Petrol prices have jumped 50 cents a litre, from $1.69 to $2.19 on average across Australia since the start of the US-Iran war, and analysts warn further increases loom as global oil markets respond to one of the most serious supply disruptions in decades.
On 28 February, Israel and the United States launched strikes against Iran, aimed at inducing regime change and targeting its nuclear and ballistic missile programme. Iran has retaliated with missile and drone attacks across the Gulf, and its military has effectively closed the Strait of Hormuz, the world's most critical oil choke point. Tanker traffic through the strait dropped first by approximately 70%, with over 150 ships anchoring outside to avoid risks.
The strait facilitates the transit of around 20 million barrels of oil per day, representing roughly 20% of global seaborne oil trade, primarily from producers like Saudi Arabia, the UAE, Iraq, and Qatar. Iran has stepped up attacks on energy infrastructure and commercial shipping, warning that the world should brace for oil prices to double. The blockade has pushed oil prices to around $100 per barrel, threatening higher inflation across the globe.
Australia sits in an uncomfortable position. Australia imports roughly 90% of its liquid fuel, which means world crude oil prices have a direct impact on Australian pump prices. More critically, more than 90 percent of refined petroleum consumed domestically is imported, largely from Asian refineries that themselves rely heavily on Middle Eastern crude, meaning a crisis in the Persian Gulf also affects the refineries in Singapore, South Korea and Japan that produce the petrol, diesel and jet fuel that Australia imports.
The immediate impact has been severe in regional areas. Retail diesel prices have jumped to more than 225 cents a litre in many regional centres, up from around 175 cents before the US launched its offensive. United Petroleum, one of Australia's largest independent fuel wholesalers, has suspended customer allocations, while Transwest Fuels, which supplies more than 2,000 farmers and agricultural customers, has declared zero petrol supply at Newcastle and Brisbane terminals.
Australia entered this crisis with what appeared to be a reasonable safety net. Australia currently holds 36 days of petrol supply, 29 days of jet fuel, and 32 days of diesel. Yet this figure masks a more concerning reality. The prediction is that reserves could cover 26 days of usual petrol demand, 25 days of diesel consumption, and 20 days' worth of jet fuel if priority is given to critical services during an emergency. Australia's current emergency strategic fuel reserve is non-compliant, and has been since 2012.
Some economists and policymakers have urged caution about longer-term risk. One analysis argues Australia must strengthen supply chain resilience by rebuilding refining capacity or securing guaranteed regional refining access, noting that Australia will not run out of petrol tomorrow but that in a world where a single conflict can immobilise a fifth of global oil trade overnight, relying on luck is not a strategy.
Global authorities have begun releasing emergency reserves. The International Energy Agency announced that its 32 member countries had unanimously agreed to release 400 million barrels of oil from emergency reserves to try to lower prices, described as a major action aiming to alleviate the immediate impacts of disruption in markets. In Australia, Treasurer Jim Chalmers has written to consumer watchdog the ACCC warning against price gouging, though he has ruled out cutting excise on fuel.
The disruption extends beyond the bowser. Airfares are affected, because jet fuel is directly linked to crude oil prices, with prices forecast to rise by 10–20%, and even more for long-haul international flights. The crisis has hit right as growers are looking to secure fuel and fertiliser for the autumn planting season, and if farmers miss their window, the production is lost for the year.
The underlying problem remains structural. Australia produces substantial crude oil and liquefied natural gas, yet exports vast quantities of energy but remains structurally dependent on imported liquid fuels. Policy has not adapted to this vulnerability despite years of warning. The current crisis exposes what governments have long deferred: whether Australia will invest in domestic refining capacity and supply chain redundancy, or continue to gamble that Middle Eastern conflicts will remain brief and distant.