Petrol prices in Australia have dropped to less than 170 cents per litre, below the levels seen before the US-Israel war on Iran began, according to recent data. This decline comes despite the closure of the Strait of Hormuz, which had disrupted about a third of the world's crude oil supply in 2025.
How Refiners Kept Oil Flowing
The closure of the Strait of Hormuz removed approximately 20.5 million barrels a day of oil and products, as estimated by the investment firm UBS. However, workarounds have significantly mitigated the shortfall. Alternative Middle East pipelines added 4 million barrels a day, stockpile releases contributed nearly another 4 million, and China drastically cut imports by about 4 million barrels a day, bringing the shortfall down to just 7 million barrels a day in May.
China's ability to reduce imports surprised analysts, as the country holds high inventories but does not publish stockpile data. Supply chains were also redrawn, with Asian nations importing record quantities of refined fuel from the Americas, while India took large deliveries from Russia and Venezuela.
Global oil demand is on course to contract by about 1% this year, the International Energy Agency reported on Wednesday, after initial high prices and lost supply cut demand.
Australia's Fuel Supply Resilience
Despite Australia's modest refining capabilities, the country managed to secure adequate fuel supplies. By April, some traditional suppliers like Brunei and Vietnam reduced crude exports, while Singapore cut petrol, Japan cut diesel, and China supplied less jet fuel. However, Australia offset these reductions by buying dramatically more crude from South Korea, jet fuel from Malaysia, and diesel and petrol from the US in April. Australian importers even purchased 50 million litres of jet fuel from the US, a rare supply route.
The government authorized the release of 20% of reserve stocks onshore and extended this until September. Reserves have been built up to 44 days' worth of petrol, 39 days' worth of diesel, and 32 days' worth of jet fuel. Additionally, the government spent $7.5 billion to underwrite private companies' fuel purchases via the Export Finance Australia agency, helping five companies secure 16 diesel shipments and three jet fuel shipments they would not otherwise have bought.
Is the Oil Crisis Over?
Brent crude fell below US$80 a barrel on Friday, a level not seen since the beginning of the conflict, amid trader optimism tied to the peace deal. Prices were above US$110 a barrel last month. However, oil executives and analysts warn that the crisis is not over. The data firm Energy Aspects notes that even if the peace deal holds, full restoration of normal shipping flows requires mines to be cleared and shippers and insurers convinced the waterway is safe.
Exxon executives have warned that oil inventories are hitting low levels and prices risk shooting higher. In the US, crude stockpiles are at their lowest level in more than 40 years, according to the Energy Information Administration. Related industries, including those producing engine oil and lubricants, warn that damage to refining infrastructure could disrupt supplies for months.
Why Are Petrol Prices Lower?
Higher oil prices initially led to higher wholesale prices, pushing retail petrol to about 260 cents a litre in March. They are now below 170 cents a litre, lower than prewar levels. Diesel prices are not quite back to pre-conflict levels, sitting at about 200 cents a litre or less. Both prices have tracked wholesale prices at fuel terminals, which have fallen back to near February levels.
Dr. Lurion De Mello, an energy market expert and senior lecturer at Macquarie University, explains: "We have plenty of petrol in the country. That's why petrol prices are quite low at the moment." Diesel prices are likely to remain elevated due to a "bigger crunch" for supply. The federal and state governments' 32-cent reduction in fuel tax also contributed to lower prices. That cut will expire on 30 June, but the federal government announced on Saturday it would reduce the excise by 16 cents for an additional month in July, seeking support from the states at national cabinet.
