Victorian fuel prices could spike by 20c a litre due to Geelong refinery fire, experts warn

Victorian motorists are being warned to brace for a spike in petrol prices of up to 20c a litre due to a huge blaze at Viva Energy’s oil refinery in Geelong, but oil and supply chain experts say the effects should be short-lived.

Viva’s Corio facility is one of two domestic refineries that reduce Australia’s heavy reliance on direct imports of ready-to-use oil products from Asia.

A fire broke out at the facility late on Wednesday, burning for about 13 hours before being extinguished, and authorities have warned the full extent of the damage is still unknown.

Victoria could see unleaded prices rise as much as 20c a litre and more service stations face temporary fuel outages, according to Vlado Vivoda, honorary fellow at the University of Queensland’s sustainable minerals institute.

“I don’t think there’s going to be an actual shortage, but [oil and fuel] tankers move very slowly … it takes time to bring extra cargos,” Vivoda said.

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He said national prices and supply should not be affected as other states are importing fuel to meet their needs.

The Geelong refinery can turn crude oil into petrol, diesel, jet fuel and some speciality products that are piped or shipped to storage terminals, and end up at service stations and with commercial customers, including airlines and road transport companies.

Most of the fuel refined in Geelong stays in Victoria, providing about 50% of the state’s petrol supply, according to David Leaney, a supply chain specialist at the Australian National University.

Leaney said there could be a “short term price spike and short term availability issues” contained to Victoria.

“It’s going to impact Victorian petrol supply, but we are talking about weeks not months, subject to the repair and re-establishment of supply from the refinery,” Leaney said.

The federal energy minister, Chris Bowen, has said petrol, diesel and jet fuel continued to be produced at the refinery at reduced levels as a safety precaution. Specifically, he said there would be an impact on petrol production.

The fire comes at a sensitive time for Australia, given there has been a huge increase in oil prices triggered by the Middle East conflict, and there are enduring concerns over supplies given the fragile state of the US and Iran ceasefire.

While Viva operates the largest fuel and convenience network in Australia under its OTR, Reddy Express and Liberty brands, many of those stations located outside Victoria, including in New South Wales, rely on imported petrol.

Viva also sells through Shell via a brand licence agreement.

Lurion De Mello, energy economist at Macquarie University, said the loss of supply in Victoria could force the federal government to authorise fuel companies to release more of their minimum stockholding, as it did in March.

“Any extra supply that’s released from the wholesale to the retail level, I think that will definitely help with the prices and so forth,” De Mello said.

Orders of crude oil to the Geelong refinery could also be redirected if it was left unable to process them into fuels, De Mello said.

Tracking data showed shipments of oil from the US, Argentina and Algeria were en route to Geelong on Thursday morning.

Shares in Viva Energy entered into a trading halt early on Thursday, pending an announcement from the company on the extent of the damage to the refinery, and anticipated disruption to petrol supplies.

Australia’s two refineries – the second is located in Brisbane and operated by Ampol – produce about one-third of Australia’s petrol requirements.