Australia is grappling with a deepening fuel crisis triggered by the ongoing war with Iran that has disrupted global oil flows through the Strait of Hormuz. As of late March, petrol prices have surged to record levels, regional shortages persist despite government assurances of adequate national stocks, and experts warn of potential rationing if disruptions continue beyond mid-April.
Demand has spiked by up to 50 per cent in some areas as motorists filled tanks and jerry cans amid war headlines, leading to dry pumps at hundreds of service stations. In NSW, over 100 petrol stations have run out of diesel, while 35 "don't have access to anything". Farmers and freight operators in regional areas have been hardest hit, with NSW Farmers President Xavier Martin saying that "farmers across the country have run out, or are running out of fuel, while others are only a week or two away from empty."
The price of petrol has already reached almost $3 a litre at some stations in Sydney and Melbourne. Australia imports more than 90 per cent of the fuel it uses, and it is priced in US dollars, so the exchange rate matters as much as the oil price. The supply chain vulnerability is acute: according to the Australian Institute of Petroleum, Singapore accounts for more than half Australia's petrol and is the number two supplier of diesel and jet fuel.
The government's response has been rapid but revealing of how unprepared Australia was for this scenario. Up to 762 million litres of petrol and diesel will be released from domestic reserves. Climate Change and Energy Minister Chris Bowen announced that the government will temporarily lower fuel quality standards for 60 days to allow higher-sulphur fuel to be sold. This will add roughly 100 million litres to the market each month. However, 100 million litres is roughly equivalent to less than a day's worth of national fuel consumption, excluding jet fuel.
What this moment reveals is not merely a short-term supply problem but structural neglect built over decades. Over several decades, the closure of domestic refineries has left Australia heavily dependent on imported petrol, diesel and jet fuel; in 2005, Australia had eight operating oil refineries, and today only two remain. The nation's two remaining refineries, Ampol's Lytton in Brisbane and Viva Energy's Geelong in Victoria, meet less than 20 per cent of demand.
This dependency was not inevitable. A 2014-15 Senate inquiry into Australia's transport energy resilience and sustainability examined the very issues in which the country is currently mired: fuel supply shortages brought on by global instability. Successive governments have allowed Australia's domestic fuel capacity to be dismantled. The industry and union response has been blunt. The Maritime Union of Australia argues that "it is indefensible that we cannot guarantee our own fuel supply" and that "fuel sovereignty is a national responsibility."
Government officials maintain the situation remains manageable. Energy Minister Chris Bowen has ruled out rationing fuel supplies at the moment and says that the government does not foresee having to go down that route, stating "that is not what we're contemplating. That is not predicted." More than 80 shipments of fuel are delivered to Australia in the average month, with the government aware of six ships that have been cancelled.
Yet the longer view is uncomfortable. Australia's reserves are uniquely low, breaching the International Energy Agency's 90-day requirement. Reserve stock levels have declined from their high of 310 days in 2002 to current levels far below that benchmark. The need for coordinated national fuel governance is not new; a 2013 report identified the core problem that Australia's growing dependence on imported refined fuels, declining domestic refining capacity and exposure to global supply chains created structural vulnerability.
The immediate question is whether the current crisis becomes a genuine policy turning point or another forgotten warning. The fuel security issue was entirely predictable and comprehensively predicted; in Australia's immediate history are the disastrous supply chain disruptions of Covid and the war in Ukraine, both of which sparked a reminder of the follies of complacency.
Some policy recommendations have emerged with clarity. Experts call for transparent reporting of usable, onshore fuel stocks across petrol, diesel and jet fuel; expanded multi-fuel storage capacity, not just diesel storage; and regional fuel security partnerships with countries such as New Zealand, Vietnam and Malaysia to build shared reserves and mutual emergency arrangements.
Australia's fuel crisis has triggered the familiar response of emergency coordination, reactive policy adjustments and renewed political attention, but the important question is why Australia still responds this way at all. The answer, uncomfortable as it is, lies in the accumulated decisions of governments that treated fuel security as a market problem rather than a strategic one. Until that assumption changes fundamentally, the next crisis will simply repeat the current one.