Middle East conflict: What the fuel price rise means for Australia
Australia’s latest energy disruption is not playing out where many expected. As conflict in the Middle East disrupts global oil trade routes and refined fuel supply chains into Asia, an immediate pressure point has emerged for Australia.
The Climate Council’s new briefing paper, Fuel shock: Why clean energy is our best defence, argues that geopolitical volatility continues to expose structural weaknesses in fossil fuel-dependent systems.
However, analysts tell Energy Insights that Australia’s electricity and gas systems are, for now, absorbing the shock differently.
Australia is currently navigating tightening fuel supply conditions driven by disruptions to refined product imports from Asia. National reserves are estimated at 30–38 days, according to Climate Change and Energy Minister Chris Bowen. Some regional shortages have been exacerbated by panic buying rather than a complete halt in supply.
Crucially, this is not translating into a domestic gas crisis.
Jim Snow, adjunct professor at the University of Queensland and Executive Director at Oakley Greenwood, is unequivocal, telling Energy Insights:
“The domestic gas market is not directly impacted – some indirect impacts under certain circumstances but right now it is having zero effect.”
Rick Wilkinson, CEO of EnergyQuest, reinforces this separation between global LNG volatility and local gas dynamics. “Historically there is little, if any impact of overseas LNG prices on Australia’s domestic gas prices,” he tells Energy Insights. “This is true for this year with the outbreak of the Iran war.
“Compared to any other international market which is an LNG importer, Australia is much better placed to weather a gas storm.”
This reflects structural features of the east coast market: long-term LNG export contracts, limited spot exposure, and domestic supply dynamics that are often driven more by seasonal demand, coal outages and renewable output than by international pricing signals.
Despite relative stability in domestic gas supply, gas continues to play a critical role in electricity pricing — particularly during peak demand periods.
Perry Wilson, Head of Advisory ANZ at Rystad Energy, told Energy Insights “global fuel shocks do reinforce the risk of gas setting electricity prices in Australia, as gas still sets the marginal price during peak hours in the NEM.”
This is where the broader system exposure lies:
Gas is often the marginal generator, setting wholesale electricity prices when demand is high or renewable output is low.
Even if gas volumes are stable, higher global fuel costs can influence price expectations and dispatch patterns, according to Perry.
Exposure varies by region, with New South Wales, Victoria and South Australia more sensitive to gas-driven pricing.
“As we move into colder winter nights, the risk becomes more acute if higher heating demand collides with coal outages, weak renewables output, or transmission constraints.”
In other words, the current shock is not about gas availability — but about how gas interacts with electricity pricing under stress conditions.
The Climate Council’s briefing paper positions this moment as part of a recurring pattern: global conflicts in fossil fuel-producing regions driving price volatility.
“The more Australia powers its grid with local renewable energy, the less exposed households and businesses are to international price shocks.”
The report also challenges the idea that slowing the transition improves stability. Henderson notes: “Right now, the risk isn’t moving too fast; it’s the cost of delays… analysis shows a one-year delay in wind or transmission projects could increase residential power prices by up to 20%.”
Solaye Snider, Climate and Energy Campaigner at Greenpeace Australia Pacific, frames the issue in similar terms: “As long as we are dependent on fossil fuels, we will be at the mercy of geopolitics… transitioning to local renewables is the way to protect Australian households and businesses from international energy price volatility.”
What emerges is a layered system response:
Disruptions in global oil markets are driving fuel supply pressure, particularly for petrol and diesel.
At the same time, domestic gas supply remains relatively stable, limiting any immediate impact on availability.
However, gas still plays a key role in electricity markets, meaning price exposure can persist under certain conditions, particularly during peak demand periods.
Australia’s energy system is increasingly buffered by renewables and storage, but not yet insulated. As Wilkinson notes, broader oil price shocks still represent “a material negative for the economy,” even if gas markets remain stable.
The Climate Council’s report ultimately reframes the current moment as a test case. The extent to which future shocks translate into consumer price impacts will depend less on global events and more on how quickly the system reduces its reliance on fuels that remain exposed to them.