Key findings

Australia is exceptionally vulnerable to global oil shocks, currently serving as the world’s largest seaborne importer of diesel. The nation imports approximately 90% of its diesel requirements and has nearly exhausted its domestic supply. Per capita, Australia consumes more diesel than any other major economy, with demand increasing two and a half times since 2000. Between March and August 2026, the country incurred a $9 billion additional bill for diesel imports due to international conflict, more than double that of the next most affected country.

This exposure has significant financial consequences. Higher fuel prices added $5 billion to the costs of Australian motorists since the conflict began, equating to roughly $300 million extra per week by late September. Transport costs rose by 9.2% in March alone, while road freight costs experienced a record annual increase of 17.6% to June. The Australian Government provided $3.3 billion in temporary fuel relief, but prices surged 14.8% immediately after the relief ended, leaving the nation no better protected against future shocks.

Introduction

Following strikes on Iran on 28 February 2026, Australians experienced eight months of significant fuel price volatility. This period marked the second global energy shock in four years, impacting households at both the petrol pump and the grocery checkout. While leaders cannot control overseas conflicts, the report argues they can influence domestic resilience. Australia ranks second globally for diesel use per person, making it one of the most exposed nations to fuel volatility. The report emphasizes that shifting investment from oil and gas toward renewable solutions is essential for lasting protection.

Timeline: eight months of fuel chaos

The crisis began with strikes on Iran in late February, leading to an immediate jump in oil prices. On 17 March, the Australian Government reduced fuel companies’ minimum stockholding obligations to release 762 million litres. By 31 March, petrol prices peaked with a record monthly rise of 32.8%. In April and May, the Victorian and Tasmanian governments implemented free public transport to assist commuters. Conflict re-escalation in late August saw electric vehicle sales reach a record 24.9% of new car sales, even as fuel prices remained high through October.

Australia’s energy security scorecard

Australia’s energy security presents a mixed picture. It is the number one seaborne importer of diesel and the third-largest importer of jet fuel and petrol. It also provides the tenth-highest level of public financial support per person for fossil fuels globally, with fuel tax credits expected to reach $13 billion annually by 2030. Conversely, Australia leads the world in rooftop solar capacity and big battery capacity on a per-person basis. However, it lags in transport electrification, ranking 26th for electric vehicle (EV) sales share and 36th for the ratio of public charging infrastructure.

What the crisis is costing us

Global oil market movements account for 80% of local pump price fluctuations. The reliance on imports means international price spikes hit Australian budgets almost instantly. Australia’s extra diesel bill of $9 billion between March and August equated to $324 per person, compared to just $16 per person in Brazil. These shocks drive broader inflation; the Reserve Bank of Australia estimates every 10% rise in fuel prices adds 0.3 percentage points to headline inflation within six months. Furthermore, road freight transport cost increases directly push up the price of everyday items through supply chain impacts.

What’s helped protect Australians – and where we remain exposed

Clean energy and electrification have served as critical shields. Owners of electric and hybrid vehicles have saved approximately $1.7 billion in fuel costs since the conflict began. These vehicles save over 17 million litres of petrol and diesel every week. Renewables also lowered wholesale electricity prices by 47% in the June quarter compared to the previous year. Grid-scale batteries have significantly reduced the need for gas-fired power, which fell to its lowest June quarter level in over 20 years. Despite this, diesel remains a major weakness, particularly in the freight and mining sectors, which consume 65% of the nation’s diesel.

More digging won’t protect us from another oil shock

The report argues that drilling for more domestic oil is not a viable solution. Australia has already extracted more than 90% of its conventional crude oil resources. The remaining commercially viable reserves could only satisfy national fuel needs for less than seven months. Furthermore, domestic oil production has fallen by 60% since its peak in 2001. Even if new supplies were found, Australian fuel prices would still be dictated by global markets. Rebuilding refining capacity is also deemed ineffective, as new refineries would cost upwards of $15 billion and still rely on imported crude.

Fixing our oil exposure for good

Lasting protection requires structural change by reducing fuel demand. Road transport is the largest diesel user, with trucks accounting for over a quarter of emissions. Urban and short-haul freight are ready for electrification now; analysis suggests 77% of current truck trips could be covered by electric models. In March 2026, Australia’s first all-electric intercity freight run between Sydney and Canberra demonstrated energy costs 84% lower than diesel. The mining industry, the second-largest diesel user, also has the technology to switch, though many companies currently rely on $3.4 billion in annual fuel tax credits which may disincentivise the transition.

Conclusion

The eight months of fuel chaos illustrate the high cost of over-reliance on fossil fuels. While progress has been made in household solar and battery uptake, sectors like heavy freight and mining remain highly vulnerable. Electrifying the whole economy is presented as the most reliable way to secure energy and reduce climate pollution. Australia has an opportunity to lead global efforts at COP31 by targeting 35% of final energy demand to be met by electricity by 2035, provided it accelerates domestic electrification and phases out support for imported diesel.