In the global push toward cleaner energy, two regions stand out for their aggressive policies: Australia and California. Both have implemented stringent environmental regulations and renewable energy mandates that have led to the shuttering of oil refineries, crippling downstream businesses in the oil and gas sector. This has not only resulted in job losses and economic fallout but has also forced consumers to rely heavily on imported gasoline, diesel, and oil feedstocks. The consequences? Higher fuel prices, supply vulnerabilities, and a stark reminder that rapid energy transitions can come at a steep cost to everyday people. Let’s dive into the histories, policies, and impacts.
The Decline of Australia’s Refineries: From Self-Sufficiency to Shutdowns
Australia’s oil refining industry has undergone a dramatic contraction over the past few decades. Once home to multiple facilities processing domestic and imported crude, the country now operates just two major refineries: Viva Energy’s Geelong in Victoria and Ampol’s Lytton in Queensland.
This follows a wave of closures, including BP’s Kwinana refinery in Perth in 2021 and ExxonMobil’s Altona refinery in Melbourne, which wound down operations by October 2022.
In total, Australia has lost half its refining capacity in recent years, with the number of operational refineries dropping from seven in 2010 to just a handful by 2022.
These closures stem from a combination of economic pressures and policy shifts. High operating costs, competition from larger Asian refineries, and declining domestic crude production—which fell steadily from 2008–09 to 2017–18—played roles.
But government interventions have been pivotal. In 2021, the Australian government stepped in with up to A$2.3 billion ($1.8 billion USD) in subsidies through 2030 to keep the remaining refineries afloat, acknowledging the risks to fuel security.
Despite this, the industry has been hammered by fuel quality regulations, energy policies favoring renewables, and climate mandates that increase compliance costs.
States like Victoria have banned gas connections in new buildings, further eroding demand for traditional fuels.
The downstream sector—encompassing refining, distribution, and related businesses—has suffered immensely. Thousands of jobs have vanished, and the closures have ripple effects on supply chains for gasoline, diesel, and feedstocks like naphtha and jet fuel.
California’s Refinery Exodus: A Similar Story of Regulatory Squeeze
California’s refining landscape mirrors Australia’s decline, albeit on a larger scale. In 1985, the state boasted over 40 refineries; today, fewer than a dozen remain operational, with more on the chopping block.
Recent announcements include Phillips 66’s Wilmington facility in Los Angeles, set to close in December 2025, and Valero’s Benicia refinery, which will follow suit.
These shutdowns will slash California’s refining capacity by 17%, contributing to a 35% drop below 1982 levels by early 2025.
Historical closures date back decades, with facilities like the one in Martinez ceasing operations in April 2021 and fully shutting down by January 2022.
The drivers? Soaring regulatory burdens, including cap-and-trade systems, low-carbon fuel standards, and emissions rules that make operations uneconomical.
California’s push for renewables and electrification has accelerated this, with policies like bans on new offshore drilling (though some recent reversals aim to offset closures).
Refineries are transitioning to biofuels, but this hasn’t stemmed the tide of petroleum-based shutdowns.
Downstream businesses face similar devastation: Job losses in the tens of thousands, disrupted logistics, and a shift toward renewable feedstocks that sidelines traditional oil and gas operations.
Shared Energy Policies: The Common Thread of Environmental Ambition
What binds Australia and California? A shared zeal for climate action that prioritizes emissions reductions over domestic energy security.
Both have adopted policies that hike costs for the oil and gas industry:
Emissions and Carbon Pricing: Australia’s climate policies, including carbon pricing and sanctions, alongside state-level bans on gas infrastructure, mirror California’s cap-and-trade and downstream CO2 regulations.
Fuel Standards and Renewables Push: Strict fuel quality regs in Australia and California’s low-carbon fuel standards increase compliance burdens, favoring imports from regions with laxer rules.
Transition Mandates: Both encourage refinery conversions to renewables, but this often leads to outright closures rather than smooth pivots.
Economic Interventions: While Australia subsidizes remaining refineries, California has flirted with profit penalties on oil companies, only to backtrack amid price fears.
These policies, while environmentally laudable, have consolidated the industry, reduced competition, and exposed vulnerabilities in supply chains for gasoline, diesel, and feedstocks.
The Consumer Toll: Surging Imports and Price Pain
The fallout for consumers is profound. In Australia, 91% of fuel consumption relies on imports, with 90% of liquid fuels coming from abroad—primarily Singapore and North Asia.
Stockholdings are perilously low: just 23-27 days for gasoline and diesel.
This dependence heightens risks from global disruptions, driving up prices and hurting households and transport sectors. California faces parallel issues. In-state crude production supplies only 25.8% of refinery needs, with 59% imported.
Gasoline imports surged 124% in 2021 to 22.6 million barrels, and post-closure reliance is expected to grow, sourcing from global markets including Ecuador and Canada.
As the nation’s top jet fuel consumer and second for gasoline, California risks higher pump prices—already premium due to regs—and supply shocks.
In both places, consumers bear the brunt: Elevated costs for gasoline and diesel trickle down to higher goods prices, while downstream job losses weaken local economies.
The Bottom Line:
Lessons from the Downstream DemiseAustralia and California exemplify how well-intentioned energy policies can backfire, dismantling downstream oil and gas infrastructure without adequate safeguards. While the shift to renewables is inevitable, the hasty killings of refineries have left consumers vulnerable to imports and price volatility. Policymakers must balance climate goals with energy security—or risk further hurting the very people they aim to protect. As global energy dynamics evolve, these regions serve as cautionary tales for the world.
When will consumers learn that the Green New Deal is nothing more than a wealth transfer? Do not make a mistake, we have to take care of the environment, but let’s end energy poverty while we move on to new technologies. The methods that have been forced upon the UK, EU, Canada, California, New York, and Australia are not working, and a fiscal collapse is pending in many areas. A balanced way forward has to be discussed.
While writing this story, I used Grok on X and Canva for the artwork, and got a narly looking Kuala Bear driving Gavin Newsom’s cousin in Australa. I don’t think AI will take over the world this week.
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