The Geelong refinery fire has temporarily cut Australia’s domestic jet fuel production, adding another worry for Qantas, Jetstar and Virgin as they manage a global fuel shock.
Energy Minister Chris Bowen said the Viva Energy refinery in Geelong was continuing to produce jet fuel “at reduced levels” due to safety precautions after the blaze broke out overnight, presenting more difficulties for airlines in need of the increasingly expensive product during a time of global scarcity.
“There will be an impact on production. At this point, production of jet fuel and diesel is continuing at the refinery at reduced levels for safety reasons as a precaution,” Bowen told Today on Thursday.
The Geelong plant is estimated to manufacture about 19 per cent of the nation’s jet fuel needs, with the rest imported from overseas.
The aviation fuel section of the plant is not believed to be damaged from the fire, but production has been cut back as part of the overall reduction.
The blaze comes in the same week that Qantas disclosed a $600-$800 million blow out in fuel costs in the second half of the financial year, making it the latest carrier to flag a sizeable impact from the Middle East conflict.
Qantas said that 90 per cent of its jet fuel comes from overseas. The airline said earlier this week it had hedged about 90 per cent of its exposure in crude oil for the second half of 2026, which means it has contracts in place to blunt the effect of price fluctuations. However, that does not account for “refining margins”, which reflect the cost of turning crude oil into aviation fuel. It is “largely exposed” to that, the airline said.
Refining margins jumped from $US20 per barrel in February to a peak of around $US120, Qantas said. Virgin, meanwhile, had hedged both crude oil and refining margins.
Virgin this week said it expects rising fuel costs to add another $30-$40 million to its fuel bill in the second half of 2026.
For the remainder of second half of 2026, Virgin is hedged 92 per cent for Brent Crude Oil and 71 per cent for refining margins, the airline said. For the first half of 2027 fuel, Virgin is hedged 93 per cent for Brent crude but only 15 per cent for refining margins.
Global fuel prices soared in March after the US and Israel attacked Iran, and the state retaliated by closing the Strait of Hormuz – through which oil transits to Asian nations that provide much of Australia’s refined fuel – and striking other nations’ energy assets in the region.
Hugh Dive from Atlas Funds Management said the Geelong fire “will have an impact” on jet fuel availability in Australia.
Atlas estimates the Geelong refinery produces 1.9 billion litres of jet fuel as year, for a market that consumes about 10 billion litres annually.
Temporarily, at least, “it will reduce the capacity to refine jet fuel in Australia,” Dive said. “Everyone is scrambling for jet fuel at the moment.”
Dive said he would be surprised if airlines didn’t impose fuel surcharges “very shortly”.
“It may get down to the situation where airlines physically can’t get hold of jet fuel,” he said.
While the ultimate impact of the Geelong fire on Australian aviation fuel is not known, supply in Asia has been hard hit.
“Beyond the direct impact of the closure of the Strait of Hormuz on crude supply, Asian refiners in China, South Korea, and Thailand are conserving inventories by imposing explicit export limits, while those in Japan and India show similar reluctance to sell abroad,” said a report from consultancy Oxford Economics released on Thursday.
The report noted said that jet fuel shortages are “constraining aviation capacity … with cuts concentrated in short-haul routes as airlines prioritise higher-yield long-haul services.”
Tourism-dependent economies and “regional aviation hubs could see reduced transit volumes and related services activity”.
Qantas, Jetstar and Virgin have all announced moderate reductions to flight networks since the beginning of March – with some impact being felt on Qantas and Virgin’s regional routes.
Virgin has been contacted for comment.
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Chris Zappone is a senior reporter covering aviation and business. He is former digital foreign editor.Connect via X, Facebook or email.
