A perfect storm to boost Australia's energy security

23 March 2026 (IEEFA Australia): The world faces the largest supply disruption in the history of the global oil market. Australia is particularly exposed to this shock due to its high dependency on oil imports. In its new briefing note The perfect storm to boost energy security, IEEFA analyses Australia’s exposure and identifies the most promising options to improve the country’s resilience to this and future oil shocks. 

In 2000, Australia was mostly self-sufficient in oil, with high volumes of domestic oil production and eight refineries capable of supplying 98% of Australia’s petroleum product consumption. Today, however, domestic production only amounts to 5.6% of our demand, and our two remaining refineries only provide 17% of our refined petroleum products. Australia now has the largest trade deficit in refined petroleum products globally.

“While Australia only buys a small percentage of its crude oil from the Middle East, it is highly exposed through the Asian refineries we import refined products from,” says Kevin Morrison, Energy Finance Analyst, Australian Gas at IEEFA, and co-author of the report. “Countries are already starting to put restrictions on exports to prioritise their domestic markets.” 

Australia’s situation is made more precarious by the country’s very low stockpiles of key petroleum products, with 37 days of petrol and 30 days or less of diesel and jet fuel. Australia has the lowest level of oil stocks of all IEA members – on average major oil importers held 141 days of stocks in December 2025.

“This exposure presents a large economic risk for Australia because oil is our largest energy source and is critical to many of our key economic sectors,” Morrison says. “We could see serious impacts on our agricultural production, mineral exports, as well as inflation and economic growth. Despite this, governments on both sides have repeatedly ignored warnings about the country’s vulnerability.” 

Australia has few options to address the situation. The government has already implemented a temporary relaxation of fuel specifications to make more fuel available, and started diversifying its suppliers of refined products. It should now take rapid action to curb demand, as recommended by the IEA. This can include voluntary measures such as working from home and reducing air travel, as well as required changes such as dropping speed limits and imposing driving restrictions. Such measures can make Australia’s stockpiles last longer without material economic impacts.

“The government could also investigate bilateral crisis supply agreements with some of our suppliers of refined oil products who are also large importers of LNG with significant exposure to interrupted imports from the Middle East,” says Amandine Denis-Ryan, IEEFA Australia’s CEO, and co-author of the report. “This would require new temporary export control mechanisms to allow the government to prioritise specific countries for Australia’s LNG spot sales in crisis times. These could be embedded in Australia’s domestic gas reservation policy from 2027.”

Source of LNG imports for suppliers of Australian refined oil products

^{Source: Kpler.} 

Increasing the taxation of coal and gas exports, which are expected to attract elevated prices for the duration of the crisis, could also help by providing funds for cost-relief and fuel-shift measures.

Longer term, Australia has more solutions available to improve its resilience to future oil market shocks, but few can offer protection at scale. Increasing domestic supply is not feasible due to the lack of commercial oil reserves, and increasing stockpiles should be a priority but will take years. 

To increase energy security, Australia needs to reduce its dependence on oil throughout the economy. Electrification is the most promising solution as it is mature, cost-effective and can deliver reductions in oil imports at scale, which can be offset with domestically supplied clean energy. The Iran oil shock is the first to happen at a time when renewables and electrification offer a credible alternative. While costly, developing supply chains for low-carbon fuels is also likely to be required, especially in aviation and other heavy transport.

“Australia lags on electric vehicle adoption, and progress in mining and heavy transport electrification is minimal,” Denis-Ryan says. “The government is even considering removing some of the incentives which have been driving EV purchases. The severe energy threat warrants a comprehensive government policy response that accelerates electrification of Australia’s transport and mining sectors.”  

The government knows what it must do – it has already developed transport and resources sector plans that show the best actions to move away from oil. Now is the time to focus on their swift implementation to ensure Australia is not left so exposed to the next global crisis.

Read the report: The perfect storm to boost energy security

Media contact: Amy Leiper, ph +61 414 643 446, [email protected] 
Author contacts: Kevin Morrison, [email protected]

About IEEFA: The Institute for Energy Economics and Financial Analysis (IEEFA) examines issues related to energy markets, trends, and policies. The Institute's mission is to accelerate the transition to a diverse, sustainable and profitable energy economy. (ieefa.org)