Australia entered March 2026 with its largest fuel stockpile in 15 years. It may not be enough. With petrol reserves standing at just 36 days, diesel at 34 days, and jet fuel at 32 days, the nation faces a critical shortfall against the International Energy Agency's 90-day minimum requirement for member countries. The closure of the Strait of Hormuz following escalating Middle East conflict has transformed a theoretical vulnerability into an immediate risk.
The trigger was swift and devastating. Following US and Israeli military strikes on Iran on 28 February, including an operation that killed Iran's supreme leader, the Iranian Revolutionary Guard Corps effectively shut down the Strait of Hormuz to shipping traffic. This waterway carries approximately one-fifth of global oil supply. Within days, international oil prices surged above $82 per barrel, their highest level since January 2025. In Australia, petrol prices jumped overnight from 171 cents per litre to 213 cents, a 42-cent spike that has already strained household budgets across the nation.
The structural reality underlying this crisis is brutal. Australia imports approximately 90 per cent of its refined petrol and diesel. The nation once operated seven oil refineries; it now has two. Ampol's Lytton facility in Brisbane processes roughly 110,000 barrels per day, while Viva Energy's Geelong operation handles about 120,000 barrels. Together, they cover less than 30 per cent of domestic fuel demand. This import dependency, combined with reserves well below international standards, has exposed a critical gap in Australia's strategic resilience.
The immediate human cost is already visible. Motorists across Sydney, Melbourne and Brisbane are experiencing cost-of-living pressure at the pump. Analysts warn that a 30 per cent price increase from current levels could push unleaded 91 petrol past $2.50 per litre in some regions. For a typical 60-litre fill-up, the difference between yesterday's prices and potential future scenarios is substantial: roughly $24 in additional costs at current spikes, potentially $40 or more if global tensions intensify.
The timing for regional Australia is particularly precarious. The nation is entering the agricultural cropping season, when demand for diesel in farming regions peaks dramatically. Unlike other industries that can defer operations during supply disruptions, crop sowing cannot wait. Seeds must go into the ground when conditions align, regardless of fuel availability. If prolonged shortages materialise, Australia's primary production sector faces the prospect of delayed plantings, harvest delays, and potential crop losses on a scale that would reverberate through commodity markets and agricultural employment.
The government has not declared a fuel emergency. Energy Minister Chris Bowen has stated there is "no immediate danger" to petrol supplies and explicitly warned against panic buying, which could artificially accelerate depletion of existing stocks. The Australian Competition and Consumer Commission is actively monitoring fuel retailers to prevent price gouging, while Treasurer Jim Chalmers has instructed the ACCC to ensure retailers are not exploiting Middle East developments to inflate prices beyond wholesale cost increases.
This measured official response reflects the existence of emergency frameworks. The Liquid Fuels Emergency Act 1984 and the National Liquid Fuel Emergency Response Plan provide a formal structure for managing supply crises. If conditions deteriorate sufficiently, the government can declare a national fuel emergency, triggering formal rationing mechanisms that limit the daily dollar value of fuel motorists may purchase. The framework exists, tested and documented, should worst-case scenarios materialise.
Yet emergency frameworks are measures of last resort, not prevention. The deeper question confronting policymakers is structural: how does Australia, a wealthy developed nation in a stable region, find itself so dependent on fuel sourced from the world's most volatile shipping lane, processed in foreign refineries and transported across contested waters? The answer lies partly in economics. Importing refined fuel has been cheaper than maintaining domestic refining capacity. The government's Fuel Security Services Payment, introduced in 2021, now subsidises remaining refineries during loss-making periods, but this represents a band-aid on a strategic wound.
The centre-right case for immediate action is straightforward: fiscal discipline demands protecting critical infrastructure, and national interest demands reducing catastrophic dependency on contested waterways. The centre-left counterargument is equally coherent: rebuilding refinery capacity is capital-intensive, globally uncompetitive, and shifts costs to taxpayers through either subsidies or higher fuel prices. Both perspectives identify real trade-offs.
The pragmatic path forward likely involves a combination of measures: maintaining adequate strategic reserves at genuinely sufficient levels; supporting the two existing refineries through subsidies until global competition shifts; exploring alternative fuel sources and supply routes; and accelerating the renewable energy transition to reduce long-term liquid fuel dependence. No single measure solves the problem. All involve costs. The question is whether the cost of prevention is preferable to the certain cost of a genuine crisis.
For now, Australians should monitor fuel prices, avoid panic buying, and understand that while the current situation is serious, it remains manageable. But the underlying vulnerability is real. The Strait of Hormuz crisis serves as a stark reminder that strategic resilience, once surrendered, is expensive to rebuild. Australia has the resources to address this challenge. Whether it has the political will to absorb those costs before the next crisis arrives is an open question.