Australia's deepest energy security vulnerabilities have been exposed not by a single catastrophic event, but by a cascade of policy choices stretching back decades. The escalating conflict in the Middle East and Iran's effective closure of the Strait of Hormuz has forced the federal government to contemplate using extraordinary powers it has possessed for four decades but never dared to employ.
The Liquid Fuels Emergency Act would give the energy minister significant control over fuel markets, though it acts as a last resort mechanism and has never been triggered. The statutory threshold is intentionally high; the Governor-General must declare a national liquid fuel emergency on the advice of the energy minister, based on a serious shortage of fuel requiring government authority across supply, allocation and rationing, with the minister convinced the crisis cannot be averted by increasing supply after consulting all state and territory energy ministers.
The real crisis, however, is not national supply but distribution. More than 500 service stations were without some kind of fuel, though more petrol and diesel was flowing to regional areas, according to Energy Minister Chris Bowen. In New South Wales, 51 out of about 2,500 outlets were out of fuel and 164 were without diesel as of late March. Victoria recorded 162 service stations out of petrol and 83 without diesel, while Queensland had 35 stations out of regular unleaded and 55 with no diesel.
The human consequences are immediate and severe. According to reporting from 9News, truck drivers attempting long-haul routes face genuinely dangerous situations. Robert Cook, who operates a heavy haulage company, has been stranded twice on the Melbourne to Perth run: once for over 24 hours on the Nullarbor Plain, where there is a 192-kilometre gap between fuel stops, and again in Keith in South Australia's south-east. Logistics giants like DHL and Australia Post have hiked surcharges significantly, with parcel delivery costs nearly tripling in some cases. Farmers warned that diesel shortages could delay planting and harvesting, potentially driving up food prices by as much as 50% if prolonged.
The financial pressure on transport operators is mounting rapidly. Bowen insisted the overall market remains well-supplied at a national level and blamed much of the local shortages on panic buying that has spiked demand by 300% to 400% in some areas. He ruled out immediate rationing but confirmed the government has released about 20% of its strategic fuel reserves, roughly a week's worth of supply, into the domestic market.
The government has pursued several intermediate measures rather than invoking emergency powers. On Tuesday, the government announced it would relax diesel quality standards for six months, allowing higher-sulphur fuel into the system to add nearly 100 million extra litres per month. The move aims to help farmers, truckers and regional communities facing acute shortages. Additionally, Labor said it would make changes to the Fair Work Act to allow truck drivers and transport businesses to make emergency applications for contract changes in response to the fuel price spikes.
The strategic calculus here involves several competing considerations. Tony Wood, senior fellow of the Grattan Institute's energy program, said it's time the government communicated the severity of the situation and its next steps, including the emergency powers. "It behoves the government, federal and state and territory governments, to be very clear on 'this is where we are'," Wood told SBS News, and governments should communicate "'We don't think we need to pull the trigger yet, but this is how we will do this, so that everybody knows what's going on'."
What often goes unmentioned is Australia's structural vulnerability to geopolitical shocks thousands of kilometres away. Iran has effectively closed the Strait of Hormuz, a critical passageway that carries 20 per cent of the world's oil supply. The disruptions stem from the U.S.-Israeli military actions against Iran that have severely curtailed oil flows through the Strait of Hormuz, cutting supplies to Asian refineries that provide most of Australia's imported fuel. This dependence is not new; for decades, successive governments have allowed Australia's domestic fuel capacity to be dismantled, with Australia now importing the overwhelming majority of its refined petrol and diesel.
As of mid-March, Australia held roughly 38 days' worth of petrol, 30 days of diesel and 30 days of jet fuel, according to the latest government figures. These reserves fall well short of the 90-day international standard. With roughly a month of petrol and diesel available under normal conditions, the system functions only because imports arrive continuously. If disruptions persist, Australia would see rising wholesale and retail prices, slower replenishment of terminals, regional supply imbalances, and tightening diesel availability before the petrol pumps run dry. If the crisis at Hormuz continues for weeks or spreads further, genuine shortages become plausible.
The institutional architecture for emergency response exists, yet remains untested. The Liquid Fuel Emergency Act was passed in 1984 in response to the 1970s energy crisis, a period of high oil prices and shortages. The threshold for the act is so high that it has not been triggered in four decades, even through two Gulf wars and the COVID-19 pandemic. Whether that restraint reflects appropriate caution or institutional timidity is now becoming an urgent policy question.
From Canberra's perspective, the implications are threefold: first, whether declaring an emergency would actually improve supply or merely create legal cover for decisions already being made; second, whether announcing rationing powers might itself accelerate panic buying; and third, whether invoking such powers sets a precedent for future use that constrains market function. The government's present strategy appears to assume the crisis can be managed through market mechanisms combined with strategic reserve releases and marginal regulatory adjustments.
The diplomatic terrain is considerably more complex than the headlines suggest. Australia has little direct leverage over the Middle East conflict or Iran's maritime blockade. Instead, policy must focus on what remains within national control: building sovereign refining capacity, strengthening strategic reserves beyond current minimums, and reducing the temporal vulnerability that leaves Australia dependent on continuous import flows.
What is often overlooked in the public discourse is that invoking the Liquid Fuels Emergency Act would represent an admission of systemic failure, not merely a crisis response. It would acknowledge that Australia, an energy exporting nation with substantial natural resources, cannot guarantee fuel access to its own transport and agricultural sectors without government rationing. That political cost may explain why the government has deployed every alternative measure before reaching for emergency powers.
Whether this approach succeeds depends almost entirely on how long the Middle East conflict persists. If the stalemate stretches on for weeks, the Federal Government could potentially move to strict rationing of fuel. The government's measured response may ultimately prove pragmatic, or it may represent a calculation that the political and economic costs of emergency rationing are simply too high to accept until supplies become critically depleted. The Liquid Fuels Emergency Act remains, for now, a power contemplated but not yet seized.