The crude oil rout, which pushed the spot price under $US30 for the first time in 12 years, is delivering windfall profits for Australia's four remaining oil refineries.
BP, ExxonMobil, Caltex and new local player Viva Energy are enjoying some of the strongest profit margins on refining for years, in stark contrast to the bloodbath taking place in oil and gas production and expectations just 18 months ago.
While crude oil prices have dropped 51 per cent since the end of June, petrol prices have fallen about 15 per cent.
Retail petrol prices in Sydney fell close to $1 a litre early this month and have since risen despite the slide in crude oil prices. Across the country, the price for regular unleaded petrol averaged $1.22 a litre last week, up 2¢ from the first week of the year, according to the Australian Institute of Petroleum.
One of the beneficiaries is a large refinery in Geelong, which commodities trader Vitol bought from Shell in early 2014 when most expected the ageing, unprofitable plant to be forced to close. Vitol owns Viva Energy, which operates the plant.
"Lower oil prices and lower exchange rates have overall been good for refining in Australia," Viva chief executive Scott Wyatt said.
"A high Australian dollar has been particularly challenging for manufacturing businesses, so the currency depreciation over the last 12 months has certainly been a very welcome relief."
Refining profits to stay strong
Some experts expect refining profits to remain strong for the rest of the decade.
Refining margins are set in Singapore and local players have no control over them. But margins on retailing petrol and diesel have climbed and were the highest in the September quarter since at least 2002, the competition watchdog said last month.
The findings triggered accusations of price-gouging that were roundly rejected by the industry, which includes refineries that were suffering heavy losses until recently.
The weaker dollar, which traded at US70.13¢ on Wednesday, means the drop in global crude prices hasn't been fully felt at the petrol pump. Also, pump prices typically rise sharply when crude prices rise, and then only show a slow decline as retailers try to undercut their competitors, industry sources say.
Caltex last month foreshadowed a record full-year profit in 2015, including earnings from its sole remaining refinery almost doubling to $400 million. Its average refiner margin was $US16.38 a barrel in the first 11 months of last year, 75 per cent higher than in 2013.
The brighter position for refining comes as crude prices touched fresh 12-year lows on Tuesday night Australian time, with the US benchmark dropping below $US30 a barrel for the first time since 2003.
While prices for Brent, the global benchmark, appeared to stabilise on Wednesday at about $US31, the continuing price plunge to levels lower than any forecaster had predicted is rattling producers and investors.
Senex Energy managing director Ian Davies warned of "global carnage" in the oil industry worldwide if prices remain around $US30 through 2016-17.
"No one can afford to operate at these levels on a sustained basis, no one," Mr Davies said, predicting spikes in US oil company bankruptcies, a "massive" lack of investment in new drilling and lost jobs.
"I think the supply situation would start to correct pretty quickly in that scenario," he said. "Locally, it means capex reductions and opex [operating expenditure] reductions, and also, unfortunately, staff."
BP, which owns an oil and gas production business as well as refineries, advised this week that 4000 jobs would be cut from its global upstream business, while Brazilian oil giant Petrobras ripped $US32 billion ($45.8 billion) out of its 2015-19 investment budget to $US98.4 billion.
The extending dive in prices has sparked dire forecasts of the possibility of much lower prices still, with Goldman Sachs and Morgan Stanley saying prices could drop to $US20, while Standard Chartered warned that as low as $US10 was possible.
The global refining business, where the oil majors have been shedding operations in recent years amid forecasts of a prolonged slump in margins, is doing much better.
Energy price pundit Fereidun Fesharaki of consultancy FGE expects refining to be "very profitable" through until at least 2019, supported by a dearth of new supply capacity starting up in China and India for the first time in years.
Demand to outstrip capacity
In FGE's analysis, demand growth for refined fuels in Asia will outstrip expansion in capacity every year from 2015 through to 2020, a reversal of the situation from 2011 to 2014. That points to a gradual increase in utilisation rates at plants in Asia Pacific that should support profitability.
Locally, where the remaining four refineries are small and old in global terms, the good times are just a temporary hiatus in an otherwise declining sector, experts said.
"We don't expect the current high refiner margins to last indefinitely, but the higher margins plus (importantly) the lower Australian dollar are a welcome reprieve for refiners in Australia at present," UBS energy analyst Nik Burns said.
"Low oil prices have stimulated demand, with new car sales in Australia and Asia up significantly, which feeds back into demand for refined products and supporting refiner margins, in particular, gasoline margins."
Viva's Mr Wyatt acknowledged the cycle would turn again for refiners.
"We know that refining margins will move up and down over time depending on global markets, so we are also very focused on making the improvements necessary to build a sustainable refining business that can withstand the low points in the refining cycle, which will inevitably come," he said.