Industry operators are facing significant competition from new refinery operations in the Asia-Pacific.
Melbourne, Australia (PRWEB) April 06, 2014
The Petroleum Refining and Petroleum Fuel Manufacturing industry processes crude oil into a range of fuel types and secondary products for downstream markets. The industry competes with imported refined fuel products for share in end markets. Over the past five years, the industry has struggled to compete with imported products. IBISWorld industry analyst Caroline Finch states “many Australian refiners have found themselves outsized and outclassed by sophisticated new refineries that have opened in the Asia-Pacific region.” The sophistication of competitors means that they are producing fuel that meets Australian standards, eroding a traditional barrier to entry for foreign refined fuels. Compounding the industry's woes, a strong Australian dollar has decreased the competitiveness of the industry. These trends have contributed to revenue declining at a compound annual rate of 5.0% over the five years through 2013-14 and the closure of some large refineries. While the internal issues in the industry have influenced its performance, global trends in the price of crude oil have also had an effect. In 2013-14, revenue is forecast to grow by 7.9% to $39.7 billion as higher domestic petroleum product prices more than offset reduced output. The converse was true in 2009-10, when global oil prices fell as demand for fuel decreased in line with reduced global economic activity.
The industry's poor performance is forecast to continue into the next five years, with confirmed refinery closures to come and the future of others in doubt. Refineries that have been closed are in the process of conversion to import terminals. According to Finch, “as import infrastructure grows, the competitiveness of wholesalers increases, putting further pressure on the remaining refiners.” Overlaid across these internal issues is volatility from world oil price and exchange rate movements.
The Petroleum Refining and Petroleum Fuel Manufacturing industry's four major players generate the majority of industry revenue, accounting for almost all the industry's refining capacity and nearly all its output. Therefore, the industry's market share concentration is at a high level. This is in line with consolidation of enterprises over the past five years. The industry is in decline phase of its life cycle, with several major players closing or having closed their Australian refineries over the past five years due to decreasing profit margins. Even with their substantial supply chains and expertise, the major players have decided to reduce expenditure into domestic petroleum refining. Undoubtedly, smaller players will follow this domestic refining exit and ultimately reduce their market concentration. The industry’s major players include BP Australia, Caltex Australia, Shell Australia and ExxonMobil Australia. For more information, visit IBISWorld’s Petroleum Refining and Petroleum Fuel Manufacturing report in Australia industry page.
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IBISWorld industry Report Key Topics
Industry firms primarily refine crude oil or condensate (a light form of oil) to produce petrol, fuel oil, aviation fuel, lubricating oil, grease base stock, petroleum gases and other petroleum products. These products are then marketed by wholesalers and retailers, which may be owned by firms that operate refineries.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Basis of Competition
Barriers to Entry
Technology & Systems
Regulation & Policy
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