Australia Fuel Crisis Update: Diesel Nears $3 a Litre as Bowen Says G7 Release Won't Help Much at Bowser

CANBERRA, Australia — Australian motorists and businesses are facing some of the highest fuel prices in the nation's history as the global energy shock triggered by the war in the Middle East grinds into its eighth month, with diesel averaging close to 3 Australian dollars a liter in capital cities.

A coordinated release of emergency oil stockpiles by the Group of Seven nations has raised hopes of relief, but Energy Minister Chris Bowen has cautioned that the move is unlikely to make much difference at Australian petrol pumps.

Prices remain high

The national capital city average price for regular unleaded petrol was 2.38 Australian dollars a liter in early October, while diesel averaged 2.85 Australian dollars, according to fuel price tracker Petrol Pulse. In some parts of the country, diesel has edged toward and beyond 3 Australian dollars a liter in recent weeks.

The Australian Competition and Consumer Commission, which has been publishing weekly fuel price reports since the conflict began in late February, said in its latest update that average retail petrol and diesel prices fell slightly in capital cities over the past week and were broadly stable in regional areas, as international refined fuel prices remained relatively high.

Fuel prices are up nearly 25% this year, according to the Westpac-Melbourne Institute consumer sentiment survey, adding to pressure on households already dealing with higher interest rates.

G7 release

On Oct. 2, the G7 nations agreed to release 100 million barrels of diesel and crude oil from strategic reserves over the next four months, coordinated through the International Energy Agency, to counter a global diesel shortage. The countries also pledged not to impose export restrictions on diesel.

Bowen welcomed the move but said its direct impact on Australia would likely be limited.

"I do welcome the actions of G7, particularly the confirmation by the United States that they are not intending to put any restrictions on diesel supply," Bowen told reporters on Saturday.

He noted that Australia sources only about 2% of its diesel and fuel from the United States. Asked whether the G7 release would ease prices at the bowser, Bowen said the more fuel allowed to flow, the better it was for everyone, but declined to put a number on any potential relief.

Bowen said Australia had already taken a similar step at home by reducing minimum fuel stockholding requirements by 20%.

How much fuel Australia has

Bowen said Australia's fuel supply remained secure despite the volatile international situation. He said the country had 41 days' worth of petrol on hand, 32 days of diesel and 28 days of jet fuel.

Those reserves have long been a point of concern. Australia relies on imports for the overwhelming majority of its refined fuel, much of it from refineries in South Korea, Singapore and Malaysia that process Middle Eastern crude. The country has only two remaining domestic refineries, in Brisbane and Geelong.

Critics have argued that Australia has failed to meet International Energy Agency requirements to hold 90 days of net oil imports in reserve, leaving it particularly exposed to disruptions in global supply.

How the crisis unfolded

The crisis began after the outbreak of war involving Iran in late February, when Tehran effectively shut the Strait of Hormuz, through which about a fifth of the world's oil normally flows.

In March, panic buying led to widespread shortages, particularly in regional areas. At the peak, more than 500 service stations nationwide reported running out of at least one type of fuel, according to Bowen. In New South Wales alone, 32 stations ran completely dry and 187 were without diesel.

The government declared the situation a national crisis and took a series of emergency steps. Bowen announced a 20% cut to the Minimum Stockholding Obligation, allowing the release of up to 762 million liters of petrol and diesel from domestic reserves.

"This will allow the release of up to 762 million litres of petrol and diesel from Australia's domestic reserves, where these can be targeted towards localised market disruption," Bowen said at the time.

The government also temporarily relaxed fuel quality standards to boost supply and warned retailers against price gouging, with Bowen describing inflated pricing as "un-Australian" and "dangerous."

Victoria offered free public transport for two months to reduce fuel demand before switching to half-price fares through the end of 2026.

Situation has eased, but problems linger

The acute shortages have eased considerably since the autumn peak. Government fuel plan data as of early September showed about 94 sites with stock-outs of petrol, diesel or both across a national network of more than 8,100 service stations.

Australia remains at Level 2, known as "Keeping Australia Moving," of the four-tier National Fuel Security Plan, meaning fuel continues to flow but localized disruptions remain possible. Regional Queensland has been one of the slowest areas to recover.

Global pressures continue

The outlook remains uncertain. Brent crude climbed back above $100 a barrel this week after new attacks by Yemen's Houthi rebels on Saudi Arabian infrastructure. Global diesel supplies remain tight, with China halting its October fuel exports and Saudi Aramco's chief warning that global oil inventories are "scarily thin."

The U.S. Energy Information Administration this week raised its forecast for Brent crude to an average of $105 a barrel in the fourth quarter.

Economic impact

High fuel costs have fed into broader inflation, contributing to the Reserve Bank of Australia's decision last week to raise its cash rate to 4.6%, the highest since 2011. Westpac expects another increase in November, citing fuel costs spreading into wider prices.

Diesel is especially critical to the Australian economy, powering trucks, farm equipment and mining operations. Higher diesel prices raise costs for transporting goods, which can flow through to grocery prices.

Consumer confidence has fallen sharply, with the Westpac survey showing sentiment among respondents surveyed after the latest rate hike dropping to levels last seen during the early 1990s recession.

Political pressure

The crisis has become a major political issue. Opposition Leader Angus Taylor has repeatedly pressed the government over fuel security, accusing Labor of mismanagement. The government has pointed to global factors beyond its control and highlighted its emergency measures.

The crisis has also renewed debate over whether Australia should invest in more domestic refining capacity and larger strategic reserves to reduce its vulnerability to future shocks.

Motorists are unlikely to see significant price relief until global supply conditions improve, including a full reopening of the Strait of Hormuz and an easing of the global diesel shortage. Analysts will watch the impact of the G7 stock release, OPEC+ production decisions and further developments in the Middle East.