Major Aussie Refinery Closing, Due to Hostile Government Policy

Guest essay by Eric Worrall

Despite desperate last minute offers of subsidies from the Federal Government, one of the last oil refineries in Australia is set to close, along with a string of dependent industries, thanks to years of political hostility towards manufacturing and petrochemicals.

Altona refinery closure to ripple across industry

Angela Macdonald-Smith
Senior resources writer
Updated Feb 10, 2021 – 7.29pm,first published at 10.19am

Fears are growing that the shutdown of ExxonMobil’s Altona oil refinery will trigger a domino-like series of closures of petrochemical businesses in Melbourne’s west, causing the loss of up to 2000 jobs as well as critical manufacturing capability and fuel security.

About 300 jobs are directly impacted by the closure, which was confirmed by the US major on Wednesday, but the indirect impact on administrators, contractors and manufacturers that rely on the 72-year-old refinery for business means the effect will be much broader, Australian Workers’ Union national secretary Daniel Walton said.

Steve Bell, chief executive of basic plastics maker Qenos, which uses LPG from the Exxon plant, confirmed the concerns around the shutdown go much wider than energy production.

“As manufacturers and unions have identified, this is also about jobs, the economy, and the future of energy-intensive, value-adding manufacturing in this country,” Mr Bell said.

He said the decision – which came despite subsidies offered by the Morrison government – reinforced the need for Canberra to get the policy settings right on gas to secure competitive prices for manufacturers and protect jobs.

“Australia’s fuel security, low for many years, is now almost zero,” tweeted Australian Industry Group policy adviser Tennant Reed. “If anything ever impedes the freedom of the seas, we are toast.”

Read more: https://www.afr.com/companies/energy/fears-for-fallout-from-altona-refinery-closure-20210210-p5714n

The closure of Altona Refinery will leave Australia with three functioning oil refineries, down from eleven just a few decades ago, and a massive dependency on fuel imports. Any disruption to shipping, say if military conflict kicks off in the South China Sea, would cripple Australia’s economy and likely lead to rapid degradation of Australia’s defence capabilities.

What led to all those refineries closing? As far as I can tell the main culprits were a hostile regulatory environment, like Victorian state restrictions on fracking and exploration, increasing compliance costs, and a choking off of the supply of crude oil to Australian refineries.

With compliance costs rising, and volumes plummeting, there was simply no point keeping the refineries open. The closure of the refineries is in turn triggering a domino series of closures of dependent industries, many of which were co-located next to the refineries; businesses which utterly relied on the steady flow of petroleum products from the refineries to function.

This same scenario could easily play out in the next few years in the USA. Biden has already moved to choke the supply of crude oil to US refineries, with his cancellation of Keystone and Federal drilling bans.

The easiest way for companies to protect their oil refineries from the promised wave of punitive environmental regulations and carbon levies is to move the refining operations and if necessary company headquarters overseas, out of reach of US federal regulators, and then starve the USA of gasoline until the profit from rising prices balances out any Biden imposed taxes and costs.

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February 11, 2021 at 12:19PM

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