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Oil refining industry in crisis.

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4 October 2000            00/436 

OIL REFINING INDUSTRY IN CRISIS  "Despite high crude oil prices which are reflected in the price of petrol and diesel, Australia's refining industry continues to register weak financial results, underscoring the need for restructuring," the Minister for Industry, Science and Resources, Senator Nick Minchin said today. 

Senator Minchin was commenting on an annual survey of the Downstream Oil Industry prepared by Ernst and Young. The survey covers the activities of Australia's refining and marketing activities of Australia's four major petrol companies (BP, Caltex, Mobil and Shell). 

"This report once again shows the folly of the ALP and Democrats' opposition to reform of the retail petroleum market," Senator Minchin said. 

"The Government has an extensive reform package prepared for the industry but, because the opposition parties have blocked it in the Senate, the industry and consumers are stuck with an outmoded and inefficient system. 

"The more closely one looks at these survey results, the worse they look. An underlying net profit after tax of $221 million is $263 million less than the previous year and represents a profit of less than 0.5 cents per litre. The underlying return, before interest and tax on the $10 billion of assets invested in this industry was just 2.6 per cent for the year."  

For the first time, the survey has reported the financial performance and position of the refining and marketing segments separately, meeting an industry commitment set out in the Downstream Petroleum Products Action Agenda launched by the Minister in November of last year. 

"The report states that the refining side of the industry recorded an underlying

net loss of $61 million," the Minister said. 

"If the refining industry is to survive and flourish in Australia, it will need to restructure so as to draw on the benefits of larger economies of scale and to underwrite the significant new investments needed to make the cleaner fuels that are on the way. 

"One point that clearly emerges from the survey is that rising oil prices do not mean higher profits for refiners or marketers. Nor do they mean less competitive pressure from the massive refineries in South East Asia. 

"There will inevitably be refinery rationalisation in Australia and there needs to be reform of the retail sector of the petrol industry. 

Contact:   Jennifer Eddy, Senator Minchin's office, 02 6277 7580


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