Australia Fuel Crisis: Diesel Near A$3 a Liter Strains Supply Chains

Australia is now in the eighth month of a fuel crisis that began with the war involving Iran and has pushed pump prices to some of the highest levels the country has ever recorded. As of October 7, 2026, diesel averages about A$2.85 a liter across capital cities and regular unleaded petrol about A$2.38, according to the price tracker Petrol Pulse. In several regions diesel has already moved above A$3 a liter, and fuel prices are up nearly 25 percent this year according to the Westpac-Melbourne Institute consumer survey.

Australia is unusually exposed because it imports roughly 90 percent of its refined fuel, mostly from refineries in South Korea, Singapore and Malaysia that process Middle Eastern crude. Only two domestic refineries remain, Lytton in Brisbane and Geelong in Victoria, and together they cover around 20 percent of national supply.

The acute phase arrived in March. Panic buying drained regional service stations, and by mid-March rural transport operators were reporting diesel price increases of 30 to 60 cents a liter along with rationing by regional suppliers. On March 24, Energy Minister Chris Bowen confirmed that 164 stations in New South Wales had no diesel, and the federal government relaxed the national diesel standard for six months to bring more product into the system. It also cut the minimum stockholding obligation by 20 percent, which allowed up to 762 million liters of petrol and diesel to be released from company reserves. At the worst point, more than 500 stations nationwide had run out of at least one fuel type. In the fruit-growing town of Robinvale in Victoria, the local station reported its worst shortage in 25 years, which raised fears that crops would be left unharvested.

Government support followed in waves. The fuel excise was halved from April 1, giving a combined saving of 32 cents a liter once the states contributed, at a cost of A$2.55 billion to taxpayers. The relief was cut to 16 cents at the end of June and ended on August 2, just as a fragile ceasefire between the United States and Iran collapsed and capital-city petrol moved back above A$2 a liter. In April, Canberra also secured an extra 100 million liters of diesel through deals with Ampol and BP, with half of it directed to regional Queensland centers such as Townsville, Gladstone and Mackay, and it began sourcing cargoes from South America and Algeria to reduce its reliance on Southeast Asia.

The situation has eased since the spring peak, although it has not returned to normal. Australia has stayed at Level 2 of the four-tier National Fuel Security Plan, known as Keeping Australia Moving, since the plan was released on March 30. Government data from early September showed 94 stations with stock-outs out of a network of more than 8,100, and regional Queensland has been one of the slowest areas to recover. Bowen says the country currently holds 41 days of petrol, 32 days of diesel and 28 days of jet fuel. Critics point out that this is far below the 90 days of net imports that International Energy Agency members are expected to hold. Official data from September 29 showed at least 3.6 billion liters of fuel scheduled to arrive over the following four weeks.

International conditions remain difficult. On October 2, the Group of Seven agreed to release 100 million barrels of crude and diesel from strategic stocks over four months and pledged not to restrict diesel exports. Bowen welcomed the decision but warned that the direct effect on Australian pumps would be small, since only about 2 percent of the country's diesel and fuel comes from the United States. Brent crude has climbed back above US$100 a barrel after Houthi attacks on Saudi Arabian infrastructure, China has halted its October fuel exports, and the US Energy Information Administration now expects Brent to average US$105 in the fourth quarter.

For supply chains, the central problem is diesel. It powers the trucks that move food, fuel and manufactured goods across a continent with limited rail freight, and it also runs farm machinery, mining equipment and backup power in remote communities. Australia burns more than 90 million liters of diesel a day, so even small price rises quickly feed into freight rates and then into supermarket shelf prices. Regional carriers and growers have been hit hardest, because they depend on a handful of local depots that were the first to run dry during the shortage and the last to be restocked. Farmers have also faced a tight fertilizer market, and in May the grower group GrainGrowers warned that only about six weeks of supply remained ahead of winter sowing.

The effects now reach well beyond transport. Higher fuel costs have fed into general inflation, and the Reserve Bank of Australia raised its cash rate to 4.6 percent last week, the highest level since 2011, with Westpac expecting another increase in November. Consumer sentiment has fallen to levels last seen during the early 1990s recession, which puts additional pressure on retailers already managing higher logistics costs. Airlines and air freight operators are also watching jet fuel stocks closely, because the 28-day cover is the thinnest of the three main fuels.

Policy makers are now trying to reduce the country's exposure for the long term. The 2026-27 federal budget includes a fuel security package of about A$10 billion, made up of a A$7.5 billion fuel and fertilizer security facility and A$3.2 billion for a permanent government-owned reserve of around one billion liters. Queensland is also fast-tracking oil, refining and storage projects.

Until the Strait of Hormuz fully reopens and the global diesel shortage eases, Australian businesses and households should expect elevated prices and occasional local stock-outs.