It is a curious paradox that sits at the heart of Australia's current fuel crisis: we pay less at the bowser than most developed nations, yet face rationing fears and supply shortages that have forced the government into emergency mode.
Australia ranks 61st out of the top 100 countries for petrol prices globally, with an average price of $2.07 per litre in March 2026. It is cheaper to fill up here than in many of our OECD neighbours, except for the United States, which has dramatically low fuel costs at $US1.06 ($1.51) per litre. Yet beneath this statistical comfort lies a hard truth about Australia's energy architecture: our apparent price advantage masks a dangerous structural weakness.
Iran's naval blockade of the Strait of Hormuz, through which one-fifth of the world's fuel passes during peacetime, has sent petrol prices skyrocketing, and governments across the world scrambling to prevent panic buying, price gouging and fuel shortages. In Australia's case, the scrambling has become desperate. The Australian Consumer and Competition Commission (ACCC) said petrol and diesel price rises between 20 February and 11 March varied widely between Australian capital cities, but had increased by nearly 50 cents on average.
The actual price journey tells the story more plainly. Australian petrol prices have increased since the beginning of the war in the Middle East, by roughly 50 cents in the past eight weeks, from $1.57 to $2.08, according to the data. Perth experienced the largest increase in average retail petrol prices between February 20 and March 11, at 59.5 cents per litre. The ACCC noticed something troubling in the pattern: retail prices moved upward almost instantly in line with wholesale shifts, rather than showing the typical week-long lag. In some cases it looks like petrol retailers increased prices at the pump when they were selling fuel they had bought before the conflict at cheaper prices, the ACCC suggested, signalling potential opportunistic pricing.
The vulnerability haunting Australia's energy policy is not complexity—it is dependency. Australia imports roughly 90% of its liquid fuel (refined petrol and diesel). This is not accidental. With only two refineries, Australia relies heavily on global supply chains. The trade-off seemed reasonable in a stable world: why maintain expensive domestic refining capacity when global markets could supply cheaper fuel? The Middle East conflict has shattered that assumption.
Australia currently holds 36 days of petrol supply, 29 days of jet fuel, and 32 days of diesel. This is technically the largest stockpile in 15 years, yet analysts note it remains inadequate should international supply channels close for extended periods. In an emergency it could take 30 to 40 days to ship crude to Singapore for refining and then transport the fuel back to Australia, according to energy market researcher Dr Lurion De Mello, meaning even our supposed reserves could prove useless in a true crisis.
The erosion of Australia's fuel security is not recent. Australia's backup fuel supply has diminished from its high of 310 days in 2002. That deterioration was treated as manageable so long as global trade remained uninterrupted. The moment it did not, policy became liability.
The government has moved swiftly on several fronts. The federal government will release an extra 800 million litres of petrol and diesel from domestic reserves as petrol prices across Australia rise above $2 a litre following escalating conflict involving Iran, the US and Israel. The government has also relaxed fuel quality standards to boost supply. Fuel companies will be allowed to keep less petrol and diesel in storage, meaning more will flow to pumps across the nation, particularly outside major cities. Yet these are short-term interventions, not structural solutions.
The Albanese Government has appointed Anthea Harris as Fuel Supply Taskforce Coordinator, a new role supporting the work governments around the country are doing to ensure Australia is overprepared and quick to respond when facing fuel and other supply chain challenges arising from the conflict in the Middle East. Anthea Harris is formerly the CEO of the Australian Energy Regulator and the former Chief Executive Officer of the Energy Security Board. The appointment signals serious intent, yet taskforce coordination cannot restore what was allowed to decline: domestic production capacity.
The deeper debate now consuming energy policy circles concerns Australia's long-term vulnerability. Defenders of the import-dependent model note that Australia's fuel tax sits at just under 50 cents per litre. Since 2014, it has been indexed and has been able to fluctuate with inflation. Rebuilding refining capacity would prove far more expensive than simply accepting global volatility. Yet critics counter that fiscal efficiency matters little if supply can be cut by geopolitical events beyond our control.
For now, the ACCC watches fuel company conduct closely. The consumer watchdog will investigate fuel suppliers including Ampol, BP, Mobil Oil and Viva Energy over allegations of anti-competitive pricing during the crisis. Price-gouging, if proven, would deepen public frustration over a problem that has nothing to do with domestic manipulation and everything to do with a Strait of Hormuz blockade thousands of kilometres away.
Australia faces a pragmatic choice with no ideal solution. Domestic refining investment is expensive and slow to deploy. Global supply chains remain vulnerable to shocks Australia cannot prevent. Fuel taxes and price controls carry their own economic costs. What is clear is that the crisis has exposed an uncomfortable reality: Australia's apparent advantage in global fuel pricing masks underlying exposure to international disruption that no amount of price-watching can resolve. The 36 days of petrol in reserve are a countdown to a reckoning about whether Australia will accept permanent strategic dependency on imports it cannot control.