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A fire that broke out on Wednesday night at the Viva Energy oil refinery has led to a significant reduction in fuel production. Diesel and jet fuel output have dropped to 80% of typical levels, while petrol production is down to 60%. The timeline for repairs remains uncertain.
David Leaney from the Australian National University reassured that despite the incident, the company’s supply, which accounts for half of Victoria’s fuel, should remain stable.
“The crucial factor here is that Viva will compensate by purchasing additional fuel on the international market and importing it to cover the shortfall,” he explained.
Nonetheless, Leaney noted that residents of Victoria might experience higher fuel prices, as Viva’s international purchases will be based on spot prices rather than long-term contracts.
Spot prices can be as much as 8 cents per litre higher than contract prices, and Leaney suggested that this increase “could potentially” be reflected in retail fuel prices.
“When would that happen? Fairly soon, as soon as those replacement contracts are in place,” Leaney said.
Any price increase could be expected to last at least a couple of weeks.
Earlier this morning, Viva chief executive Scott Wyatt said the costs imposed by the fire would be “absorbed” and not passed on to the consumer.
“Except for this fire, costs were actually trending down, and the number of petrol stations out of fuel were trending down – two really good trends,” Leaney told Today.
“With the exception of Victorian motorists over the next two to four weeks, I think we can see petrol prices fairly stable.”
He said another good sign was the government’s securing of additional fuel supplies, with Prime Minister Anthony Albanese touting the success of bringing in 100 million litres from overseas.
That amount of fuel is, however, typically what Australia consumes in just 1.3 days – but Leaney said the bigger picture was showing improvement, with fuel reserves trending up from 32 days at the beginning of the crisis, to close to 40 now.
“These are good trends and it is important that we’ve got those supplies shored up,” he said.
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