Treasurer braces for inflation from Middle East war with first Australian oil refinery in 60 years

Australia’s first new oil refinery in 60 years could be built in Western Australia under the Albanese government’s long-term strategy to shield the country from future global oil shocks.

The commonwealth and the WA government will fund a $4m early-stage feasibility study into construction of what would be the country’s third large-scale petrol refinery. A series of refinery closures over the past 25 years means Australia now imports about 90% of its liquid fuels, a vulnerability exposed by the international oil crisis sparked by the US-Israel war on Iran.

The announcement comes as Jim Chalmers, the treasurer, warned the recent escalation of the Middle East conflict posed “a substantial threat to global inflation”. With petrol and diesel prices up by 25 cents and 50 cents a litre this month, respectively, the rekindling of the conflict has also boosted expectations that central banks will need to do more to bring inflation back under control – piling more pressure on households.

The proposed WA project, were it to go ahead, would be constructed by Perdaman, the large multinational behind a $4.5bn fertiliser plant in the Pilbara. Perdaman would privately fund the project but could be eligible for taxpayer-funded assistance, such as concessional loans.

Prime minister Albanese, and the WA premier Roger Cook will announce funding for the scoping study after visiting Perdaman’s urea plant in Karratha.