Spotlight on Australia - March 2026

George Miller’s Mad Max movies are set in the post-apocalyptic Australian outback. We are thankfully a long way from that dystopia, but the closure of the Strait of Hormuz is starting to affect the Australian economy, from empty petrol stations to idle tractors.  

Australia is using more oil than ever; however, consumption has been declining relative to GDP over time (see chart below). The adoption of EVs is having an impact and may eventually wean Australia from its oil dependence.

Hormuz is hurting the transport sector

In 2024, 94.3% of oil products consumed in Australia came from overseas. So when the Iran war disrupts global oil supplies, the Australian economy suffers.

The transport sector is the most directly affected, with a 73.9% share of total oil consumption (see chart below).

Around 80% of Australia’s transport fuel comes from foreign refineries, with the rest from two domestic refineries. In the current crisis, the distinction is not critical as both sources of fuel are affected by the war. 

Transport includes everyday Australians taking their kids to school and travelling for work. But more critically, transport includes the freight and distribution sectors. Over 80% of freight in Australia is by diesel trucks with 12% by diesel trains. Without diesel, supermarkets would soon have empty shelves.

“Australia is a diesel economy. Without fuel, trucks carrying our food, pharmaceuticals, and supplies stop, making us vulnerable.” Daniel Tehan, federal Liberal member for Wannon, and Andrew Hastie, federal Liberal member for Canning.

Diesel and dust

Diesel is also a critical input into some of Australia’s most important industries.

Agricultural equipment largely runs on diesel, from motorbikes to tractors and harvesters. There is also the impact of the war on fertiliser prices and supply. Already farmers are facing difficulties in securing fuel and are being forced to sacrifice production.

“Farmers need diesel to put a crop in … farmers have probably accelerated their deliveries and that’s put the system under pressure,” Mark Fowler, WA Farmers Grains Council, president.

Similarly, the big machines used by miners, and Australia’s defence force largely rely on diesel.

“You don’t have a [defence] strategy if you don’t have a fuel reserve.” Andrew James Molan AO, DSC, retired major general and former federal senator.

Diesel is even important as a backup power source at renewable energy sites.

Rising prices

The most immediate impact on fuel from the Iran war is rising prices.

Daily average petrol prices started rising with the US naval buildup and have continued to climb with the outbreak of the war (see chart below). Petrol is the Australian term for gasoline and benzine.

Running on empty

However, perhaps more critical than price is the level of fuel supply. Australia only has around one month’s worth of fuel in reserve (see chart below).

This is far short of the International Energy Agency’s 90-day benchmark, which was created after the 1973 oil shock. It is also among the lowest levels in the developed world (see chart below).

Already over 300 service stations on the east coast have ‌run out of petrol or diesel.

If the war in Iran continues for another month, the federal government could be forced to ration fuel under The Liquid Fuel Emergency Act 1984. Wargaming in 2019, based on the closure of the Strait of Hormuz, had rationing imposed after 21 days. Australia has not experienced fuel rationing since the 1970s.  

"Our short-term buffer will obviously not survive, and we're going to have to immediately switch to rationing." Samantha Hepburn, Deakin Law School, professor of energy policy.

The government's response so far

The federal government has reacted like a rocket to increase short-term fuel supply.

It has allowed the release of 800 million litres of petrol and diesel from the publicly mandated reserves. The government has‌ also relaxed fuel standards for 60 days so that high-sulfur petrol normally destined for export can be used domestically.

The government is also keeping an eye on prices. It has asked the Australian Competition and Consumer Commission to monitor price gouging.

The federal government has also created a Fuel Supply Taskforce Coordinator to help with the current supply situation. This effectively replaces the dormant National Fuel Council, created in 2023.

Why are Australia’s reserves so low?

The level of Australia’s reserves has changed little despite concerns raised by the influential Blackburn report in 2013 on fuel security and concerns over supply-chain security raised during several defence white papers and the pandemic. Policies have come and gone, but national fuel reserves remain too low.

"Our failure of leadership in this country to deal with our risk and vulnerabilities will backfire on us, and it'll happen incrementally and then everyone will try and blame each other." John Blackburn, retired air vice-marshal, 2025.

Australia’s national reserves are not publicly held. Instead, the reserves are held by Australia’s major fuel importers and refiners as required by the  Minimum Stockholding Obligation, which was introduced under the Fuel Security Act 2021.

Australia has a lease agreement with the US Strategic Petroleum Reserve, which was created by the Liberal federal government in 2020, but no oil has been stored with the US since June 2022.

A greener road to energy security

The good news is that Australia’s transport fleet is not as dependent on oil as it used to be.

Improvements in fuel economy over time have had an impact, but the greater impact is from the adoption of EVs and hybrids. This can be seen in the distance between the lines in the chart below compared to the distance along the lines.

EVs remain a small percentage of Australia overall fleet, but its share of new cars has increased from less than 1% in 2020 to over 12% in 2025 and should keep climbing (see chart below). Australia has already overtaken the US but is still far from the levels of Scandinavian countries such as Sweden: 61% and Norway:97%. 

Importantly, EVs are making inroads into road freight and the mining industry. Logistic companies have been using electric trucks in urban areas for a few years, but an increase in range and reduction in price is seeing increased uptake for intercity trucking. Over 90 electric prime movers were on the road in 2025. In 2025, road-freight giant “Linfox” committed to buying 30 electric prime movers from Volvo. Meanwhile, newcomers “New Energy Transport” are looking to operate 50 electric trucks by 2031.  

Green-hydrogen fuel cells could be an option in the future, but require further development. 

Embracing biofuel

An easy way for Australia to further reduce its oil dependancy is to increase the amount of biofuel it uses for transport.

Adding ethanol to fuel has long been unpopular among Australian voters and has resulted in low level of ethanol blend by international standards. However, the current crisis could provide an opportunity for the government to increase the blend level.

In 2023, the CSIRO released a report outlining how Australia could produce 90% of its jet fuel locally by 2050 by using biofuel.

Source: USDA

Final thoughts

As the COVID-19 pandemic showed, supply chains are vulnerable to external shocks. Australia has been living close to the line with fuel and may have to pay the price if the Strait of Hormuz remains closed for an extended period. In the long term, the rise of EVs should alleviate Australia’s oil dependence and help with carbon emissions; Mad Max can become Electric Dreams.