Shipping disruptions through the Strait of Hormuz, one of the world's most important oil corridors, caused by escalating war in the Middle East, are now reshaping household costs across Australia. Between late February and mid-March, average petrol prices have risen nearly 50 cents a litre across Australia's five largest capital cities, with average prices of unleaded petrol surpassing $2 a litre in every capital city except Perth.
For farmers heading into spring planting, the timing is particularly problematic. The conflict has created challenges for farmers on the cusp of harvesting summer crops and planting for winter, with National Farmers' Federation president Hamish McIntyre noting that Australian farmers are at the mercy of geopolitical tensions because of their heavy reliance on imported inputs and export markets. Real shortages, not just prices, are emerging in rural areas. NSW Farmers President Xavier Martin said farmers across the country have run out or are running out of fuel, while bulk suppliers in rural and regional areas are telling members they are dry as well, with no more fuel coming.
The concern extends directly to family budgets. If constraints on fuel and fertiliser continued, National Farmers' Federation president Hamish McIntyre warned costs on perishable goods such as dairy, fruit and vegetables could rise by 40 to 50 per cent, describing it as a double effect of delivery costs plus costs to farmers that add up to greater costs for consumers in supermarkets. These are not speculative warnings. A Nowra dairy farmer received 1500 litres of fuel delivered last week, half his usual order, at 80 cents a litre higher than the last delivery.
The government's response has unfolded over recent days. The Albanese Government appointed Anthea Harris as Fuel Supply Taskforce Coordinator, a new role supporting governments to ensure Australia is overprepared and quick to respond when facing fuel supply chain challenges from the Middle East conflict. Since the conflict commenced two weeks ago, the Albanese Government has released up to 20 per cent of its diesel and fuel reserves to help address regional shortages, temporarily amended national fuel standards to keep more Australian-made fuels onshore, and cracked down on petrol companies ripping off Australian consumers.
That crackdown has become more formal. The ACCC is closely scrutinising all fuel markets and investigating matters urgently after receiving reports of alleged anti-competitive behaviour, with the investigation focusing on major suppliers Ampol, BP Australia, Mobil Oil and Viva Energy.
Australia's structural vulnerability lies beneath these policy responses. Australia once had eight oil refineries but that number has dwindled to just two, the Viva Energy facility in Geelong, Victoria, and the Ampol Lytton refinery in Brisbane, Queensland. Australia imports roughly 90 per cent of its oil as refined product from South Korea, Singapore, Malaysia and Taiwan. Australia is the only IEA member that does not hold the mandatory 90-day fuel reserve requirement, something the country has failed to meet since 2012, with the goal downgraded to 50 days; most IEA members hold an average of 140 days while Australia holds between 50 and 58 days.
The immediate threat is not total depletion. Despite some shortages, the bigger issue at the moment is affordability rather than availability, with diesel particularly vulnerable because Australia's diesel supply depends heavily on refineries in South Korea, Japan and Singapore. Yet sustained price pressure creates real economic costs. Surging diesel prices pose the threat of a 50% spike in food costs and potential collapse of just-in-time logistics networks, pressures that would affect inflation and may compel the Reserve Bank to implement interest rate hikes even as household incomes shrink.
The farming sector's frustration is plain. NSW Farmers president Xavier Martin said the position was clear that state and federal governments must ensure a guaranteed supply of diesel for agriculture as a priority, noting the conflict has been more than two weeks old while Australian government action has been slow. Yet the underlying challenge is beyond any government's immediate control; it flows from geopolitical forces and decades of industrial decisions that reduced domestic refining capacity.
Australians are being urged to avoid panic buying, which authorities warn creates the very shortages people fear. What remains clear is that the era of cheap food, built on cheap diesel and stable global supply chains, is no longer guaranteed. Whether the Middle East conflict proves temporary or prolonged will determine whether these are sharp spikes or the beginning of sustained cost pressures on Australian household budgets.