The short version
- Diesel prices in Australia have climbed significantly since the start of September, reaching levels not seen since early April due to restricted global supply chains.
- Analysts warn that a potential US export ban on diesel could trigger severe shortages and price spikes, though some experts argue domestic stockpiles remain adequate for now.
- The Reserve Bank is expected to raise interest rates further in response to inflationary pressures driven by high fuel costs affecting transport, agriculture, and manufacturing sectors.
Fuel costs across Australia have escalated to levels unseen since early April, raising concerns about renewed inflationary pressure and the likelihood of another interest rate increase. Diesel prices in Canberra reached nearly 299 cents per litre on Thursday, with unleaded petrol at 250 cents, while other capital cities reported similar upward trends. This surge adds approximately $22 to the cost of filling a standard 55-litre vehicle tank compared to the beginning of the month, marking a rise of nearly 40 cents per litre.
The primary driver of this increase is the struggle international refineries face in securing affordable crude oil. Ongoing hostilities in the Middle East have disrupted supply routes, preventing fuel tankers from passing through critical chokepoints such as the Strait of Hormuz and Bab al-Mandab. Consequently, diesel exports from Gulf countries have plummeted to just one-quarter of their prewar volumes. Additionally, Ukrainian military actions have severed Russian supply lines, further constraining the global flow of oil products.
Brent crude oil prices have remained above $100 per barrel for most of the past two weeks, hitting a high point not seen since May. Service stations in Australia have passed these steady international increases directly to consumers. The situation could deteriorate significantly if the Trump administration implements a ban on US diesel exports. Such a measure is currently under consideration as a strategy to lower domestic service station prices ahead of the November midterm elections.
The United States has become a major supplier of global diesel since the war began, exporting more than 1.5 million barrels daily. ANZ bank analysts note that removing this supply would be particularly disruptive to markets already strained by conflict. Australia relies almost entirely on overseas imports for its diesel needs. Government data indicates that between January and July 2026, the country imported over 18.4 billion litres of diesel, with only about 510.9 million litres coming from the US, most of which arrived in April.
Opinions among experts regarding the potential impact of a US export ban vary considerably. Saul Kavonic, an analyst at MST Financial, predicted that Australia would face rationing and prices exceeding $4 per litre within weeks if such a ban were enacted. He argued that the loss of US supply would create immediate scarcity in a market already dependent on imports.
Conversely, Dr. Lurion De Mello from Macquarie University’s Transforming Energy Markets Research Centre maintains that Australia’s current supply situation remains healthy. He noted that while removing any supplier creates upward price pressure, the impact might be mitigated if Asian refiners continue to access oil. De Mello suggested that prices could surpass $3.10 per litre but are unlikely to reach $3.50 under those conditions.
Australia’s strategic stockpiles of diesel have declined from 39 days’ worth of supply in July to 31 days in March levels. Energy Minister Chris Bowen stated that government-backed fuel purchases had slowed because existing storage facilities were full. If a US ban occurs, Europe, which also relies on American diesel, would likely compete with Australia for shipments from South Korea and other Asian refiners, intensifying price competition.
The economic implications of sustained high fuel costs are significant for industries heavily reliant on imported diesel, including farming, mining, food production, manufacturing, and transport. These sectors face rising operational expenses that could be passed on to consumers. The Reserve Bank is expected to raise interest rates to 4.6% on Tuesday, a 14-year high, partly in response to the upward pressure on inflation caused by these fuel costs. While the Albanese government previously lowered the fuel excise in March when prices exceeded $3.10, no second cut has been offered.
Sources behind this briefing
Go to the original reporting
- The Guardian World↗Diesel prices across Australia could surge beyond $3 a litre as Trump eyes cut to US fuel exports
