Australia Braces for $120 Oil, Diesel Soars Past A$3/L

Australia’s federal government is preparing contingency measures for a sustained rise in global crude prices, including a scenario where oil remains above US$120 a barrel . The planning comes as diesel prices across the country have moved beyond A$3 per litre , raising costs for households and diesel-dependent businesses.

Officials have framed the work as readiness planning rather than a prediction of where prices will settle. The near-term focus is on keeping fuel supply reliable and ensuring product can be transported and delivered, particularly to areas outside major cities where distribution can be more vulnerable to disruption.

Shift from monitoring to logistics coordination

Prime Minister Anthony Albanese is expected to convene a national cabinet meeting focused on petrol supply. The stated purpose is to align approaches across jurisdictions while conditions are tracked, signalling a move toward more active coordination on availability and delivery.

Inside government, the Treasury Department is running scenario analysis on the economic effects of different oil-price paths. One of the assumptions being tested is crude holding at US$120 per barrel for an extended period, which has been described as modelling to understand possible outcomes rather than an official forecast.

Strategic reserve release and incoming cargoes

Energy Minister Chris Bowen said Australia has released 757 million litres from its strategic fuel reserve. He said that total includes 545 million litres of diesel and 212 million litres of petrol.

Bowen said the released volumes are being directed to regional areas where demand is higher. The government has also acted on shipping logistics by replacing six refined-fuel shipments that had been cancelled and securing two additional shipments, with arrivals expected in the coming weeks.

Biofuels under review; rationing not on the agenda

Treasurer Jim Chalmers said the government is considering whether to expand ethanol mandates nationally to increase biofuel availability. No decision has been announced and no timeline has been provided.

On emergency measures, the government has said fuel rationing is not imminent. Bowen also said internal documents from 2020 that outlined potential steps during a severe disruption—such as purchase limits and restrictions on non-essential driving—are outdated, and that rationing is not part of the current agenda.

Why it matters for prices, policy, and markets

Diesel is a key input for freight, agriculture, and many service industries, so higher pump prices can feed into transport and distribution costs across the economy. The emphasis on regional deliveries highlights that price spikes can coincide with practical supply constraints, not only affordability pressures.

For policymakers and investors, Treasury’s sustained high-oil scenario underscores the risk that persistent energy costs could complicate the balance between inflation pressures and economic activity. Key uncertainties remain, including how long global crude prices could stay elevated and whether the ethanol mandate option advances beyond consideration.