Alex M.
Following a trend of refinery closures in Australia, (see last month’s Vanguard article on the sale of Shell’s Geelong refinery) Caltex announced that it was closing its Kurnell refinery (below) and using the facility as a storage and distribution centre for imported refined oil product. The refinery is to cease production later this year.
It was stated in last month’s article that there were four refineries still in operation in Australia. The four refineries listed were: Shell Geelong; BP Kwinana in WA; the Queensland BP refinery at Bulwer Island, Brisbane and Exxon Mobil’s facility at Altona in Victoria. This was not correct; a couple of refineries were missed. Caltex has the Lytton refinery in Brisbane as well, which when we add the soon to be closed Kurnell refinery to the four listed makes six refineries.
The total of number of refineries is not going to remain at six for much longer, however. Caltex’s Kurnell refinery at Sydney will be closed soon and the Shell Geelong refinery will be sold or converted to a storage and distribution centre next year, bringing the figure back to four.
Leaving the correction aside regarding the number of refineries, the issue of Australian energy security that was highlighted in last month’s article remains pertinent. That is, petrochemical multinationals operating in Australia have made decisions about their refining operations in Australia based on profitability, not about the long-term considerations of Australia’s energy needs and energy security.
One would think that allowing multinational corporations to make decisions about how they will supply Australia’s increasing demand for hydrocarbons based on what is most profitable for them, would trouble policy makers somewhat. Think again.
In a report on the oil refining industry in this country by a Standing Committee of the House of Representatives published in January this year, everything is rosy as far as energy security goes. The report states: “The closure of the refineries will not lead to negative price outcomes for consumers. Australian fuel prices reflect an import parity price, which is the price in international markets. The Australian Competition and Consumer Commission was clear in its advice to the committee that as a result of import parity pricing, the retail price for petrol is not impacted by refinery closures.
“The changes in domestic refining capacity to date will not impact on Australia meeting its liquid fuel requirements. There are reliable, mature and highly diversified international fuel supply chains, which provide Australia with economic security. The Australian Institute of Petroleum and refiners were also confident about the reliability of Australia’s supply chains and infrastructure to continue to meet local fuel demands, as it has done over many decades.”
All will be well then because we the policy makers have been advised that it will be so by one of our ‘watchdogs’ and by industry representatives.
What about the petrol price fluctuations that occur weekly or daily at the bowsers? Have we ever seen petrol prices decline over time? What is completely overlooked in the report which paints the decline of the oil refining industry in Australia in an entirely positive light is the pivotal role that profitability plays in this and all other industries.
In the wake of Caltex’s announcement about the closure of its Kurnell refinery, it posted an increase in its net refining margin in the first quarter this year. That is, profits from its Australian refining operations went up, boosting its overall net profit for the first quarter to $190 million from $106 million last year. Even so, it is not profitable enough for Caltex; the profits in refining are too volatile it is suggested. The end result of course is that jobs will be slashed and Australia will become more dependent on imported manufactured products.
These developments have real bearing on the nature of Australian independence. The energy security of Australia requires that decisions about petrochemical production be made by the working people of Australia based on long term plans, the goal of which is the building of socialism. We can make a start by nationalising the Australian oil industry.
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