Understanding the Supply Chain: How Oil Gets from Distributors to Australian Industries
Oil is an essential commodity that powers key Australian industries from transportation to manufacturing. But before oil can end up in your car's gas tank or be used to make plastics and other materials, it goes through a complex supply chain journey involving various players along the way.
This article provides an in-depth look at the key steps and stakeholders involved in getting crude oil and refined petroleum products like diesel, petrol, jet fuel from oil fields halfway across the globe to end users in Australian homes and businesses.
Exploration & Production
The oil supply chain begins with exploration and production (E&P). This involves identifying potential underground oil reservoirs, drilling extraction wells and "upstream" processing like separating raw crude from natural gas and water. Major global oil companies like ExxonMobil, BP and Shell dominate E&P and extract crude oil from places ranging from the Middle East to domestic shale fields in the US.
Refining
Once crude oil is extracted, it gets transported via pipelines, oil tankers and rail to refineries globally. Australia has four major local oil refineries located in Victoria, Queensland and Western Australia operated by Viva Energy, BP and Ampol. Refineries distill crude oil using heat and pressure to extract various final "refined" products like petrol, diesel, jet fuel, heating oil and petrochemical feedstocks used to manufacture plastics, synthetic fabrics and more.
Wholesale & Trading
The refined oil products are then transported to storage terminals and sold by refiners like BP and ExxonMobil's Australian offshoot Mobil, as well as independent fuel importers like Viva Energy to wholesalers. Wholesalers may blend refined products to produce fuels tailored to Australian standards before distribution. For example, petrol must have minimum Research Octane Number (RON) levels and ultra-low sulfur diesel specifications suited for Australian vehicles and environmental needs.
Larger wholesalers include Sinopec, United Petroleum, Puma Energy and Liberty Oil while companies like 7-Eleven and Westside Petroleum focus more on downstream petrol station forecourt retail sales. Trading companies like Vitol, Trafigura and Glencore also participate by buying and reselling batches of refined oil products sourced globally. These trading firms help match world oil supply with domestic Australian fuel demand.
Distribution Infrastructure
Australia has an extensive distribution infrastructure network spanning ports, pipelines, storage depots and road/rail transportation for moving refined petroleum. This infrastructure is operated by a mix of large energy companies as well as specialist logistics firms.
Key distribution channels and operators include:
Shipping ports: Mobil, BP, Viva, Vopak operate import terminals handling products from Singapore refineries.
Pipelines & terminals: Jointly owned by energy companies to transport fuels interstate.
Storage: Viva Energy, Terminals Pty Ltd, Caltex own depots.
Trucking fleet: Specialist downstream fuel distributors like NTS and Commonweath Oil Transport.
Retail sites: BP, Coles Express, Caltex, Woolworths, Puma Energy and Metro Petroleum own nationwide petrol station networks.
This collective downstream distribution network serves to cost-effectively deliver bulk fuel to retailers around Australia. Sophisticated supply chain coordination using shipment scheduling, demand planning and infrastructure sharing between peer companies helps promote efficient resource utilization.
Petrol Stations & End Consumers
The last link bringing refined oil to end consumers in Australia involves branded petrol stations operated by international oil companies as well as supermarkets under franchise models and independent dealers. Fuel retailers sell petrol, diesel and auto gas directly to Australian motorists, transport operators and industries.
Beyond just filling up your car, petroleum products also make their way into countless consumer goods and commercial/industrial applications across the Australian economy via extensive supply chains:
Transportation: Jet fuel, diesel, petrol, marine fuels power the movement of goods and people.
Manufacturing: Feedstocks from lubricants in factories to refinery byproducts used in petrochemical plants to make everyday plastics, detergents and more.
Mining: Diesel to run heavy machinery and transport ores. Explosives made from oil derivatives.
Agriculture: Fuel for machinery and transport. Fertilizers beginning from oil-based ammonia.
Electricity: Some power stations run on liquid fuels like diesel or LPG.
Commercial Heating: Diesel or heating oil to heat buildings and water.
Thus, the hidden presence of oil-derived products is ubiquitous across Australia's economy from B2B industries to household goods. Retail fuel purchases by consumers and businesses ultimately link back to the global crude oil supply chains underpinning modern economic activity.
Managing Supply Chain Risks
With such heavy dependence on petroleum, unexpected oil supply disruptions whether from geopolitical unrest, natural disasters or refinery outages can severely impact Australian industries and consumers. The sudden spike in crude and petrol prices following Russia's invasion of Ukraine in early 2022 highlights such energy security risks.
Thankfully, Australia has a comprehensive liquid fuel emergency response plan led by the Department of Industry, Science, Energy and Resources (DISER) and the Australian Government. This includes reserves like the Australian Government's stockpile of petrol, diesel and crude oil strategic reserves equivalent to around 22 days of consumption as well as private stockholdings by local refiners.
The International Energy Agency treaty also legally requires Australia to maintain at least 90 days' net oil import coverage via combination of government and industry stocks along with fuel substitution and demand restraint contingency plans. Such strategic oil reserves and coping mechanisms help Australia minimize supply disruptions from global shock events.
Future Outlook
While pressure mounts globally to tackle climate change and transition towards renewable energy, liquid petroleum fuels will continue playing an indispensable role in powering Australian industry and society for years to come. However, increasing adoption of electric vehicles locally does point to petrol demand declining over the longer term.
Yet, oil remains essential as raw feedstock for myriad petrochemical goods. And Australia is set to retain 4 local oil refineries beyond 2030 ensuring reliable domestic fuel production supported by substantial product imports and storage infrastructure while longer term investments in green hydrogen, biofuels and waste-to-energy technologies offer promising potential oil alternatives.
Thus, oil supply chain dynamics will certainly evolve but remain integral to Australian economic services - underpinning movement of goods and people which translates to everyday prosperity and quality living over the coming decades despite incremental shifts towards energy sustainability goals.