A fire has ripped through one of Australia's two critical oil refineries, stoking fears that a fresh supply shortage will grip motorists and drive up prices at the pump once again.
The Viva Energy oil refinery in Geelong, Victoria suffered damage in an explosive fire which began about 11pm yesterday, with production output expected to be slashed to "minimum rates" following the blaze.
When at full capacity, the refinery can produce up to 120,000 barrels of oil per day, including petrol, diesel, LPG and jet fuel.
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It supplies over 50 per cent of Victoria's and 10 per cent of Australia's fuel.
Experts have warned the incident will likely result in a supply chain and price shock in Victoria and beyond.
"Initially it's going to have an effect because there will be less supply, [we] should see a pickup in price," Senior Lecturer from the School of Economics at The University of Sydney Dr Luke Hartigan told Nine.com.au.
"It's not a positive thing to have that out of commission now."
"Under normal conditions usually these things do take time, but considering what's been happening it could happen right away."
The impact will be felt initially in Victoria, where Viva Energy supplies most of its fuel.
Fuel prices and shortages may also worsen as national output shrinks at the refinery, Hartigan said.
"If you think about what happened with the Strait of Hormuz, that is 20 per cent [of global oil supply], and you can see that effect around the world," Hartigan said.
"Even in a small part, when you've got restricted supply, it means it could have an effect."
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Hartigan said the fire will likely "dull the benefits" of the federal government's efforts to ease supply and price pain, including the temporary excise reduction.
Swinburne's Professor of Transport Technology and Sustainability Hussein Dia said any positive progress made by the Victorian state government may be reversed, including the impacts of offering free public transport for the month of April.
"It's not just a shock to supply, but it is a loss of flexibility, and that's what's going to put upward pressure on prices, despite what the government has been doing," Dia said.
"This was unexpected, and the government has been trying to shield consumers by the cutting of the fuel excise, and in Victoria, we have the free public transport."
Dia said fuel prices in Victoria will likely grow, but said it might not be a "dramatic" spike at the pump tomorrow.
"The system was already under pressure and now it's operating with less buffer, and that will likely show up in prices over time," he added.
The flow-on effect of the Geelong fire could also touch the supermarket supply chain if Victorian farmers lose even more access to diesel.
"There's less access to food because if trucks can't get diesel, then they can't deliver food," Hartigan said.
"There's the worry that there's an impact on pricing… and that there is less supply of diesel now because that refinery is [partially] offline."
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Energy Minister Chris Bowen earlier said the blaze will worsen Australia's national fuel supply as the refinery slashes its production, describing it as "not a positive development".
"There will be an impact on production," Bowen told Today.
"At this point, production of jet fuel and diesel is continuing at the refinery at reduced levels for safety reasons as a precaution. At this point, the impact is mainly on petrol production."
Australia's only other operating oil refinery, the Ampol Lytton Refinery in Brisbane, may need to fill in the gaps left by Viva Energy's reduced output.
The Brisbane refinery also provides about 10 per cent of Australia's fuel.
The remainder is imported from overseas, including the Middle East and Singapore.
"It will be a delicate balance between trying to get it to work a bit longer but not trying to work it too hard," Hartigan added.
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