At least six oil shipments bound for Australia in April have been turned back or deferred due to escalating tensions in the Middle East, as the blockade of the Strait of Hormuz tightens global energy supply. President Trump threatened to 'obliterate' Iranian power plants if they didn't completely open the strait without 48 hours, and Iran responded by warning it would close the waterway completely if its infrastructure was attacked.
The cancellations reveal a structural vulnerability in Australia's energy security. Australia receives about 80 shipments of oil each month, predominantly from Asia, but with only two domestic refineries still operating, Australia gets more than 80% of its petrol, diesel, and jet fuel from refineries in Asia. The problem compounds because these Asian refineries get, on average, about 60 to 70% of their crude oil from the Middle East, mostly via the Strait of Hormuz.
According to reports, Prime Minister Anthony Albanese has taken a direct diplomatic approach to the crisis. Senior government sources told news outlets that he called the leaders of Asian oil-producing neighbours over the weekend to ensure steady supplies would be delivered over coming weeks. The Prime Minister is continuing his engagement this week as China has told its oil refiners to halt all fuel exports. Australian gas exporters are profiting hugely as the supply from Qatar has stopped, giving Canberra leverage in negotiations.
The government has acknowledged the immediate strain on fuel availability. Energy Minister Chris Bowen confirmed on March 21 that six oil shipments bound for Australia in April have been turned back or deferred. He stated the flow of oil to Asian refineries has slowed, creating uncertainty for Australian supplies. However, Bowen emphasised that overall supply remains stable, with petrol reserves at 38 days, diesel and jet fuel at 30 days after releases from the strategic reserve.
Australia's fuel reserves sit uncomfortably below international standards. Australia has long fallen short of the goal set by the IEA to have 90 days' worth of stored fuel. The situation reflects decades of declining domestic refining capacity. Australia has just two oil refineries left in operation, down from eight about 20 years ago. The Albanese government has been expanding domestic reserve capacity, especially for diesel, which fuels trucks moving freight around the country.
Market impacts have been swift and severe. National average unleaded petrol reached 219.5 cents per litre for the week ending March 15, according to the Australian Institute of Petroleum, up from around 169 cents before the conflict intensified. Demand spiked by up to 50 percent in some areas as motorists filled tanks and jerry cans amid war headlines, leading to dry pumps at hundreds of service stations.
Panic buying has complicated the government's management of the crisis. Current price spikes are likely to be more affected by panic buying and perhaps even price gouging than by an actual supply shortage. The IEA announced its members would release a collective 400 million barrels of oil onto the market to try to bring oil prices down, a measure designed to reassure markets and dampen panic.
Australia faces a genuinely complex energy challenge. The country benefits from massive liquefied natural gas exports that give it diplomatic negotiating power with Asian neighbours. Yet that same reliance on distant Asian refineries creates exposure to supply shocks beyond Canberra's direct control. The crisis exposes what energy analysts have long warned: a developed economy with only a month's fuel buffer and minimal domestic refining capacity sits vulnerable to geopolitical disruption.
Albanese's diplomatic approach reflects pragmatism. Rather than confronting the Iran-US conflict directly, the government is working backward through its supply chains, attempting to secure alternative flows from Asian producers before shortages worsen. Whether those efforts succeed depends partly on factors beyond Australia's influence, including the durability of the Strait blockade and the willingness of Asian producers to prioritise Australian demand over their own domestic needs.