Australia's Fuel Crisis: Why Are We Paying More?

Australia is one of the world's great energy exporters. We have enormous natural gas reserves, produce crude oil and condensate, and export energy commodities around the world. So why are Australians paying so much for petrol and diesel?

It's a question worth asking, particularly when rising fuel prices affect far more than the cost of filling your car.

According to Geoscience Australia, Australia's energy exports were nearly eight times its imports in 2023–24. Yet the country remains heavily dependent on imported petrol, diesel and other refined fuels.

Janine Cox asks: ‘How can a country with so many energy resources be so exposed to international oil prices? And could Australia do things differently? ‘

Perhaps by refining more oil domestically, keeping more gas here, or capturing more value from the resources we export.

But there's also another side to this discussion. While households struggle with higher fuel prices, rising oil and gas prices can create opportunities in the share market. However, identifying the right energy stocks takes more than simply following the headlines.

Why rising fuel prices affect every Australian

When petrol prices rise, motorists feel the impact immediately. Filling the car might cost another $10 or $20, sometimes considerably more.

But diesel is arguably even more important because it supports so much of the Australian economy.

Transport companies, farmers, miners, construction businesses and freight operators all depend heavily on diesel. When fuel costs rise substantially, businesses face a choice: absorb the extra expense and reduce profit margins or pass the costs on to customers.

That's how an oil price shock can become a broader inflation problem.

The Reserve Bank of Australia reported that higher fuel prices contributed approximately 0.8 percentage points to annual headline inflation in March 2026. It also warned that higher fuel costs would progressively flow through to other goods and services.

In May, the RBA increased the cash rate to 4.35 per cent.

Fuel wasn't the only reason. Inflation was already above target, and capacity pressures remained a concern. However, the conflict in the Middle East pushed oil and other commodity prices higher, making inflation harder to manage.

So, when we discuss Australia's fuel crisis, we're also talking about business costs, household budgets, inflation, and potentially higher interest rates.

Why does Australia export oil and import petrol?

Here's where Australia's fuel situation becomes particularly interesting.

Geoscience Australia reports that during 2023–24:

• Approximately 96 per cent of Australia's crude oil and condensate production was exported.
• Approximately 74 per cent of Australia's natural gas production was exported.
• Australia remained heavily dependent on imports of crude oil and refined petroleum products.

We export most of our crude oil, much of it to Asian refineries, and then import large quantities of the petrol and diesel we need.

Why not keep more Australian oil and refine it ourselves?

That's a reasonable question, but the answer isn't as straightforward as it seems.

Why Australia has only two major oil refineries

Australia currently has two major operating oil refineries: Ampol's Lytton refinery in Queensland and Viva Energy's refinery in Geelong, Victoria. Twenty years ago, we had considerably more. 

Over time, large Asian refineries developed economies of scale that made domestic refining comparatively expensive.

We also need to ask whether Australian crude oil suits our existing refineries.

Australia produces substantial quantities of relatively light, low-sulphur crude oil and condensate. However, refineries are designed to process crude oil blends to produce specific petroleum products.

Our remaining refineries process crude oil blends rather than everything Australia produces.

Geography also matters. Much of Australia's oil production is in Western Australia, while our remaining major refineries are in Victoria and Queensland.

Consequently, exporting crude oil to Asia and importing refined fuel has often made commercial sense. The problem arises when international supply chains are disrupted.

Should Australia treat domestic refining as insurance?

Building another refinery wouldn't automatically give Australians cheaper petrol.

Oil and refined petroleum products trade internationally, and domestic fuel prices are influenced by global oil benchmarks, refining margins, and movements in the Australian dollar.

Even a refinery operating in Australia has commercial incentives to price its products according to international market conditions.

Maybe we're asking the wrong question.

Instead of asking whether another refinery would deliver cheaper fuel, we should ask what Australia is prepared to pay for energy security.

Think about home insurance. You pay premiums hoping you'll never need to make a claim. But when something goes seriously wrong, that insurance becomes invaluable.

Domestic refining capacity could be viewed in much the same way.

The debate isn't necessarily about producing every litre of fuel we consume. It's about maintaining sufficient domestic capability to protect Australia when global markets experience major disruptions.

The Australian Strategic Policy Institute has warned about our reliance on imported liquid fuels and long maritime supply routes.

Meanwhile, the federal government's 2026–27 Budget includes a $3.2 billion Australian Fuel Security Reserve, designed to hold approximately one billion litres of diesel and jet fuel.

The government is also supporting Australia's existing refineries and providing $10 million for feasibility studies into expanding domestic refining capacity.

We're already paying for energy security. The question is whether we're investing in the right protection.

Could Australia become less dependent on imported fuel?

Building additional refineries is only one possibility. Another approach is to reduce the quantity of imported petroleum Australia needs.

Electric vehicles can replace imported petrol with electricity generated domestically. Biofuels can replace some conventional petroleum products, and ethanol is already used in E10 petrol.

Renewable diesel could become increasingly relevant for industries where electrification is more difficult, and hydrogen may eventually play a role in heavy transport and industrial applications.

None of this means every vehicle needs to become electric tomorrow. What Australia needs is greater flexibility.

