Petrol pumps across New South Wales are running dry. The Strait of Hormuz, one of the world's most critical shipping corridors, has effectively closed. And Australia's strategic fuel reserves are measured in weeks rather than months.
This convergence of events has thrust an uncomfortable reality into focus: Australia's fuel security rests on assumptions that no longer hold. The Strait of Hormuz, a vital waterway through which about 20% of the world's crude oil and natural gas typically passes, has roiled global energy markets following the closure of the strait, described as the largest disruption to energy supply since the 1970s energy crisis and the largest in the history of the global oil market.
According to SBS News, Energy Minister Chris Bowen told Parliament Australia currently has 34 days of diesel, 32 days of jet fuel and 36 days of petrol available. This margin is razor thin. We get through approximately 44 million litres of petrol and 92 million litres of diesel every 24 hours.
The government has moved swiftly. As reported by The Verge, the Albanese Government will release up to 20 per cent of the baseline Minimum Stockholding Obligation for petrol and diesel, allowing the release of up to 762 million litres of petrol and diesel from Australia's domestic reserves. The government also temporarily lowered fuel quality standards for 60 days to allow higher-sulphur fuel to be sold, adding roughly 100 million litres to the market each month.
But emergency interventions can only do so much. The real issue is the gap between supply and demand during a prolonged crisis. Australia is the only member of the International Energy Agency that does not hold the mandatory 90-day fuel reserve requirement, something the country has failed to meet since 2012.
What the energy watchdog recommends
The International Energy Agency, the world's preeminent energy authority, has proposed a suite of demand-reduction measures. These are primarily focused on road transport, which accounts for about 45 per cent of global oil demand, with measures including working from home and driving slower.
The specific recommendations are practical. Working from home where possible reduces fuel demand for commuting, while lowering speed limits, shifting from private cars to public transport, and alternating private vehicle access in cities, could further reduce congestion and fuel consumption. Travel for work accounts for between 20 per cent and 40 per cent of aviation activity, which can be substituted by online meetings, with a reduction of around 40 per cent of flights taken for work purposes feasible in the short term while maintaining productivity.
These measures carry an implicit tension. They ask citizens and workers to shoulder immediate costs through lifestyle disruption, while the underlying vulnerability that created the crisis persists unchanged. That's not to dismiss the recommendations entirely; demand reduction works, and quickly. But it is a band-aid on a structural problem.
The long question
Australia once had domestic refining capacity. In 2005, Australia had eight operating oil refineries, but today only two remain: the Ampol Lytton refinery in Brisbane and Viva Energy's Geelong refinery, which supply less than 20 per cent of Australia's liquid fuel demand. The closures happened for sound economic reasons at the time; importing refined products was cheaper than manufacturing them domestically. That calculation assumed uninterrupted supply chains and stable geopolitical conditions.
The current crisis tests both assumptions. Reasonable people disagree on the policy response. Some argue that market forces should guide fuel investment, and that short-term price signals will naturally incentivise import diversification and domestic production. Others contend that fuel security is too critical to rely on market mechanisms alone, and that government should actively rebuild refining capacity.
Both views have legitimate points. Markets are efficient at allocating capital in stable conditions. But fuel security is not simply an economic problem; it has implications for national resilience that market prices alone may not capture. On the other hand, government-directed industrial policy has a mixed record, and there is real risk that subsidised refining capacity could become locked-in inefficiency.
What is clear: the current situation is untenable. With just 26 days of diesel and 29 days of petrol consumption in reserve in Australia, any serious disruption to imports becomes an existential threat not just to energy markets, but to agriculture, emergency services, and food supply. A farmer running out of diesel during seeding season cannot wait for import markets to reopen.
The International Energy Agency has outlined what governments should do now. But events in the Middle East also illuminate what they should have done years ago. An energy-dependent nation with shrinking reserve buffers and minimal domestic refining capacity is, by definition, vulnerable. Australia has the economic capacity to address this. Whether the political will exists remains an open question.