The Fuel Crisis in Australia: A Nation on Edge
As the war in the Middle East continues to escalate and the flow of traffic through the Strait of Hormuz remains at a relatively low level compared to pre-war volumes, billions of people around the world are wondering how this will affect their daily lives. In this context, Australia is no exception and may be more vulnerable than most developed nations due to its limited fuel reserves—holding only a little over a month’s worth of fuel.
The Albanese government has prepared a layered response strategy based on the levels of fuel stockpiles in the country. According to reports from the ABC, based on a document produced by the Department of Prime Minister and Cabinet, voluntary conservation of petrol was assumed to begin when the level of stock fell to 15 days, with rationing expected to start when stock levels dropped to 10 days’ worth of consumption.
Understanding Fuel Consumption Trends
In more normal times, grasping what major fuel conservation efforts could look like would be an abstract concept. However, pandemic-era data provides us with real-life numbers on the reduction of fuel consumption during a major crisis.
The Hard Numbers
Fuel consumption varies significantly throughout the year, and these variations are assessed using federal government figures on total monthly sales of fuel by type. The current analysis focuses on diesel and petrol consumption, as jet fuel usage was impacted by closed borders and pandemic-related restrictions.
Petrol consumption saw the most significant drop during the height of the pandemic. The absolute peak in reduced petrol demand occurred in April 2020, with total monthly sales down by 42.7 per cent compared to April 2019. The next worst month for 2020 was August 2020, with sales down by 19.7 per cent compared to that time in 2019.
In 2021, the two worst-performing months for petrol were August and September, with sales down by 28.8 per cent and 23.5 per cent respectively compared to those months in 2020.
In contrast, diesel consumption showed a different pattern. There was a similar shock effect in April 2020, with total diesel consumption falling by 9.8 per cent relative to the same month in 2020. While 2020 also had several months with major drawdowns in diesel consumption, the magnitude of these falls was much smaller than what was seen in petrol.
In 2021, the stories of diesel and petrol diverged even further. Even during the hardest hit months of lockdown, such as August, when petrol consumption fell by nearly 29 per cent, diesel consumption actually grew compared to the same period in 2019.
Across 2021, the average rate of growth in diesel consumption relative to the same month in 2019 was 4.6 per cent, a stark contrast to the consistent declines in petrol consumption for every month compared to pre-pandemic levels.
The Big Picture
The broader issue becomes clear when looking at total combined diesel and petrol consumption during the pandemic. In 2020, the height of the pandemic impact saw total combined consumption fall by 22.0 per cent in April, followed by May and August as the worst months, with falls of 13.4 per cent and 11.0 per cent respectively.
However, 2021 told a different story. Even at the height of the 2021 lockdowns, total combined consumption fell by just 9.3 per cent. On an average monthly basis for the year, lockdowns and pandemic-driven restrictions led to a 1.0 per cent decrease in consumption compared to the same months in 2019.
The Takeaway
The pandemic data highlights the challenges of reducing fuel consumption in an economy like Australia. Even when petrol demand collapsed by nearly 30 per cent during the 2021 lockdowns, the overall reduction in diesel and petrol consumption was only 9.3 per cent.
Australia is a deeply diesel-reliant economy, by some metrics the most diesel-reliant in the world in per capita terms. With well over half of Australia’s fuel imports refined from oil that transited the Strait of Hormuz, a scenario requiring rationing is not entirely implausible.
Ultimately, the data shows that demand for petrol and diesel in Australia is fairly inelastic at an aggregate level. Even attempts to reduce consumption by a small proportion, such as 10 or 15 per cent, would quickly lead to significant challenges.
