The world is currently experiencing the largest supply disruption in the history of the global oil market, with Australia particularly vulnerable due to its heavy reliance on imported oil. In its new briefing note, The Perfect Storm to Boost Energy Security, the Institute for Energy Economics and Financial Analysis (IEEFA) examines Australia’s exposure and outlines the most promising measures to strengthen the country’s resilience against this and future oil shocks. In 2000, Australia was largely self-sufficient in oil, producing high volumes domestically and operating eight refineries that supplied 98% of the nation’s petroleum product consumption.
Today, domestic production covers only 5.6% of demand, and the country’s two remaining refineries provide just 17% of refined petroleum products. As a result, Australia now holds the largest trade deficit in refined petroleum products globally. “While Australia only imports a small portion of its crude oil from the Middle East, it remains highly exposed through the Asian refineries from which we import refined products,” said Kevin Morrison, Energy Finance Analyst, Australian Gas at IEEFA and co-author of the report. “Many countries are already restricting exports to prioritize domestic supply.”
Australia’s vulnerability is further compounded by its low stockpiles of key petroleum products, with just 37 days of petrol and 30 days or less of diesel and jet fuel. Among all International Energy Agency (IEA) members, Australia has the lowest oil stock levels, compared with an average of 141 days held by major oil importers as of December 2025. “This exposure represents a significant economic risk because oil is Australia’s largest energy source and is critical to many key sectors,” Morrison said. “Shortages could disrupt agricultural production, mineral exports, and broader economic growth, while driving up inflation. Despite repeated warnings, governments have not acted to address this vulnerability.”
Options to address the crisis are limited. The government has temporarily relaxed fuel specifications to increase supply and begun diversifying sources of refined products. IEEFA recommends rapid demand-reduction measures, including voluntary actions such as remote work and reduced air travel, as well as mandatory interventions such as lower speed limits and driving restrictions. These measures can extend stockpile longevity without causing major economic disruption.
“The government could also explore bilateral crisis supply agreements with suppliers of refined products who are also major LNG importers exposed to Middle East disruptions,” said Amandine Denis-Ryan, CEO of IEEFA Australia and co-author of the report. “Implementing temporary export control mechanisms could allow Australia to prioritize LNG spot sales to specific countries during a crisis, potentially linking this to the domestic gas reservation policy from 2027.”
In addition, higher taxation on coal and gas exports, which are expected to experience elevated prices during the crisis, could generate revenue for cost-relief and fuel-shift initiatives. Longer-term solutions are more limited. Increasing domestic oil production is not feasible due to insufficient commercial reserves, and stockpiling, while important, will take years.
Reducing dependence on oil across the economy is essential, with electrification emerging as the most viable solution. Electrification is cost-effective, scalable, and can be supported by domestically produced clean energy. For sectors such as aviation and heavy transport, low-carbon fuel supply chains will also need development.
“Australia is behind in electric vehicle adoption, and electrification in mining and heavy transport is minimal,” Denis-Ryan said. “Some government incentives that have promoted EV uptake are even under consideration for removal. The severity of the current energy threat demands a comprehensive policy response to accelerate electrification across transport and mining sectors.”
The report concludes that while the government has already developed transport and resources sector plans outlining effective strategies to reduce oil dependence, immediate focus on implementation is critical. Swift action is necessary to ensure that Australia is not left highly exposed to the next global oil crisis.
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