Market Operation Issues of Australian Oil Industry

Running head: ECONOMICS FOR BUSINESS
Economics for Business
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1ECONOMICS FOR BUSINESS
Executive Summary
This report discusses the market operation issues of Australian oil industry and the reasons
for such issues. The structure of the market the change in demand supply of petrol and
relevant reasons have been discussed. It discussed how an oil exporter became an oil importer
with decreasing oil reserve. The lack of refineries as one of the prominent resource
constraints worsened the condition of oil industry in Australia that forced the country to take
help from other countries for refinery services. It has been discussed in the report that how
demand supply disparity increased petrol price. Indications of future threat to the oil industry
like global warming and electric cars have been given in the report. Thus, it is concluded that
the oil industry in Australia is definitely facing severe issues and there are more to come.

2ECONOMICS FOR BUSINESS
Table of Contents
Introduction................................................................................................................................3
Key Issues of Oil Industry in Australia......................................................................................3
Economics of the Oil Industry in Australia................................................................................5
Supply Demand Mismatch.....................................................................................................5
Resource Constraint...............................................................................................................6
Market Structure of Oil Industry............................................................................................7
Substitute of Petrol Cars.........................................................................................................7
Conclusion..................................................................................................................................9
References................................................................................................................................10

3ECONOMICS FOR BUSINESS
Introduction
Oil industry is among one of the most important industry for any country in the world.
Likewise, in Australia oil industry holds a good position because it is the main driving force
of transport system in the world. In recent times, the oil industry in Australia is facing many
issues and mismatch in supply and demand of petrol creating a major problem. This report
tries to discuss the main issues like increase in exploration, finding and drilling cost and strict
government licencing policy for new oil production unit that are affecting the operation of oil
industry in Australia and declining the petrol productivity. Other issues like lack of oil
refineries, introduction of new pollution free technology to run cars and global warming
discouraging people to use petrol operated vehicles. However, the report discusses the
operational issues of the oil industry in Australia with special emphasis on petrol from the
microeconomic aspect. Apart from the existing issues, focus is given on the problems that
might affect the demand and supply of petrol in long run.
Key Issues of Oil Industry in Australia
During early days, Australia used to produce and meet its entire domestic demand for
petrol. Even 20 years earlier, it is true for Australia, but in the last few years, production of
petrol has declined drastically. Australia currently imports about 90% of its domestic demand
for petrol (BBC News 2018). It has only 23 days of petrol reserve for emergency purposes
(Department of the Environment and Energy 2018). The major issues that are affecting the
Australian oil industry are high cost of finding and drilling new oil sites, lack of oil refineries
and low production of petrol (Velins 2016). Exploration and production at new sites require
social licence from the government, receiving which is critical. These issues decreased the
exploration and production in Australia, which might affect the future supply of petrol and
fail to meet the demand. High cost of finding and drilling oil sites forced Australia to import