Australia's food prices are about to get a lesson in geopolitics. Iran has effectively closed the Strait of Hormuz, a critical passageway that carries 20 per cent of the world's oil supply, and the shockwaves are already rippling through petrol pumps and supermarket supply chains across the country.
According to SBS News reporting, over 107 fuel stations across NSW experienced diesel shortages, with at least 600 retail sites across the country having run out of at least one type of fuel. The shortages have coincided with surging demand and panic buying that has drained local tanks faster than suppliers can replenish them.
But the immediate concern now is not whether petrol stations run dry. It is what happens when rising fuel costs work their way through to your local Woolworths or Coles. Petrol prices have jumped 50 cents a litre from $1.69 to $2.19 on average across Australia, and diesel in parts of Australia has topped $3 a litre.
Supply chain expert Elizabeth Jackson, quoted by SBS News, framed the problem clearly: "Trucks that move our food and goods around, machinery used in farming and mining, and even backup generators all rely on diesel." She added that many freight companies will be unable to absorb these costs, and so will likely push them onto their customers in the form of higher prices.
Jackson warned that fresh produce will feel the pinch first. Price increases are likely within two to three weeks given short supply chains and constant transport requirements. 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, though the extra fuel will not flow immediately due to supply chain complexities.
Coles, one of Australia's major supermarket chains, has already signalled it is responding. The supermarket has indicated it will allow fuel companies to keep less in storage and get more into pumps, and the chain is reviewing freight cost components more frequently to reflect volatility in fuel markets.
The squeeze, however, falls hardest on small business owners and tradies who lack the scale to absorb rising costs or negotiate with suppliers. As reported by 9News, a 26-year-old joinery owner now spends nearly $285 a week on fuel compared to his previous $150, and a garage door maintenance operator in Perth reported her fuel bill jumping more than 20 per cent in recent weeks. These businesses face an impossible choice: reduce their own income, pass costs to customers and risk losing work, or gamble that fuel prices will fall soon.
There is a legitimate counterargument worth taking seriously. The government has taken meaningful steps to ease pressure. Up to 20 per cent of the baseline Minimum Stockholding Obligation for petrol and diesel can be released, allowing the release of up to 762 million litres from Australia's domestic reserves. Australia is easing fuel standards for 60 days so dirtier fuel marked for export can be diverted into the local market, which will inject 100 million litres of extra petrol per month into rural and regional areas. Leaders acknowledged that while Australia is well prepared and current supply is secure, the nation must be prepared for all scenarios.
Yet these measures come with real constraints. The government cannot simply flip a switch to increase supply overnight. Fuel takes weeks to arrive by ship, and rerouting cargo through disrupted Strait of Hormuz routes costs more. Australia imports roughly 90 percent of its refined fuels, leaving it vulnerable to global shocks, and Australia imports roughly 90% of its liquid fuel, which means world crude oil prices have a direct impact on pump prices.
The underlying issue reveals something uncomfortable about Australian economic vulnerability. More than 90 percent of refined petroleum products consumed domestically are imported, largely from Asian refineries that themselves rely heavily on Middle Eastern crude. A crisis at the Strait of Hormuz does not merely affect Australia indirectly through global markets; it strikes the refineries that produce the fuel Australia depends on.
What happens next depends partly on variables beyond government control. If conflict in the Middle East resolves quickly, fuel will flow again and prices will ease. If it persists, rationing becomes possible, and the price rises already visible at petrol pumps will translate into real hardship for households already struggling with cost of living. Small business owners may face genuine insolvency.
This crisis has exposed a structural trade-off that Australia can no longer ignore. A modern economy demands fuel. Cheap fuel requires stable global oil supplies. Australia has chosen to remain dependent on imported refined fuels rather than investing in domestic refining capacity or alternative transport infrastructure. That choice was economically rational in decades of stable global markets. It becomes a vulnerability in moments like this.
The government's emergency response has been fiscally prudent and operationally sensible. But it treats the symptoms, not the cause. The harder question for policy makers, one that reaches beyond the current crisis, is whether Australia should continue to outsource its fuel security to global markets and hope that distant conflicts do not disrupt essential supply chains. Food prices beginning to rise suggest that Australia may finally need to answer that question.