Iran war sparks energy security debate as Sydney petrol prices skyrocket to $2.40 a litre

Petrol prices topped $2.40 a litre across swathes of Sydney’s eastern and inner-west suburbs on Wednesday, a sign the four-day Middle East war is already hurting Australian consumers.

The Middle East war also led politicians to join a fractious debate about whether Australia’s estimated 36-day supply of emergency petrol reserves is sufficient to protect the country if overseas deliveries were choked off by the conflict, or another war between major powers.

Talking to The Nightly, Barnaby Joyce, the One Nation Member for New England said Australia must build more refineries to produce fuel as a matter of national energy security.

“We’re not starting to reap the consequences of our idiotic climate policy,” he said. “We haven’t changed the climate, but we’ve changed the security of Australia for the worse. A decade ago we had 12 oil refineries now we’ve got two.

“And not having [sufficient] domestic fuel is becoming an exponential threat. Totalitarianism is on the rise, the Ukraine war’s been going four years, and China’s unilaterally taking back the South China Sea for more than a decade.

“So, this [Middle East] war was only a surprise to the naive. Diligent government plans for surprises, it doesn’t have surprises planning them.”

Cost of energy security

John Coyne, the Director of National Security Programs, at The Australian Strategic Policy Institute said Australia imports most of its fuel from overseas as it’s cheaper, with local refiners facing expensive labour and power costs.

“So the first thing is how do we pay for the investment in building new refineries,” he said. “Should you and I pay through [a surcharge] at the bowser and checkout? Or will the government pay, which means you and I pay for it in tax, or the government spends less on things like education, health, etc. So what’s a wise investment in terms of value for money, risk and opportunity?”

However, Mr Joyce rubbished concerns about the cost of investing in new refineries, versus what he said is the existential risk of not investing.

“What’s the price if your trucks cannot move and you can’t eat?” he said. “Meat and veggies don’t fly to the supermarkets. We had [Labor Minister] Tanya Pilbersek on Sunrise saying we could have electric trucks, but seriously how many electric trucks have you seen recently? So, if you don’t have diesel how you going to do it?”

On Tuesday, Labor Minister for Energy Chris Bowen said he’s confident Australia has sufficient fuel storage supplies through to May and that it made no sense for motorists spooked by the Middle East conflict to panic buy fuel.

Mr Bowen also estimated Australia currently has 34 days of diesel as he touted Labor’s 2023 legislation that instituted minimum supplies for diesel, petrol, and jet fuel. However, the spiralling Middle East conflict has revived long-running concerns the supply is insufficient and far lower than the 90-day minimum agreed with and recommended by the International Energy Agency.

According to Mr Coyne, it could be argued that Australia in 2026 has a more pressing need to increase its fuel reserves as the old world order of security and defence alliances that existed since the Berlin Wall’s falls in 1989 are under more strain due to nations ignoring unilateral bodies such as the United Nations.

“Australian governments always thought the cost of fuel insurance [in more reserves] was too high,” he said. “Now you could say it’s a little different as we’re in a new world of poly-crisis and red [geopolitical conflict] warning lights flashing all the time. But remember this kind of national resilience, or insurance costs money and consumers won’t want to pay. At the fuel pump they just want a low price, they don’t care whether it’s from an Australian refinery or not.”

In Sydney’s eastern suburb of Randwick on Wednesday, premium unleaded prices at a Shell station were as high as $2.49 per litre, with other fuel retailers also charging more than $2.40 per litre across large parts of the city’s sprawling suburbs.

Oil jumps

The shock rise comes after an Iranian drone damaged a key liquefied natural gas (LNG) export hub on Tuesday to stoke fears that a hot war in the Middle East could limit supplies of oil and gas from the region.

Benchmark Brent Crude prices rose around 5 per cent overnight on Tuesday to $US81.50 a barrel and have now jumped around 13 per cent since the start of the conflict.

“The war in the Middle East intensified, with Israel launching a new wave of strikes against Iranian infrastructure, while Iran continued to target countries across the region,” said Westpac’s economics team.

“President Trump announced that the US government would provide maritime insurance and Navy protection for trade in the Middle East.”

Westpac’s economics team said Brent Crude prices could surge as high as $US185 a barrel in a worst-case scenario of the Middle East war lasting more than three months, adding $1-a-litre to the cost of petrol.

“The longer and more intense the disruption, the greater the real economy cost and hit to sentiment,” Westpac said.

On Tuesday, Treasurer Jim Chalmers wrote to the Australian Competition and Consumer Commission’s acting chair Mick Keogh asking his agency to monitor potential petrol price gouging.

“I would expect the ACCC as the independent regulator enforcing Australia’s competition and consumer laws to investigate any concerns arising about misrepresentations regarding petrol prices, false and misleading conduct or anti-competitive conduct in petrol markets, and to take appropriate action,” Dr Chalmers said.

The price jumps of up to 20 per cent at the bowser over the past week sparked queues at some service stations as motorists scrambled to fill up over concerns that prices may rise further, or shortages emerge.

According to the New South Wales Fuel Check app, the average price for Premium unleaded near Sydney’s city centre is $2.18, with cheaper E10 unleaded petrol at an average of $1.95 per litre on Wednesday morning.

Despite some reports of queues of motorists seeking to buy petrol on Tuesday evening, an Ampol service station manager in central Sydney on Wednesday said she thought this week’s higher prices were actually prompting drivers to fill up less than prior months.

Viva Energy as the operator of 643 Reddy Express service stations did not respond to a request for comment. Petrol retailer also Ampol did not respond to a request for comment.