Australians have been forced to pay $5 billion more at the bowser since the start of the war in Iran, according to a new report from the Climate Council that exposes the country’s severe vulnerability to global fuel shocks. The “crude awakening” report, published on Wednesday, reveals that heavy reliance on imported diesel and petrol has driven up domestic costs for motorists and households alike.
How Middle East Strikes Triggered $9 Billion Diesel Tab
The conflict in the Middle East directly impacted global supply chains following United States and Israel strikes on Iran on February 28, which severely disrupted oil flows through the Strait of Hormuz. In the aftermath, Australia picked up the world’s largest diesel tab, totaling $9 billion or $324 per person. Climate Council chief executive Amanda McKenzie stated that the subsequent inflationary pressure reaches far beyond the petrol station. “The inflationary pressure and the pressure that average mums and dads are feeling at the petrol station, at the grocery store, is linked to this exposure we have to fuel insecurity,” McKenzie said.
Domestic inflation climbed from 3.7 per cent in February to 4.6 per cent in March following the supply shock. Although figures have cooled slightly, inflation remains stuck above target at 4 per cent. Reserve Bank of Australia Governor Michele Bullock noted that higher-than-normal oil prices contributed to four interest rate increases this year. “Inflation is too high and has been driven by domestic capacity pressures,” Bullock said. “The inflation impulse from the Middle East conflict is in addition to this.”
Dwindling Domestic Production Leaves Supply Buffers Thin
Australia’s heavy reliance on foreign oil is the result of a 25-year decline in domestic production. Crude oil extraction began in the 1960s and reached a peak of 563,000 barrels per day during the 2000–01 financial year, supported by eight domestic refineries that supplied 98 per cent of local petrol needs. By 2025, production had plummeted to roughly 10 per cent of that peak, while oil imports surged by 240 per cent since 2012, leaving only two refineries operational.
Today, Australia imports 80 per cent of its jet fuel, 68 per cent of its petrol, and relies on international partners for 90 per cent of its diesel, making the nation the world’s largest seaborne importer of the fuel. Institute for Energy Economics and Financial Analysis (IEEFA) expert Kevin Morrison warned that international stockpiles have already been heavily drawn down to manage the crisis. “We’ve seen the globe respond to this crisis by releasing all the stockpiles they have and so we’ve got those buffers have really got much thinner,” Morrison said. “So we don’t really have that shock absorber and so that’s why we could be subject to more price volatility.” Morrison added that Australia is never entirely insulated from foreign conflicts and urged policymakers to reduce the nation’s dependence on foreign crude.
Drivers save billions as electric car sales surge while freight relies on diesel
To mitigate future exposure to foreign supply disruptions, the Climate Council report advocates for a faster transition to electric and hybrid vehicles. Drivers of electric and hybrid cars have saved a combined $1.7 billion and 17.4 million litres of fuel since the war began. Consumer adoption has accelerated, with Electric Vehicle Council data showing EVs account to 29 per cent of all car sales, equating to one vehicle sold every 100 seconds.
However, the freight and trucking sector remains heavily reliant on diesel. Electric heavy trucks accounted for just 0.7 per cent of local truck sales, trailing far behind international markets such as China at 20 per cent, Germany at 7 per cent, and the United Kingdom at 2 per cent. McKenzie emphasized that government policy must shift toward electrifying commercial transport corridors. “The government has been focused on the immediate crisis, but the issue is a longer-term one,” McKenzie said. “That if we don’t deal with the more medium-term in electrifying our transport system, if we remain just as heavily reliant on diesel and petrol, that means that our economy is just very exposed to foreign wars and foreign volatility.”
Frequently Asked Questions About Fuel Security and Inflation
Why is Australia more vulnerable to Middle East conflicts than other nations?
Australia relies on partner countries for 90 per cent of its diesel, 80 per cent of its jet fuel, and 68 per cent of its petrol, operating only two domestic refineries after local crude production slumped to roughly 10 per cent of its 2000–01 peak.
How much did the post-strike diesel tab cost individual Australians?
Following the February 28 strikes on Iran, Australia incurred a $9 billion diesel tab, which translates to $324 per person according to the Climate Council’s findings.
What role does the Reserve Bank of Australia attribute to oil prices?
Reserve Bank Governor Michele Bullock stated that higher-than-normal oil prices contributed to four interest rate hikes this year, adding to domestic capacity pressures and keeping inflation above target at 4 per cent.
How fast are electric vehicles selling in Australia compared to heavy trucks?
Electric vehicles account for 29 per cent of all passenger car sales with one sold every 100 seconds, whereas electric heavy trucks represent just 0.7 per cent of total truck sales.
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