Just when most of us had managed to put the pandemic behind us, along comes another global crisis sending prices higher and threatening to change the way we live and work.
The US-Israel war on Iran has unleashed a global energy shock that has sent global oil prices soaring and triggered a spike in fuel costs.
With daily reports of petrol stations running out of fuel as Australians rush to fill up amid fears of shortages, there has even been talk that governments could be forced to take even more drastic action: fuel rationing.
Australia last put in place forced rationing in mid-1979, during the second oil crisis of that decade, which followed the Iranian revolution.
Authorities in Australia dictated that motorists with odd-numbered licence plates could fill up on one day, and even-numbered licence plates the other. The restrictions lasted for weeks.
But the trigger wasn’t the global energy shock, it was the decision by workers at the since-closed Caltex Kurnell oil refinery to strike.
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A research paper by Acil Allen Consulting in 2014 concluded that during the 1970s, despite the disruptions and chaos, “there were no interruptions to supply to or in Australia”.
So that’s comforting, right?
Well, kind of.
Kevin Morrison, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, notes that Australia’s fuel supplies were much more secure in the ’70s than they are now.
“We were largely self-sufficient in the 1970s,” Morrison says.
The last time Australia experienced rationing due to a true lack of supply was during the second world war, when Australians had to apply for petrol licences and ration tickets.
As an article in the Journal of the War Memorial noted: “At the start of World War II Australia was totally unprepared for an extended conflict and had sufficient petrol reserves for only three months of normal consumption, and limited storage capacity.”
As many of us now know, we rely on imports for 90% of our liquid fuel needs, with a big chunk of the petrol, diesel and jet fuel produced by Asian refineries.
They, in turn, rely heavily on Middle Eastern oil, which has become in very short supply since the start of the US-Israel war on Iran and the closure of the strait of Hormuz, through which 20% of the global oil trade passes.
Chart showing fuel import sources
Malaysian and Chinese officials have already flagged that they are prepared to curb exports of fuels to shore up supplies for their own citizens and businesses.
Petrol rationing would be an extraordinary measure, but the International Energy Agency has already called this energy shock the most extraordinary in history.
Chart showing oil import sources
CBA’s chief economist, Luke Yeaman, says the shock is unprecedented in two ways: the scale of the supply disruptions and the lack of spare capacity.
“The famous 1970s oil shocks caused by the Arab oil embargo and the Iran revolution affected only around 5‑7% of global oil supply; today around 15% is at risk,” Yeaman says.
“In the 1970s, global spare oil capacity was around 5‑8%; today it is lower at around 3‑5%.”
CBA analysts believe the disruptions will last for months, not weeks.
And if that is the case, then all options have to be on the table.
“Oil is about 40% of the total energy we consume each year,” Morrison says.
“We keep talking about how we are such a key global supplier of coal and gas, but we have neglected our own energy security. That has been a real failure of policy.”
So far the focus has been on reassuring panicky motorists that there is no need to hoard fuel, while at the same time taking steps like releasing 20% of our fuel reserves to plug supply gaps in regional areas that has left some towns out of petrol.
Chris Bowen, the climate change and energy minister, on Friday said the nation’s overseas fuel shipments “will continue to arrive” and “are locked in” for the month or so.
“Obviously beyond that late April period, we’re dealing with more uncertainty [and it] depends how the international circumstance rolls out,” Bowen said on Friday.
After the fuel release program, we probably have less than a month of reserves.
Bowen says the government is working through “contingencies”, but rationing “has not been contemplated as something we need to do in the immediate future”.
“We’re not there and we’re not close to there,” he said.
The government is sharing information and discussing options with states, fuel companies, businesses and motoring groups to coordinate official responses aimed at easing bottlenecks in specific regions and areas.
And then there’s the demand side of the equation.
Trying to reassure people not to hoard fuel was the early strategy but that seemed to have little effect. The Greens have urged authorities to make public transport free during the Middle East crisis.
The world’s energy watchdog has advised governments to reduce highway speeds and encouraged workers to carpool or, ideally, work from home to combat soaring oil prices and impending fuel shortages caused by the Middle East conflict.
Other countries are already taking steps. Sri Lanka and the Philippines have mandated a four-day working week for public servants in an effort to cut down on petrol use.
Shane Oliver, AMP’s chief economist, reckons Australia should be following the lead of other countries to take pressure off fuel supplies.
“We should be moving now to curtail demand in ways that are least disruptive to business – like encouraging or allowing workers who can to work from home, encouraging more reliance on public transport, encouraging people and businesses to avoid non-essential air travel and encouraging greater use of E10 fuel,” Oliver says.
“The longer we leave it the greater the risk of real disruption.”