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Australia's heavy reliance on other nations for our fuel supply has made us particularly vulnerable to geopolitical crises like the war in Iran, and the current petrol crisis should serve as a "wake-up call", a leading resource expert has said.
The United States's war with Iran has sent shockwaves through the international community, with brief hopes of a ceasefire dashed after Israel bombed Lebanon, prompting Iran to quickly shut the Strait of Hormuz in retaliation, once again cutting off a key oil shipping channel.
Despite the government cutting the fuel excise, Australian fuel prices have remained elevated above $2.00 a litre for unleaded and above $3.00 a litre for diesel since the war began on 28 February 2026.
Saul Kavonic, Senior Energy Analyst at MST Financial, has 15 years of experience in the oil and gas sector, and says this war should serve as a "wake-up call" for the Australian government to adjust how we approach our fuel supply chain.
"The way [our supply chain] works is oil is drilled in Saudi Arabia, it's put on a ship, it sails out of the Strait of Hormuz to a refinery in, say, Singapore, it goes through the refinery, which is shipped to Australia and distributed to service stations," Kavonic explains to Drive.
"That whole process can take six weeks. Because the war is only six weeks old, a lot of the fuel in our service stations is from before the war began. So the crunch point for fuel shortages is going to be later in April."
"The crunch point for fuel shortages is going to be later in April."
Kavonic says Australians should be aware of the potential for more serious consequences if a similar conflict occurred closer to home, and that we should count ourselves "lucky" that the effects of the current conflict are relatively minimal.
"The issues we face today are occurring because of a maritime trade disruption happening in the Middle East. This needs to be a wake-up call for us to be more self-sufficient in our fuel again. Consider if there was a war over Taiwan – if you think this situation is bad, that would be 1000 times worse. We are lucky the disruption has only been what happened."
When will Australian fuel prices go down?
"Even if the war ends tomorrow, it’s going to take months before things return to normal, and even then we’re not going back to what it was like pre-war," Kavonic says.
"There has been permanent damage to infrastructure, and if the Iranian regime remains intact, they will be emboldened to use disruptions to the Strait of Hormuz on an ongoing basis.
"Oil prices were $60 before the war, and it’s hard to see us going back to that."
Can Australia run out of fuel?
While it's unlikely, it's certainly possible for Australia to run out of fuel – particularly if the Strait of Hormuz remains closed. And a lot of our future access to fuel relies not solely on supply, but rather on our diplomatic relations.
"We’re seeing about 11–13 per cent of global oil supply reduced at the moment, and though the major Asian refining nations will still have some fuel to export beyond their domestic needs, what's left over is less than normal, and so some [export] countries will have to go short," Kavonic says.
"Australia wants to make sure we get priority dibs. This is where Australia is having diplomatic efforts reaching out to Singapore and Japan to say, make sure we get priority. What the concern will be is that as the shortage gets more severe, there will be more countries all around the world leaning on their political relationships."
While Kavonic acknowledges that it's inconvenient to pay more for fuel, he notes that it's vastly preferable to having no fuel at all.
"The bigger risk is that we can't get fuel at any price. Australia is the only country within the International Energy Agency (IEA) that doesn't meet 90-day stock levels. [Usually] we have just under half of that, but we're at 30-something days at the moment," he explains.
"Already we're seeing localised shortages, and we will face structural shortages long before those stock levels go to zero. If you listened to Anthony Albanese's address to the nation, he was starting to prepare the public for the potential for deprivations and more stringent measures."
Could the war in Iran cause a recession?
"Oh, definitely," says Kavonic. "We are talking about the biggest energy market shock, actually ever. It’s over three times the size of the impact of what we saw in the 1970s when oil prices tripled in some instances, and it took more than a year to come back down to normal levels.
"The difference [of today's crisis] is that the scale of the oil market structure is bigger, but we’re seeing disruptions elsewhere and to major supply chains all at the same time. The Middle East is a huge centre of a lot of logistics and manufacturing – all of these things happening at the same time."
For example, a third of the world's tradeable fertiliser has been disrupted by the war, which could impact crops in the second half of the year and, in turn, affect our ability to access food.
Although frustrating, Kavonic says the elevated fuel prices could be the least of our concerns.
"We have to be concerned about vital economic corridors like agriculture and mining, not to mention hospitals, police and emergency services, because a lot of Australia’s industrial base is in remote areas and is heavily reliant on diesel," he says.
"The consequences of this are much bigger because oil flows through every part of our economy."
Where does Australia get its fuel from?
To understand how and why Australia has been so heavily affected by a war that doesn't technically involve us, you need to understand how our fuel supply chain works.
"If we rewind 20-plus years, Australia used to be self-sufficient with our fuel. We produced our own crude oil and had a number of refineries across the country," Kavonic explains.
"Since then, Australia now produces very little oil, and we’ve closed down all but two of our refineries and those last two refineries are quite old and small. That was due to decisions made several years ago that it was more efficient and lower cost to rely on the refineries of our major Australian trading partners."
As a result, Australia imports over 80 per cent of our fuels – including gasoline, diesel and jet fuel. "We are almost entirely dependent on imports for our fuel security," he says.
That's important, as it means we rely on other nations to act as the so-called middlemen for our fuel supply – and they each have their own domestic interests to protect.
"Most of the fuel we get comes from refineries in Asia – particularly Singapore, Malaysia, South Korea and China. Those countries don’t produce their own oil either; they actually import most of the oil they need from the Middle East, because of its proximity, whereas oil from West Africa goes to Europe," Kavonic says.
"Therefore, even though Australia doesn’t import a lot directly from the Middle East, we are quite strongly reliant on it."
Susannah Guthrie has been a journalist for over a decade, covering everything from world news to fashion, entertainment, health and now cars. Having previously worked across titles like The New Daily, Elle, Harper's Bazaar, People Magazine and Cosmopolitan, Susannah now relishes testing family cars with the help of her husband and three-year-old son.
