Iran War Exposes Australia’s Fuel Folly, George Christensen

As oil rockets past $100 a barrel and war in the Middle East threatens one of the world's most vital energy arteries, Australians are discovering an uncomfortable truth: our country has almost no fuel security.

The Iran war has sent global energy markets into turmoil. Brent crude surged dramatically in the opening days of the conflict amid fears that production and shipping across the Persian Gulf could be severely disrupted. Governments across the world are scrambling to soften the blow. The G7 is discussing emergency reserve releases. South Korea has imposed fuel price controls. Japan is preparing emergency interventions of its own.

Australia, meanwhile, has little room to manoeuvre.

Already, Aussie motorists are feeling the shock. Petrol prices have surged across the country, with Sydney prices moving above $2.25 a litre and some areas pushing toward $2.40. Analysts warn the spike could add another 30 to 40 cents a litre if the conflict drags on. But the real danger runs deeper than the price of petrol.

Fuel is the bloodstream of the modern economy. It powers agriculture, mining, construction, freight and aviation. When oil prices explode, the cost of producing and transporting everything rises with it. The Reserve Bank has already warned that the shock could drive inflation significantly higher, potentially forcing further interest rate increases at a time when Australian households are already under severe pressure.

Yet the most alarming fact is how little fuel Australia actually has in reserve.

If imports stopped tomorrow, Australia would have roughly a month of fuel available. Current estimates suggest stocks equivalent to roughly 30 to 36 days of consumption, depending on fuel type. Diesel supplies, critical for trucking, farming and industry, sit in a similar range.

That is not a strategic reserve. There is nothing strategic about being a month away from reverting to a pre-industrial society.

Unlike the United States, which maintains the massive Strategic Petroleum Reserve capable of supplying the country for months, Australia relies overwhelmingly on imported fuel arriving continuously by ship. Around 90 per cent of our refined fuel is imported, mostly from refineries in Asia that themselves depend on Middle Eastern crude.

In other words, Australia's energy lifeline stretches across thousands of kilometres of vulnerable sea lanes and through one of the most volatile regions on earth.

And that brings us to one of the more astonishing policy failures in recent Australian energy history.

When Angus Taylor served as energy minister in the Morrison Government, Australia's fuel vulnerability was already widely recognised. Years of refinery closures had left the country dangerously dependent on imported fuel. Industry experts, defence analysts and parliamentary committees all warned that Australia needed deeper domestic fuel storage, stronger refining capacity and greater strategic reserves.

But when the government finally acted in 2020, its headline fuel security initiative bordered on absurd.

Instead of building a strategic fuel reserve in Australia, the government decided to store oil in the United States.

Under the arrangement, Australia spent public money purchasing crude oil that was stored inside the US Strategic Petroleum Reserve. The policy allowed Australia to count those barrels toward its international stockholding obligations under the International Energy Agency.

On paper, it improved Australia's compliance with global rules. In reality, it did almost nothing to improve Australia's ability to withstand a real crisis.

Fuel stored on the other side of the Pacific is not immediately available in an emergency. Even in normal conditions, it could take weeks to ship crude oil to Australia. In a major geopolitical crisis affecting global shipping routes, there is no guarantee those barrels could reach Australia at all.

To make matters worse, the oil was stored as crude rather than refined petrol or diesel, ready for immediate use. Given Australia now has only two operating refineries, even accessing that crude would not solve the underlying supply problem.

And here's where the comical gets farcical: The reserve barrels we had in the US were actually already released during the global oil crisis following the start of the war in Ukraine, meaning the reserve was never really a permanent stockpile sitting ready for Australia in an emergency.

The whole Angus Taylor fuel security program was, in effect, a gimmick designed to satisfy international accounting rules rather than real-world resilience.

The Iran war now demonstrates the consequences of that mindset.

Around the world, governments are preparing emergency responses to protect their populations from the energy shock. Some are releasing strategic reserves. Others are capping fuel prices or intervening in markets to stabilise supply.

Australia has very few options because we never built a serious strategic buffer at home.

The country that once prided itself on resource independence now relies on ships arriving every few days to keep its economy moving. If those shipments were disrupted for any extended period, Australia would face severe fuel rationing within weeks.

This vulnerability is not theoretical. It has been identified repeatedly by defence planners and parliamentary inquiries. Yet for years, the warnings were ignored while domestic refining capacity shrank and strategic storage remained inadequate.

The result is a nation dangerously exposed to the kind of geopolitical shock now unfolding in the Middle East.

The Iran conflict may or may not escalate further. Oil prices may settle in the weeks ahead if shipping routes stabilise and emergency reserves are released.

But the lesson should be unmistakable.

Energy security is national security. A country that cannot fuel its trucks, tractors, aircraft and defence forces without constant imports is not a resilient nation.

Australia urgently needs a serious long-term strategy: larger domestic fuel reserves, expanded storage capacity, stronger refining capability and diversified supply chains.

The current crisis is a warning shot.

The question now is whether policymakers will finally treat fuel security as the strategic priority it should have been all along.