Fuel Price Shocks: Why Australia Can’t Escape Global Energy Turmoil
As Australians gear up for the Labour Day long weekend, concerns about rising fuel prices are intensifying. The escalating crisis in the Middle East is sending ripples through global energy markets, and Australia, as a major importer of refined fuel, is feeling the pinch.
The Strait of Hormuz: A Critical Chokepoint
Shipping through the Strait of Hormuz, the world’s most vital oil transit chokepoint, has slowed significantly, contributing to a roughly 10% surge in global oil prices. This narrow passage, connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea, is crucial for the transportation of crude oil and oil products. Approximately 20 million barrels per day passed through the Strait in 2025, representing around 25% of the world’s seaborne oil trade.
Impact on Australian Consumers
Australia imports approximately 90% of its liquid fuel, making it highly vulnerable to global price fluctuations. Analysts predict petrol prices could increase by around 40 cents per litre, adding roughly $24 to the cost of filling a 60-litre tank. The impact extends beyond petrol, with airfares also expected to rise by 10-20%, and potentially more for long-haul flights.
Limited Buffering Capacity
Unlike some nations, Australia lacks a robust liquid fuel market to regulate prices. The Australian Competition and Consumer Commission (ACCC) monitors for price gouging, but its powers are limited to preventing exploitative practices – it cannot shield consumers from legitimate market increases. Australia’s emergency strategic fuel reserve, while recently bolstered, is currently estimated to cover 36 days of petrol, 34 days of diesel, and 32 days of jet fuel, and has been non-compliant since 2012.
Gas Prices and Global LNG Markets
Rising tensions in the Middle East are also impacting gas prices. Australia is a major exporter of Liquefied Natural Gas (LNG), and domestic prices are linked to global export prices. Approximately 93% of LNG produced in Australia was shipped overseas in the first half of 2025. Disruptions in the Strait of Hormuz, which handles a significant portion of global LNG trade, have already pushed international LNG prices up by around 12%.
Government Intervention and Future Policies
The Australian government has implemented a mandatory gas code, including a price cap of $12 per gigajoule, to regulate domestic gas prices. The Domestic Gas Reservation Mechanism exists, though it has never been triggered. A new gas reservation policy, set to take effect in 2027, will require exporters to prioritize domestic supply, setting aside 15-25% of production for the Australian market.
FAQ
Q: How much will petrol prices increase?
A: Analysts predict a potential increase of around 40 cents per litre.
Q: How long will Australia’s fuel reserves last?
A: Current reserves are estimated to cover 36 days of petrol, 34 days of diesel, and 32 days of jet fuel.
Q: What is the government doing to protect consumers?
A: The government has implemented a gas code and a new gas reservation policy to regulate prices and ensure domestic supply.
Q: Will airfares be affected?
A: Yes, airfares are expected to rise by 10-20%, potentially more for long-haul flights.
Did you understand? The Strait of Hormuz is only 50km wide at its entrance and exit, and just 33km at its narrowest point.
Further information on the Strait of Hormuz can be found at the International Energy Agency and the BBC.
Pro Tip: Monitor fuel prices using comparison apps and consider adjusting your travel plans to minimize fuel consumption.
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