A combination of domestic refining, strategic fuel reserves, alternative fuels, electrification where practical, and diversified import sources could reduce the economy's exposure to overseas disruptions.

Fuel security isn't simply about increasing supply. It's also about reducing dependence.

Should Australians receive more benefits from our natural resources?

Australia's natural gas industry raises another interesting question.

We're one of the world's largest LNG exporters, yet domestic consumers have experienced high gas prices.

Once Australian gas connected to international LNG markets, global prices became increasingly influential at home.

This has fuelled discussions about gas reservation, where exporters must ensure enough gas remains available for Australian consumers. Could a similar principle apply more broadly to our natural resources?

That doesn't necessarily mean forcing oil producers to sell crude cheaply to Australian refineries. Resource exporters could perhaps contribute to strategic reserves or other energy-security infrastructure.

There is also the question of how much revenue Australia receives from exporting non-renewable resources.

Australia already collects petroleum resource rent tax, company tax and state royalties. The industry certainly doesn't pay nothing.

However, organisations including the Grattan Institute and The Australia Institute have questioned whether Australia receives the best possible return from its natural resources.

Once Australia extracts and exports oil or gas, that resource is gone. So how should Australia use the wealth generated?

Could Australia establish a resource Future Fund?

Australia already has a Future Fund designed to strengthen the Commonwealth's long-term financial position.

But imagine establishing a separate resource investment fund.

A defined percentage of certain resource revenues could be invested rather than spent immediately through the annual budget.

Over time, those investments could compound and potentially generate an ongoing income stream.

Norway provides an example of this broader approach to managing resource wealth.

Once an Australian resource fund becomes sufficiently large, its investment earnings could potentially support energy infrastructure, reduce government debt, offset other taxes or even provide Australians with a resource dividend.

Janine believes the possibility of a resource dividend deserves serious consideration, although she isn't suggesting Australia should automatically adopt such a policy.

An important distinction exists between distributing income from accumulated investments and borrowing billions to provide household payments whenever petrol prices rise.

Borrowing to fund additional spending could stimulate demand and worsen inflation.

Using sustainable earnings generated from accumulated resource wealth would be a different proposition.

The broader question is whether Australians should participate more directly in the financial benefits generated by resources they collectively own.

Would removing fuel excise solve Australia's fuel crisis?

Fuel excise is one component of petrol prices that the Commonwealth can directly control.

When international oil prices surge, governments can temporarily reduce excise to provide immediate relief.

Australia did this in 2026, and the RBA estimated that the temporary reduction would subtract approximately half a percentage point from annual headline inflation in April.

But permanently removing fuel excise creates another problem.

The government would need to replace the lost revenue by reducing expenditure, raising another tax, or borrowing more money.

There is also a longer-term issue. As electric vehicles become more common and conventional vehicles become more fuel-efficient, fuel excise revenue will gradually decline.

That raises the possibility of road-user charging, where motorists contribute based on factors such as kilometres travelled, vehicle weight, or congestion.

Fuel excise is currently general Commonwealth revenue rather than money deposited into a dedicated road maintenance account.

So perhaps the discussion should extend beyond simply reducing fuel tax.

What's the fairest way to fund roads, and what level of taxation on transport fuel is appropriate?

What Australia's fuel crisis means for ASX energy stocks

Rising fuel prices have another side that traders should understand.

While motorists face increasing costs, some oil and gas producers may benefit from higher commodity prices.

That doesn't mean every energy company will rise when oil prices increase.

Nor does it mean that buying an energy stock simply because crude oil has surged is a sensible trading strategy.

A good starting point is identifying companies listed in the ASX energy sector. Websites such as Listcorp can help traders compile an initial list.

But selecting stocks requires considerably more work.

A company may have an attractive story, yet its share price might have already risen substantially. Alternatively, its chart may not support the positive outlook suggested by the headlines.

This is why Janine emphasises the importance of combining stock selection with a sound trading strategy.

Traders need to identify suitable companies, analyse their price behaviour and establish whether a genuine opportunity exists.

Developing a trading plan is an important part of that process.

For further reading, Wealth Within also explores how to trade stocks and how to identify the right ASX energy stocks.

The important point is that opportunities aren't limited to energy stocks.

Today, oil and gas may be attracting attention. Tomorrow, it could be technology, materials, financials or another sector.

Markets move in cycles, and understanding them lets traders prepare rather than react.

Turning rising energy prices into opportunities

Australia's fuel crisis raises questions that extend well beyond petrol prices.

Should we invest more in domestic refining? Could alternative fuels reduce our reliance on imports? Are Australians receiving sufficient long-term value from exporting finite natural resources?

These questions deserve serious discussion because rising energy prices affect households, businesses, inflation and ultimately the broader economy.

But traders should consider something else. Instead of focusing entirely on how much more petrol will cost, we can also examine which businesses may benefit from changing energy markets.

That doesn't mean rushing into energy stocks whenever oil prices rise.

It means building the knowledge to spot opportunities, assess price trends, and apply a proven trading strategy before committing capital.

At Wealth Within, we teach people how to trade using structured strategies, price analysis and sound risk management principles through our government-accredited trading courses.

Whether the next opportunity appears in energy, technology or another sector, the objective remains the same: develop the knowledge and skills to recognise opportunities and trade them with confidence.