Just as many Australians thought they’d navigated the worst of the global pandemic, a new international crisis has emerged, sending prices skyward and casting a shadow over our daily lives and work patterns. The escalating conflict between the US and Israel against Iran has triggered a significant global energy shock, leading to a dramatic surge in oil prices and a sharp increase in fuel costs across the nation.
Reports of petrol stations running dry, with Aussies rushing to top up their tanks amidst fears of impending shortages, have even sparked conversations about the possibility of governments resorting to more extreme measures, such as fuel rationing.
A Look Back: Australia’s History with Fuel Rationing
When was the last time Australia faced fuel rationing? The nation last implemented mandatory fuel rationing in mid-1979, a consequence of the second oil crisis that decade, which followed the Iranian Revolution. During this period, authorities dictated that motorists with odd-numbered licence plates could refuel on specific days, while those with even-numbered plates had their designated days. These restrictions remained in place for several weeks.
However, the primary trigger for the 1979 rationing wasn’t a global energy shock, but rather industrial action by workers at the Caltex Kurnell oil refinery, which has since closed.
Despite the disruptions and the perceived chaos of that era, a 2014 research paper by Acil Allen Consulting concluded that “there were no interruptions to supply to or in Australia” during the 1970s. While this offers a degree of comfort, the current situation presents a starkly different landscape.
Kevin Morrison, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, points out that Australia’s fuel supply security in the 1970s was considerably more robust than it is today. “We were largely self-sufficient in the 1970s,” Morrison states.
The most significant instance of rationing due to a genuine lack of supply occurred during World War II. During this time, Australians were required to obtain petrol licences and ration tickets. An article in the Journal of the War Memorial highlighted the nation’s unpreparedness, noting: “At the start of World War II Australia was totally unprepared for an extended conflict and had sufficient petrol reserves for only three months of normal consumption, and limited storage capacity.”
Why the Renewed Talk of Fuel Rationing?
As many Australians are now acutely aware, the nation relies on imports for a staggering 90% of its liquid fuel needs. A substantial portion of the petrol, diesel, and jet fuel consumed domestically is refined in Asian countries. These refineries, in turn, depend heavily on oil from the Middle East. The ongoing conflict between the US and Israel against Iran, coupled with the closure of the Strait of Hormuz – a vital chokepoint through which approximately 20% of global oil trade passes – has severely impacted Middle Eastern oil supplies.
Consequently, officials in countries like Malaysia and China have already indicated their readiness to curb fuel exports to safeguard their own domestic supplies for citizens and businesses.
Petrol rationing would undoubtedly be an extraordinary measure. However, the International Energy Agency has already characterised the current energy shock as the most unprecedented in history.
CBA’s chief economist, Luke Yeaman, explains that the shock is unique in two key aspects: the sheer scale of the supply disruptions and the limited availability of spare production capacity globally.
“The famous 1970s oil shocks caused by the Arab oil embargo and the Iran revolution affected only around 5-7% of global oil supply; today around 15% is at risk,” Yeaman notes. “In the 1970s, global spare oil capacity was around 5-8%; today it is lower at around 3-5%.”
CBA analysts predict that these supply disruptions could persist for months, rather than mere weeks. If this forecast holds true, then all possible solutions must be considered.
“Oil is about 40% of the total energy we consume each year,” Morrison observes. “We keep talking about how we are such a key global supplier of coal and gas, but we have neglected our own energy security. That has been a real failure of policy.”
The Federal Government’s Response and Options
To date, the federal government’s primary focus has been on reassuring the public and discouraging panic-driven hoarding of fuel. Simultaneously, measures have been implemented, such as releasing 20% of the nation’s fuel reserves to address supply gaps in regional areas that have experienced petrol shortages.
Chris Bowen, the Minister for Climate Change and Energy, stated recently that the nation’s overseas fuel shipments are expected to “continue to arrive” and are “locked in” for approximately the next month.
“Obviously beyond that late April period, we’re dealing with more uncertainty [and it] depends how the international circumstance rolls out,” Bowen commented.
Following the release of fuel reserves, Australia likely has less than a month’s worth of reserves remaining. Minister Bowen indicated that the government is actively exploring “contingencies,” but stressed that rationing “has not been contemplated as something we need to do in the immediate future.” He added, “We’re not there and we’re not close to there.”
The government is actively engaged in sharing information and discussing potential responses with state governments, fuel companies, businesses, and motoring organisations. The aim is to coordinate official actions to alleviate bottlenecks in specific regions.
Beyond supply-side management, there is also the crucial aspect of demand management.
The initial strategy of reassuring the public not to hoard fuel appears to have had limited impact. In response to the ongoing Middle East crisis, The Greens have advocated for making public transport free.
The world’s energy watchdog has advised governments to reduce highway speeds and has encouraged individuals to carpool or, ideally, work from home as a means to combat soaring oil prices and the looming threat of fuel shortages stemming from the conflict.
Several other countries are already implementing such measures. Sri Lanka and the Philippines, for instance, have mandated a four-day working week for public servants in an effort to reduce petrol consumption.
Shane Oliver, AMP’s chief economist, suggests that Australia should follow the lead of other nations by taking proactive steps to reduce demand and ease pressure on fuel supplies.
“We should be moving now to curtail demand in ways that are least disruptive to business – like encouraging or allowing workers who can to work from home, encouraging more reliance on public transport, encouraging people and businesses to avoid non-essential air travel and encouraging greater use of E10 fuel,” Oliver advises. “The longer we leave it the greater the risk of real disruption.”
