Petrol prices in Australia have dropped below levels seen before the Iran war began, now at less than 170 cents a litre after spiking to about 260 cents a litre in March. The decline reflects improved supply flexibility and reduced demand, though experts caution the oil crisis is not over.
How Did Refiners Keep Getting Oil?
The US-Israel war on Iran closed the Strait of Hormuz, through which about a third of the world's crude oil travelled in 2025. Oil is refined into petrol, diesel and other fuel products. Without oil, the world risked fuel shortages. The International Energy Agency called for lower highway speeds and increased working from home, while the International Monetary Fund warned of global recession.
Investment firm UBS estimates the closure removed about 20.5 million barrels a day of oil and products, but workarounds emerged. Suppliers outside the Middle East proved more flexible than expected. Alternative Middle East pipelines added 4 million barrels a day, stockpile releases added nearly 4 million, and China drastically cut imports, bringing the shortfall to just 7 million barrels a day in May, UBS found.
China's ability to cut imports by about 4 million barrels a day surprised analysts; while it is known to have high inventories, it does not publish stockpile data. Supply chains were 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.
How Did Australia Keep Getting Fuel?
Australia, with modest refining capabilities, is always vulnerable to supply cuts. By April, Brunei and Vietnam had reduced crude exports to Australia, Singapore cut petrol, Japan cut diesel, and China supplied less jet fuel. Offsetting that, Australia bought dramatically more crude from South Korea, jet fuel from Malaysia, and diesel and petrol from the US in April, government data shows. Australian importers even bought 50 million litres of jet fuel from the US, a rare supply route.
Supply has held up, with 92 ships of fuel arriving in Australia, according to the government, which authorised the release of 20% of reserve stocks onshore and extended that 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.
The government also spent $7.5 billion to underwrite private companies' fuel purchases via the Export Finance Australia agency, helping five companies take on 16 diesel shipments and three jet fuel shipments they would not otherwise have bought.
Countries have had different experiences. Bangladesh rationed power soon after the conflict started after vital liquefied natural gas supplies were disrupted.
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, the prices rub against repeated warnings from oil executives and analysts that the oil crisis is not over.
Data firm Energy Aspects says even if the peace deal holds, full restoration of normal shipping flows requires mines to be cleared and shippers and their 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 other lubricants, have warned that damage to refining infrastructure during the conflict could disrupt normal supplies for months, even if trade through the strait reopens.
Why Are Petrol Prices Lower Than Before the War?
Higher oil prices initially led to higher wholesale prices, pushing up retail prices. Petrol prices spiked to about 260 cents a litre in March but are now less than 170 cents a litre, below 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, says because Australia secured more fuel supply than it was using, prices fell. "We have plenty of petrol in the country," De Mello says. "That's why petrol prices are quite low at the moment." Diesel prices are likely to remain elevated, he says, given a "bigger crunch" for supply.
The federal and state governments' 32-cent reduction in fuel tax also contributed to falling prices. That cut to the excise will expire on 30 June. The federal government announced on Saturday that it would reduce the excise by 16 cents for an additional month in July. "We … will seek support from the states for July at national cabinet on Monday," the government said.
