Australians copped $5 billion hit as war reveals nation’s vulnerability
Australians have been forced to pay $5 billion more at the bowser since the start of the war in Iran, as a new report exposed just how vulnerable the country is to global shocks.
The Climate Council found motorists were hit with added costs due to the heavy reliance on diesel and fuel imports in its “crude awakening” report published on Wednesday.
Australians have been forced to pay $5 billion more at the bowser since the start of the war in Iran. Kate Geraghty
“The inflationary pressure and the pressure that average mums and dads are feeling at the petrol station, at the grocery store, is linked to this exposure we have to fuel insecurity,” Climate Council chief executive Amanda McKenzie said.
Australia is the world’s largest seaborne importer of diesel and relies on partner countries for 90 per cent of the usage.
The country also imports 80 per cent of its jet fuel and 68 per cent of its petrol.
Following the United States and Israel strikes on Iran on February 28, which disrupted much of the world’s fuel supply, Australia picked up the world’s biggest diesel tab in $9 billion or $324 per person.
It has sent domestic inflation soaring from 3.7 per cent in February to 4.6 per cent in March.
While inflation has cooled slightly, it remains above target at 4 per cent, according to the latest monthly data.
The Reserve Bank of Australia has increased interest rates four times this year, partly due to the higher-than-normal oil prices, and is expected to do so again at the next meeting in November.
“Inflation is too high and has been driven by domestic capacity pressures. The inflation impulse from the Middle East conflict is in addition to this,” central bank Governor Michele Bullock said.
According to Institute for Energy Economics and Financial Analysis (IEEFA) expert Kevin Morrison, Australians could be hit with worse cost of living pressures if the global conflict continues.
“We’ve seen the globe respond to this crisis by releasing all the stockpiles they have and so we’ve got those buffers have really got much thinner,” he said.
“So we don’t really have that shock absorber and so that’s why we could be subject to more price volatility.”
Australia’s exposure to global oil shocks is not new and has increased over the past 25 years since domestic oil production has dwindled, according to the IEEFA.
Crude oil production started in the 1960s and peaked at 563,000 barrels a day in the 2000-01 financial year with eight refineries behind 98 per cent of the petrol needs.
By 2025, production slumped to about 10 per cent of that peak, oil imports had soared by 240 per cent since 2012 and only two refineries remained in operation.
Morrison said Australia is therefore never “entirely out of the woods” when it comes to global oil shocks, as he called for the government to reduce reliance on imports.
“That’s why it’s best that Australia takes more control over its energy supply,” he said.
“They say we’ve got lots of coal, lots of gas, lots of renewable energy potential. Whereas oil is the weak link.”
Oil supply through the Strait of Hormuz has been severely disrupted since the outbreak of the war. AP
The Climate Council’s report suggests the way to help ease the reliance on fuel is to increase the number of electric and hybrid vehicles after those drivers saved $1.7 billion and 17.4 million litres in fuel since the war began.
Motorists have increasingly taken up EVs, with the latest data from the Electric Vehicle Council finding that they make up 29 per cent of all car sales and one is sold every 100 seconds, but trucks and freight have lagged.
Electric trucks accounted for only 0.7 per cent of truck sales, according to the report, compared to 20 per cent in China, 7 per cent in Germany and 2 per cent in the United Kingdom.
McKenzie said the government’s focus should turn to increasing the number of electric heavy vehicles and trucks for short- to medium-haul routes.
“Much of the world’s oil at its source is dependent on the Middle East, and we have just seen in the last few years, but since the 1970s, increasing volatility of foreign oil supply,” she said.
“The government has been focused on the immediate crisis, but the issue is a longer-term one.
“That if we don’t deal with the more medium-term in electrifying our transport system, if we remain just as heavily reliant on diesel and petrol, that means that our economy is just very exposed to foreign wars and foreign volatility.”
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