Australia faces an escalating fuel security crisis as conflict in the Strait of Hormuz disrupts global energy markets, according to a commentary by the Institute for Energy Economics and Financial Analysis on Wednesday.
The resumption of conflict combined with Ukrainian drone strikes on Russian refineries is creating a perfect storm that threatens to tighten global diesel supplies, posing severe risks to Australia's diesel-dependent economy, IEEFA noted.
The country is heavily reliant on imports for 80% of its oil product consumption, a vulnerability exacerbated by the closure of about 75% of its refining capacity between 2001-2021.
While Australia maintains sanctions on Russian energy, IEEFA highlighted that the global diesel market will become increasingly competitive as other nations, such as Turkey, China, and Brazil, scramble to secure alternative supplies.
The economic strain is compounded by Australia's relatively thin oil stockpiles, which remain well below the 90-day requirement mandated for members of the International Energy Agency.
As the conflict over the Strait of Hormuz drags on, Australian motorists and essential industries, including mining and agriculture, may face significant pressure over higher fuel costs, IEEFA said.