Fuel shock tests Australia’s global supply reliance

Australia's fuel security is facing renewed challenges due to global supply disruptions from the conflict in the Middle East.

The crisis has renewed debate over whether Australia can continue to depend on overseas refineries for fuel, especially as global markets become less open and  predictable. 

As of May 9, Australia had 42 days of petrol, 35 days of diesel, and 29 days of jet fuel in  reserve, according to Energy Minister Chris Bowen and the Public Fuel Supply Taskforce. The  taskforce said 55 tankers were in transit to Australia, including 10 crude oil tankers and 45  product tankers, with 4.6 billion litres of fuel locked in for delivery in the coming weeks.  

The Albanese government has announced a $14.8 billion fuel resilience package, including Australia’s first government-owned strategic domestic fuel reserve. The package also includes  support for Australia’s remaining two refineries, feasibility studies for refinery expansion and  a target to lift reserves to 50 days.  

“The Albanese Government is fixing that so that we are better placed for future  international crises,” Bowen said.

Energy consultant Colin Harrison, said global supply shocks did not always create immediate shortages, but could still  quickly affect prices, shipping and market confidence.

“We are buying oil and gas from the cheapest source, not the nearest source. That’s the difference,” Harrison said.  

He said long-term contracts, refining capacity, and shipping all shape how quickly countries  can respond to disruption. While price rises were the first impact, Harrison said the deeper  issue was how much fuel a country could access during a prolonged shock.  

“From a price perspective, that’s something you just have to live with,” Harrison said. “But  from a supply perspective, that’s critical. How many weeks, days, or months of supply do you  have?”  

The Strait of Hormuz, connecting the Persian Gulf and the Gulf of Oman, is one of the world’s  most important oil routes. Around 25 per cent of seaborne oil trade transits through the strait, according to the International Energy Agency (IEA). 

Harrison said the current pressure was a consequence of market expectations surrounding the  crisis in the Strait, rather than an immediate lack of supply.

Monash University politics and international relations senior lecturer, Dr Tom Chodor, said the issue was not only commercial. He said fuel security should be treated as a national security  issue, because “national security, in the end, is about making sure normal life can continue uninterrupted and un-coerced by other actors”. 

Dr Chodor said Australia’s exposure reflected decades of policy choices that prioritised  efficiency over resilience. 

“Australia really is at the end of almost all supply chains,” he said.  “We assume that because we export all this gas and coal, we are secure. We don’t really think  about where the oil comes from.” 

While the government’s 50-day target would improve current reserves, it would remain below  the IEA’s 90-day emergency reserve stock benchmark. Dr Chodor said longer-term resilience would require Australia to reduce dependence on imported refined fuels through electrification  and renewables. 

“Australia needs to be more resilient and prepared for shocks to come in the future,” he said.