, a fire at the Geelong facility, which supplies 10 per cent of the nation's fuel, sparked fears of a fuel supply shortage as Australia was reeling from global oil shocks triggered by the US-Israel war on Iran.

That incident highlighted a structural issue, according to Hussein Dia, a professor of Future Urban Mobility, at Swinburne University of Technology.

"Australia has significantly reduced its refining capacity over recent decades, increasing reliance on long international supply chains. While those systems are generally reliable, events like this show how limited redundancy exists when something goes wrong locally," Dia said at the time.

Experts say Australia needs to accelerate its shift away from liquid fuels, with electrification of transport offering a pathway to greater energy security.

"Improving fuel storage capacity, diversifying energy sources, and expanding electrification of transport would strengthen Australia’s economic resilience to global energy shocks," said University of the Sunshine Coast economics expert Sajid Anwar.

The chief executive of Ampol, which runs the Brisbane refinery, recently told the Australian Broadcasting Corporation petrol production could one day become more expensive in Australia.

"There's a point at which making petrol and refining petrol becomes more challenging, and as soon as you have to try and put that petrol that you're making in Brisbane, for example, on a ship and send it somewhere else, that becomes very, very expensive," Matthew Halliday told the ABC's That's Business podcast.

"And so, how you adjust your production to produce more diesel and jet [fuel] and less petrol over time is an important challenge that needs to be solved because it becomes less profitable."

He said there was a structural shift that will occur over time with the uptake of electric vehicles.

"As you're seeing more and more EVs and hybrids coming to the system, you need to produce less petrol and more diesel and jet fuel," he said.

"That'll be part of what we need to contemplate: is how we produce less petrol and more diesel and jet fuel, but that's expensive."

He said the company was thinking "longer term" to ensure the refinery's future viability, and that it was discussing with the federal government about long-term investments in the Brisbane Lytton refinery.

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