Western Australia faces an environmental crisis with hundreds of thousands of litres of waste oil accumulating in garages and workshops each month because a fall in demand for recycled oil has left licensed storage and processing facilities full.

Thewest.com.au reports that the Motor Trade Association warned yesterday of illegal dumping and a growing fire risk, saying mechanics and car dealers were storing waste oil in drums because oil recycling companies had stopped collections.

The Australian Oil Recycling Association confirmed its members had stopped collecting waste oil because they had nowhere to store it.

Association chairman Fred Wren, who is also managing director of Bunbury oil recycling business Wren Oil, estimated up to 800,000 litres a month of waste oil was not collected.

Wren Oil‘‘s 20 million litres of storage capacity - at its own facility in Picton and tanks in North Fremantle, leased from Shell, and Kwinana, leased from Verve Energy - were full and the situation was the same with WA‘‘s other major oil recycling business, which had similar storage capacity.

"Our members are particularly concerned that stopping collections will lead to the illegal dumping of waste oil with its consequent negative effects on our precious environment, " Mr Wren said. "The more our economy booms the bigger the problem is as all our mining and support enterprises generate more and more waste oil and there is nowhere to store it. "

Recycled oil has historically been used in WA as a burning fuel source by industry and exported for use in Asian electricity generation through BP‘‘s Kwinana refinery.

But Mr Wren said industrial customers had increasingly turned to natural gas from the Dampier to Bunbury pipeline and exports via the BP refinery had been halted because Western Power had withdrawn permission to use a pipeline that ran between storage tanks on its property and the refinery.

"Oil recyclers are facing an extreme glut of waste oil that has arisen as a result of a progressively worsening imbalance between the supply of used oil and demand for recycled oil over the last few months, " Mr Wren wrote in a letter to the MTA last week.

MTA chief executive Peter Fitzpatrick said the situation was an environmental disaster waiting to happen unless something was done quickly. There was a danger rogue operators would dispose of waste oil illegally causing substantial environmental damage.

"All our businesses are loaded up with used oil at the moment, " Mr Fitzpatrick said. "It‘‘s a potentially very serious environmental problem and the last thing we want is for large amounts of waste oil to be entering our environment.

"And then there‘‘s the secondary issue, like fire risk. "

Environment Minister Tony McRae could not be contacted last night but a spokesperson for the Department of Environment said it was aware of the problem and was working with the industry to find solutions