SYDNEY: Australia’s government assured residents on Friday (March 20) that the country is not running out of fuel as the energy crisis and a lack of reserves fuelled panic buying and prompted warnings that food prices could rise.
The surge in fuel prices due to the war in Iran has taken a heavy toll, especially in regional areas, where farmers use diesel to power machinery and tractors, and are also facing supply bottlenecks for fertilisers.
In the most populous state of New South Wales, which has about 3,000 petrol stations, 80 had no diesel and 40 had no petrol on March 19, mainly due to panic buying.
Though fuel shortages should be avoided if the war ends within weeks, the crisis has raised concerns about the adequacy of Australia’s fuel reserves.
Australia has about 36 days’ worth of stored petrol, 30 days’ supply of diesel and 29 days supply of jet fuel, making it the only country in the 32-member International Energy Agency to breach its treaty obligations to store 90 days’ worth of the previous year’s net oil imports.
Dr Lurion De Mello, a finance lecturer at Macquarie University, told The Straits Times that successive governments had failed to plan ahead for potential shortages of fuel.
“It is a failure of government policy,” he said.
“We don’t have enough refineries, so the government needs to build bigger storage facilities for petrol, diesel and jet fuel. Australia has been buying fuel as it comes in, rather than having a long-term strategy.”
He added: “It’s crazy – diesel is a lifeline for farmers, for ambulances, for buses.”
Australian Energy Minister Chris Bowen said on March 20 that fuel supplies in Australia were adequate up to the end of April and that all shipments of oil to Australia were arriving as scheduled. Beyond late April, he said, the country will face “uncertainty”.
“Our fuel supply remains as it did before the bombing of Iran,” Bowen told ABC Radio.
“The challenge we have is that demand remains very, very high… Any supply chain for any commodity is going to struggle with that.”
To boost supplies in the face of panic buying and price pressures, the federal government has allowed oil firms to release 762 million litres of petrol and diesel from their required reserves.
The government also lowered fuel quality standards for 60 days to allow higher-sulphur fuel to be sold, which will allow one of the nation’s two refineries to sell its high sulphur petrol domestically instead of exporting it to countries with lower fuel standards. Higher sulphur levels can affect air quality and can lead to corrosion of engines.
In the past two decades, refinery numbers in Australia fell from eight to two as local oil production decreased and existing refineries struggled to compete with Asian refineries. Australia’s refined fuel comes mainly from South Korea, Singapore, Malaysia and Taiwan, though these countries rely mainly on supplies from the Middle East and could soon reduce output.
Experts say Australian food prices could rise as farmers face increased costs of fuel and fertiliser. Australia exports about 71 per cent of its agricultural output, while two-thirds of its imports of the common fertiliser urea come from the Middle East.
Associate Professor David Ubilava, an economist at the University of Sydney, told The Straits Times that current increases in diesel and fertiliser prices could lead to higher food prices of 1 per cent to 2 per cent.
But he said a prolonged war could lead to actual shortages of fuel and fertiliser, which would force farmers to avoid planting crops and could see lower output and significantly higher prices.
“If the conflict does not linger too long, we will get close to back to normal within a few weeks,” he said.
“If the conflict persists, farmers won’t be able to plant on time and might be more inclined to not invest in this year’s harvest. But that is still an unlikely scenario.”
The war in Iran has also raised concerns about global supplies of liquefied natural gas (LNG), prompting calls for Australia – the world’s third-biggest exporter behind the United States and Qatar – to boost supplies.
An Iranian strike this week on Qatar’s Ras Laffan Industrial City wiped out about 17 per cent of its export capacity, according to QatarEnergy, a state-owned energy firm.
Japan, which depends on Australia for 40 per cent of its LNG imports, asked it in mid-March to increase its supply. Japan has increasingly been importing more than it requires and exporting LNG to Asia and South-east Asia, especially Taiwan and South Korea.
But analysts say Australia is not in a position to significantly boost output in the short term and that local firms will face political pressure if they divert domestic supplies to exports.
Australian Resources Minister Madeleine King said Australia would honour its LNG contracts and ensure its supplies were maintained.
“Measures to secure our domestic gas supplies won’t harm investment or alter existing energy contracts,” she said on March 17.
Walter James, an energy finance specialist at the US-based Institute for Energy Economics and Financial Analysis, told ST that the impact of the Iran war on Japanese LNG exports was not yet clear.
He said Japanese firms may prioritise domestic supplies rather than boost exports, especially as Tokyo focuses on curbing domestic energy price hikes, but “Japanese buyers may opt to resell cargoes to capture profits if available LNG inventories are deemed sufficient”.
The surge in gas prices has delivered a windfall to Australia’s gas giants. But the government is now reportedly considering imposing an additional – and long-discussed – tax on the gas companies’ profits. The tax could be announced in the federal budget in May 2026. - The Straits Times/ANN
