The message to the Federal Government from Australia’s industry leaders is stark and simple: if something is not done quickly to address the growing crisis in fuel supplies, then the very health of the nation’s economy is at risk of being severely impaired.
They warned that any state that attempted to go its own way in this crisis would be seen as a higher investment risk in the future.
When there is actual stress, the warning arrives. About one fifth of the world’s seaborne oil supply has been choked by Iran’s effective closure of the Strait of Hormuz after the US and Israeli conflict with Tehran escalated in late February.
Fears that important Asian refining countries might start hoarding their own supplies were heightened when Energy Minister Chris Bowen confirmed on March 21 that six oil tanker shipments headed for Australia in April had been delayed or turned back.
Prices have risen accordingly. The average price of unleaded petrol has risen to 219.5 cents per litre, as per the Australian Institute of Petroleum, as of the last week ending 15th March.
The price of diesel has also risen, crossing the 245 cents per litre mark. In Sydney, isolated reports indicate diesel prices rising close to $3 per litre.
In the trucking industry, fuel is one of the single largest costs and the price rise is causing severe cash flow pressure on truckies.
The agricultural, pharmaceutical and aquaculture industries are also being affected and prices will rise accordingly.
Farmers sound the alarm
The suffering is more intense in regional Australia than anywhere else. According to the Victorian Farmers Federation, suppliers are having trouble finding new shipments, and entire towns have run out of fuel.
By mid March, more than 107 service stations in New South Wales had run out of diesel and 42 were completely dry.
Similar shortages have affected Western Australia, Victoria and regional Queensland, where farmers risk missing their limited window for planting the year’s grain crop.
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National Farmers Federation President Hamish McIntyre cautioned that food prices could go up by as much as 50% if the diesel crisis continues and interferes with the farming season.
“Farming seasons don’t wait for bureaucrats and supply chains to catch up. If we miss our window, we lose our production for the year.”
The government has taken several steps to deal with the crisis, including the release of 762 million liters of petrol and diesel from its domestic supplies.
Australia is importing approximately 90% of refined fuels, with only two refineries operational in the country.
In the event that the Strait of Hormuz disruption extends beyond mid April, experts have cautioned that Australia may actually face fuel shortages, not just supply crunches.
For an industry sector already facing rising costs, sagging confidence and squeezed profit margins, the fuel crisis could not have arrived at a worse time.
