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The blaze broke out about 11.15pm on Wednesday at Viva Energy’s Geelong refinery, a facility commissioned in the 1950s and now one of just two refineries left in Australia — and among the older operating plants globally.

The fire was still burning on Thursday morning but had been contained, with authorities confirming no workers were injured. Flames and thick smoke were visible across Geelong overnight, prompting a Watch and Act warning for surrounding suburbs. Residents were urged to stay indoors, shut windows and doors, and avoid the area as emergency services worked to control the incident.

The cause of the fire remains under investigation, though early reports indicate a leak may have developed before the blaze broke out. Energy Minister Chris Bowen says there were no suspicious circumstances and the fire was believed to be accidental.

Viva Energy chief executive Scott Wyatt said the incident would disrupt petrol production at the facility, with output continuing but at sharply reduced levels.

Mr Wyatt said the refinery remained operational, but production was “very low relative to what we were doing before”, underscoring the scale of the disruption. He said Viva would seek to cover lost output by drawing on international supply as authorities assess the extent of the damage and the timeline for restoring operations.

Energy analysts have warned the hit to supply is expected to ripple across the economy, lifting fuel prices and driving up costs for freight, aviation and heavy industry, with the risk of broader inflationary pressures if shortages persist.

Investment bank Macquarie said the fire could disrupt operations for anywhere between three weeks and three months, threatening a hit to earnings and tightening petrol supply at a critical time for the domestic market.

Early estimates suggest even a short outage could shave about $20m from earnings, while a prolonged disruption could push losses closer to A$70m, underscoring the financial and operational risks from the incident.

Rystad Energy partner Gero Farruggio said the outage was compounding an already tightening global fuel market, raising the risk of more severe supply constraints in Australia.

“With the Geelong refinery now out of action — and first reports suggesting it could remain so for a significant period — I cannot see how Australia avoids moving to Stage 3. The two crises are now compounding each other,” Mr Farruggio said.

Stage 3 of Australia’s liquid fuel emergency framework allows the federal government to take control of fuel supplies and ration access, prioritising critical industries while curbing broader demand — a step reserved for severe shortages.

“To be clear about the Middle East dimension: even if a ceasefire were declared tomorrow, the best-case scenario still sees fuel supply chains disrupted for a further two months as shipping routes, refinery output, and distribution networks normalise,” Mr Farruggio said.

“The Geelong fire does not replace that problem — it sits on top of it. The combined impact on Australia’s domestic diesel and jet fuel supply is severe, and the price consequences for consumers, freight operators, and aviation will be significant.”

The Geelong refinery processes about 120,000 barrels of crude oil a day into petrol, diesel and jet fuel, supplying roughly half of Victoria’s fuel needs and running hard to offset the country’s growing reliance on imports.

Viva Energy said it would seek to offset lost production through increased imports, supported by global commodities trader Vitol, though analysts warned spare supplies are scarce, making additional cargoes both costly and difficult to secure.

MST Financial energy analyst Saul Kavonic said the outage would force the federal government to source additional fuel offshore at a time when global markets were already under strain.

“We have lost up to 10 per cent of our fuel supply just as the crunch point of the global fuel shortage is about to hit us,” Mr Kavonic said.

He said the government would now have to scramble to secure additional cargoes at higher prices, compounding existing challenges in maintaining baseline import levels.

“The government will now have to scramble additional fuel imports at much higher prices, on top of their existing efforts just to maintain our normal fuel import levels, which was challenging enough as it is,” Mr Kavonic said. “This increases the risk of fuel shortages and the need for stronger demand management measures to be taken earlier.”

Australia relies on imports for around 90 per cent of its fuel, and with just two ageing refineries remaining, the domestic system has little buffer when disruptions occur.

While it remains unclear how long the Geelong facility may be affected, analysts said even a temporary reduction in output — even with the plant still running — could tighten fuel availability and place upward pressure on prices.

Viva Energy has also deferred some maintenance at the refinery in recent months as it kept the plant running at high utilisation to support fuel supply, though Mr Wyatt said the delayed work was unrelated to the section of the facility affected by the fire. He said there was no indication the deferral had contributed to the incident, which remains under investigation.

Local authorities said air quality impacts from the smoke plume were being monitored, with health advice issued as a precaution. Residents reported a strong smell of fuel and visible haze across parts of the city overnight.

The Geelong refinery sits close to residential areas, meaning incidents can quickly spill beyond the facility’s perimeter and require broader public safety responses.

For now, the priority remains containing the fire and ensuring the safety of workers and the surrounding community. But the broader implications for Australia’s already stretched fuel system — reliant on ageing infrastructure at home and tight markets abroad — are unlikely to fade quickly.