A shortage of oil reserves leaves the country unprepared for the fuel crisis <\/p>\n
Australia\u2019s inflation rate is forecast to outpace that of any other developed country as the crisis in Iran continues and the Strait of Hormuz remains closed, shows the IMF\u2019s April World Economic Outlook.<\/p>\n
Inflation is expected to increase by 1 percentage point from the previous IMF October forecast. Meanwhile, National Australia Bank\u2019s March Business Survey shows business confidence plunging to the lowest levels since Covid-19.<\/p>\n
\u201cEven economies with strong resource endowments remain vulnerable when essential inputs depend on a narrow set of routes, fuels and processing hubs,\u201d says Julien Chaisse, professor of transnational economic governance at the City University of Hong Kong. \u201cOnce energy prices move, the shock does not stay in energy \u2014 it passes through into fertiliser, transport, food and wider production costs.\u201d<\/p>\n
Data from the University of Technology Sydney<\/a> shows that around 30 per cent of Australia\u2019s refined oil needs to pass through the Strait of Hormuz as its sources in South Korea and Singapore import from the Middle East. <\/p>\n The breakdown in supply has caused fuel prices to rise dramatically, with petrol prices increasing by 29.3 per cent since the war began and diesel prices soaring by 65.3 per cent, according to Global Petrol Prices.<\/p>\n And, unlike its peers, Australia has failed to meet the International Energy Agency\u2019s mandate of 90-day oil reserves.<\/p>\n On April 14<\/a>, the IEA cut its oil forecast, calling the situation the \u201clargest disruption in history\u201d to the global oil supply. <\/p>\n In its latest forecast, the IMF urges the Australian government to avoid implementing cost of living relief measures, such as cutting the fuel excise, which could push inflation even higher.<\/p>\n A fire at Viva Energy Group\u2019s Geelong refinery \u2014 one of the country\u2019s two oil refineries \u2014 on April 15 will further damp fuel production, says Australia\u2019s energy department.<\/p>\n Energy policy future<\/p>\n The Institute for Energy Economics and Financial Analysis in a March 23<\/a> report argues that the fuel crisis highlights the need for the country to reduce its dependence on oil and strengthen electrification<\/a> through government policy measures.<\/p>\n The Australian Energy Market Operator says renewables supplied more than half of the country\u2019s energy supply in the fourth quarter of 2025, and the crisis could help speed up the transition.<\/p>\n \u201cThe fuel crisis is providing some tailwinds to the energy transition and we\u2019re seeing early signs of that in Australia, in areas like [electric vehicle] sales,\u201d says Australian Sustainable Finance Institute chief executive Kristy Graham. <\/p>\n \u201cIt has shifted energy security from a long-term consideration to an immediate constraint, reinforcing Australia\u2019s role as a [liquefied natural gas] supplier and the need to reduce our exposure to fossil fuel prices,\u201d she continues. <\/p>\n The fuel crisis is providing some tailwinds to the energy transition and we\u2019re seeing early signs of that in Australia, in areas like EV sales<\/p>\n \u201cA decarbonised energy system, low-emissions transport and accelerating the decarbonisation of industry is very much aligned with Australia\u2019s long-term energy security. Policy settings need to recognise this alignment, take a long-term view and continue to ensure capital can be directed with confidence.\u201d<\/p>\n Australia\u2019s Labour government, along with the Green party, has proposed a gas export tax on oil and gas companies as their stock prices soar with the added war premium. <\/p>\n