It's kind of both. For some strange reason I watched that movie again recently. I guess they were supposed to be the distilled version of whatever was considered bad in society in the 90s: hyper-masculinity, smoking, oil tankers, guns, religion (they went on "crusades", the leader was "The Deacon") etc.
Yeah I think I’ve seen that movie three or four times and I never made the connection between the name and smoking cigarettes. Figured it was all the oil they had, and engines they could run with it.
The only thing I remember is they made some old dude row around the oil tank on a tiny boat because they had apparently forgotten how fuel gauges and dip sticks work.
Thinking back on it, were they powering their pirate jetskis with heavy crude? Was there a distillation column set up on the oil tanker? I probably shouldn't think too hard about Wet Mad Max because I bet a lot of that movie doesn't really make sense on closer inspection.
Yeah the lack of a refinery does seem like a problem. Maybe they were making something close-enough to diesel out of it with some crude process? No way they were making gasoline, nor most other petroleum fuels.