Australia’s oil reliance in the green era: why $2.50 fuel can still happen
Australia may look greener, but it still depends on imported oil. A supply shock from Iran has pushed fuel prices sharply higher—raising risks for inflation and possible rationing.
Australia’s homes may be sprouting solar panels and its streets increasingly show electric cars, but the country’s fuel system still runs on oil—sometimes in ways that surprise people.
The current lesson has come fast.. Conflict in Iran has disrupted global oil supplies and triggered one of the worst supply squeezes in history.. The knock-on effect reached Australian fuel bowsers, with regular unleaded briefly hitting an all-time high of about $2.50 a litre, while diesel climbed from roughly $1.80 to around $3.19.. For households, that’s not an abstract market story.. It’s the daily cost of driving to work, dropping kids at school, and keeping trades moving.
While the shift to cleaner electricity has helped reduce oil’s role at the generation level, the wider economy still uses oil heavily.. Australia still consumes more than 1 million barrels of oil per day.. The share of oil in the overall energy mix has fallen compared with the 1970s—when it sat around half—yet it remains a major slice at about 40%.. In other words: even with the energy transition underway, oil is still the backbone of many transport and logistics functions.
What the “green” picture misses
Another piece of the reality is scale.. Australia’s population has grown, and overall energy demand has risen alongside it.. So the energy transition isn’t simply a clean swap where oil disappears overnight.. It’s a gradual process, and oil can remain dominant in the areas where alternatives take longer to build—whether that means charging infrastructure, vehicle supply chains, or the practical shift of heavy transport to new power sources.
A useful comparison is to look at what has changed versus what hasn’t. Australia can decarbonise electricity faster than it can fully restructure transport and industry. That gap is exactly where a global oil shock finds leverage.
Why global disruption lands on Australian forecourts
This matters because supply chains are long—and vulnerable.. When oil supplies tighten, refiners and importers across Asia have to compete for the same replacement shipments.. Even if Australia can secure fuel deliveries, the price signal often arrives first, and it arrives quickly.. Australia’s fuel availability can remain steady for now, helped by tank storage and ongoing ordering.. But the margin for error shrinks the longer disruptions continue.
At the consumer level, the danger is that “steady supply” can still come with expensive supply. Higher fuel prices don’t just affect motorists; they cascade into the cost of food distribution, services that depend on transport, and the day-to-day logistics of running a business.
Declining local refining makes the shock sharper
As production declined, so did refining capacity.. Of the eight refineries operating around the early 2000s, six have since closed.. The closures include ExxonMobil’s Altona refinery in Melbourne’s west and BP’s Kwinana plant in Perth, both shut in 2021—at the time fuel demand was disrupted during COVID-era travel bans.. Today, Australia has just two local refineries: Viva Energy’s Geelong plant and Ampol’s Lytton refinery in Brisbane.. Both are receiving taxpayer-supported lifelines to keep operating.
The effect is straightforward: with fewer domestic refineries, Australia depends more on other countries’ refining schedules and inventory levels. Even when the global market is stable, that structure increases sensitivity to sudden shocks.
Where pressure would bite, and what comes next
The risk isn’t limited to a short, painful spike at the bowser.. A prolonged Middle East conflict could keep oil prices high long enough to supercharge inflation, strain household budgets, and worsen business costs.. In a worst-case scenario, governments have a menu of responses, and fuel rationing—rare in modern Australia—would become one of them.
Looking further ahead, forecasts from major oil companies suggest Australia’s oil consumption could be cut by about half by 2050, helped mostly by declining use in road transport.. That projection aligns with the direction of travel many Australians already feel: EV adoption, efficiency gains, and cleaner power.. Still, until transport and logistics shift decisively at scale, oil shocks can keep breaking through the “green” surface.
For now, the country is trying to ride out the market storm: refiners are delivering what they can, and importers and the government are paying whatever is needed to keep supplies flowing.. But the longer the conflict drags on, the more likely it becomes that Australia’s position at the end of long global supply chains will matter in a way people can feel in their daily spending—not just in energy statistics.