Fuel companies and the federal government are in talks about further lowering Australia’s fuel-quality standards to widen the pool of available imports, as Donald Trump’s declaration the war with Iran would continue for up to three weeks exposes Australia to heightened risk of shortages by the end of April.
While fuel stockpiles remain strong and imports continue to arrive, experts warn a looming supply crunch across Asian refineries could force the Albanese government to impose stage three of the fuel crisis plan. This may include promotion of fuel saving measures such as carpooling and further releases from the national stockpile of petrol and diesel.
The longer the conflict drags, the greater the risk to Australia’s import supply lines as Iran continues to effectively blockade about 20 per cent of global oil supply.
Asian fuel refineries, which supply more than 80 per cent of Australia’s petrol and diesel, get most of their oil from the region and are expected to curb their exports in coming weeks as their import lines dry up and inventories dwindle.
The government was considering a further reduction to the fuel imports standards that control elements such as particulate matter, sulphur content and pollution potential, according to industry sources who asked not to be named while talks are ongoing.
If changes are made, it would mark the third time Energy Minister Chris Bowen has reduced standards since the war began on February 28. He has already changed diesel flashpoint requirements and sulphur content rules.
The Albanese government has also committed to underwrite the cost of importing petrol and diesel.
Albanese and fuel companies have been working to secure more import shipments to address shortage risks, and the government has secured three additional shipments in the coming weeks.
Australian Petroleum Institute chief executive Malcolm Roberts, who represents Australia’s refiners and importers including Ampol, BP, Mobil and Viva, said petrol and diesel supply would probably remain stable for weeks, but risks were increasing the longer Middle Eastern exports remained cut off.
“There’s only so much time for this problem to be solved before it really begins to bite,” Roberts said.
“Ninety-six per cent of the fuel we use in this country comes from overseas, either as crude oil or as a refined product, so that’s the inescapable logic of our position. Obviously, the longer the war goes the less likely it is that will be able to escape disruption to our fuel supply.”
MST Financial energy analyst Saul Kavonic said that despite Australia’s heavy reliance on fuel imports and warnings of a worsening fuel crunch in Asia in coming weeks, Australia should be able to “ride this out” in a much better shape than many other countries,
However, much would come down to the success of the government’s efforts to continue securing extra cargoes from the US and Europe, as well as its ability to leverage the nation’s role as a coal and gas supplier to reciprocal Asian trade partners to secure increasingly scarce deliveries of petrol, diesel and jet fuel from their refineries, he said.
“There is almost no spot-cargo availability left in Asia,” he said.
“Without successful diplomacy, Australia faces cuts in flights and a need to redistribute diesel to vital economic corridors and services from later in April, meaning many Australians in cities may need to conserve fuel use.”
The owner of Australia’s Shell, Liberty Oil and Reddy Express petrol station chains said Australia was in a relatively strong position to ride through global fuel supply chain pressure.
Viva Energy chief executive Scott Wyatt said its Geelong oil refinery was running at full capacity, and the company had secured strong flows of fuel heading into May, and of crude oil heading into June.
“In the context of this uncertain environment, we are in a relatively strong position,” he said.
“The best thing for the country is to get through this without any significant intervention or rationing, and I think we have a good chance of that if we all put in.”
In a speech on Thursday from the White House, Trump offered no clear timeline to end the war in the Middle East but said the US would hit Iran “extremely hard over the next two to three weeks”. However, Trump said it would be up to other nations to ensure the Strait of Hormuz was opened to shipping.
Energy experts said Trump’s speech “anchors expectations” of a de-escalation within weeks not months.
“A more protracted conflict, or deeper damage to production and infrastructure, would delay the reopening of the strait and extend disruptions across global supply chains,” said Claudio Galimberti, chief economist at research group Rystad Energy.
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Mike Foley is the climate and energy correspondent for The Age and The Sydney Morning Herald.Connect via email.
Nick Toscano is a business reporter for The Age and Sydney Morning Herald.Connect via X or email.