The strategic calculus here involves several competing considerations. Before the first meaningful wave of war-related oil costs has even reached Australian shores, a significant portion of petrol retailers in Sydney and Melbourne have already moved to extract higher margins from motorists, according to reporting by the Sydney Morning Herald. With roughly half of stations in both cities having lifted prices by as much as 10¢ a litre, the behaviour fits a pattern economists and consumer advocates have long warned about: geopolitical anxiety moves retail prices faster than the underlying supply economics can justify.
The proximate cause is the US-Israeli military campaign against Iran, which began on Saturday, 28 February. The conflict has sent oil prices surging for a third consecutive day, with the Strait of Hormuz, the shipping lane on Iran's southern border through which about 20 per cent of the world's oil and gas is shipped, effectively closed. Four vessels have been hit in Gulf waters since the conflict began, and with shipping companies and their insurers concerned about vessel safety, tankers are not risking passage through the strait. JPMorgan's head of global commodities research, Natasha Kaneva, described the disruption in stark terms, saying her firm's base case assumption that such an unprecedented closure would remain improbable had simply "failed."
What often goes unmentioned in coverage of retail fuel pricing is the lag between global crude movements and what Australians pay at the bowser. NRMA spokesman Peter Khoury confirmed that it takes seven to ten days for overseas price movements to flow through to the pump, and that wholesale prices had already risen four cents a litre for petrol and three cents for diesel, an increase likely to be passed on to motorists in coming days. That means at least some of the retail increases already observed in Sydney and Melbourne have run ahead of what costs currently warrant. The distinction matters enormously for consumers trying to determine whether they are paying for real supply-chain pressure or simply funding a margin grab.
Treasurer Jim Chalmers acted quickly to signal the government's position. Dr Chalmers wrote to the Australian Competition and Consumer Commission to monitor petrol price gouging, warning service stations against "opportunistic" increases as the war in the Middle East threatens to drive up global oil prices. In his letter, Dr Chalmers wrote that "unfolding events should not be used as an excuse for retailers to gouge customers or to increase prices opportunistically above and beyond the impacts of events in the Middle East." Energy Minister Chris Bowen separately met with the heads of Australia's oil refining companies. Mr Bowen told reporters at Parliament House that the refining companies had "absolutely no plans of increasing the price of petrol, until and unless the price of oil increase flows through to Australia."
On the question of supply security, the government has been at pains to calm consumer behaviour. Energy Minister Bowen stated there was no need for consumers to be concerned about fuel shortages, noting that Australia held 36 days' worth of petrol, 34 of diesel, and 32 of jet fuel in reserve, the highest level in over a decade. That context is important. Australia's fuel reserves have historically been low compared to other developed nations and have remained well below the International Energy Agency's recommended 90-day threshold, a structural vulnerability that successive governments have addressed only partially. The current reserve levels offer a modest buffer, not a guarantee.
The economic stakes are real, and it would be intellectually dishonest to dismiss the retailers' concern about future cost increases. Australians could be paying $1 a litre more for petrol if a key oil shipping route near Iran remains closed for up to three months, according to Australian economists. A three-month disruption could see the CPI temporarily spike by around 1.5 percentage points at its peak, with GDP 0.5 percentage points lower by the end of 2026. CBA Head of Australian Economics Belinda Allen acknowledged that the Reserve Bank of Australia would likely look through a short-term spike in petrol prices, though she cautioned that a prolonged conflict morphing into a broader demand shock could shift the balance of risks for monetary policy. If oil reaches US$100 a barrel, interest rates could settle around 0.25 percentage points higher over the longer term; at US$150 a barrel, higher inflation's drag on spending could leave the RBA holding rates steady.
The regional picture also carries a precedent worth examining. During the 12-day Iran war of 2025, Australian fuel prices rose between five and ten per cent following the conflict but returned to normal within a few days. NRMA's Peter Khoury expressed a preference for a similar outcome but cautioned the situation was "very volatile and hard to predict." The difference this time is the scale: the current halt to oil flows through the Strait of Hormuz is, by most accounts, unprecedented in the waterway's modern history. Even OPEC+'s decision to boost production by 206,000 barrels a day for April may count for little if, as RBC energy analyst Helima Croft has argued, the absence of a viable sea passage renders those additional barrels effectively stranded.
The diplomatic terrain is considerably more complex than the headlines suggest. There is a legitimate argument that retailers facing genuine uncertainty about procurement costs in the coming weeks are rationally hedging forward, and that framing all early price movements as gouging oversimplifies a genuinely difficult inventory management problem. There is an equally legitimate counter-argument that consumers, already under cost-of-living pressure, have a right to expect that price increases track actual costs rather than anticipated anxiety. Fuel is one of the more volatile parts of inflation and can move headline CPI around significantly, which means the behaviour of individual retailers at the pump carries aggregate economic consequences that go well beyond the fuel sector itself.
What the present situation reveals is a gap in Australia's consumer-protection architecture: the ACCC's fuel monitoring role is largely observational rather than punitive, and the government has no direct power to cap retail prices in an emergency. Whether that gap is a feature of a well-functioning market or a structural deficiency is a question reasonable people can debate. What seems clear is that the speed of retail price movements in Sydney and Melbourne, relative to the underlying wholesale data, warrants the scrutiny the Treasurer has now formally requested. The coming days, as genuine cost increases begin to flow through the supply chain, will provide the clearest test of whether the market corrects itself or requires a firmer institutional response.