BY WEALTH ADVISER
If you filled up your car in late March 2026, you already know something has gone seriously wrong with fuel prices. Regular unleaded hit a national average of around $2.53 per litre — an all-time record — before the government stepped in with an emergency excise cut on 1 April. Diesel, which powers the trucks that move almost everything Australians buy, reached even more punishing levels above $3.00 per litre in some cities.
The government’s decision to halve the fuel excise from 52.6 cents to 26.3 cents per litre for three months will take some of the immediate sting out — roughly $19 off a 65-litre tank, once the lower-taxed fuel works through the supply chain. But the excise cut treats the symptom, not the cause. And the cause is worth understanding, because it explains not just why petrol is expensive right now, but why the effects are flowing through to grocery prices, airfares, interest rates, and the value of your mortgage repayments.
The part of the story you haven’t heard
Most of the media coverage has focused on the oil price. Brent crude climbed above US$116 a barrel in March, and that number gets the headlines. But crude oil is only the raw ingredient. What you put in your car, what powers a truck, and what keeps a plane in the air is refined product — petrol, diesel, and jet fuel — and the refined product market is under greater stress than the crude market.
The difference matters. When Russia invaded Ukraine in 2022, global oil markets experienced a severe price shock, and refinery margins spiked as supply chains scrambled to adjust. But the disruption was largely one of trade redirection — Russian oil eventually found new buyers in Asia, and global refining capacity adapted. The system strained, but it adjusted over time.
The 2026 crisis involves more severe supply-chain bottlenecks, particularly for refined products. The closure of the Strait of Hormuz — the narrow waterway between Iran and the Arabian Peninsula through which roughly a fifth of the world’s oil supply normally passes — has disrupted an estimated 14 to 15 million barrels per day of crude transit. Several emergency measures have partially offset the crude shortfall: the IEA reportedly coordinated a record strategic reserve release, Saudi Arabia ramped pipeline exports, and the UAE increased alternative pipeline throughput. Together, these have prevented the crude price from spiralling to the levels many feared.
But for refined products, the buffers are far thinner. The Strait normally carries around 5 to 6 million barrels per day of finished fuels — petrol, diesel, and jet fuel — representing roughly a fifth of all seaborne trade in refined products globally. Unlike crude, there are very limited alternative routes through which these products can bypass the chokepoint, and the ones that exist add significant cost and time.
The problem compounds from there. Around 80 per cent of the crude that normally transits the Strait flows to Asian refineries. With that feedstock disrupted, refineries across the region have reportedly reduced output. According to industry estimates cited by Clime Investment Management, China’s Sinopec has cut throughput by more than 10 per cent, Singapore’s major refineries are operating at 50 to 60 per cent of capacity, and total Asian run cuts may be in the range of 4 to 5 million barrels per day. These are early estimates and the full picture is still emerging, but the direction is clear: the shortfall in finished fuels is far larger than anything the crude-market buffers can address.
The result is that while the crude oil price has stayed below its 2022 peak, refined product prices are reported to be well above their 2022 levels. The jet fuel crack spread, according to industry data, is running at close to double its 2022 high — which is why Qantas has raised international fares and other airlines are cutting routes entirely.
Why this matters at your kitchen table
Australia is unusually exposed to this particular type of disruption. The country imports roughly 90 per cent of its liquid fuel as refined product from Asian refining hubs. South Korea supplies around 32 per cent, with Singapore and Malaysia making up most of the remainder. Australia’s two remaining domestic refineries — Ampol’s Lytton in Brisbane and Viva Energy’s Geelong facility — provide a partial buffer, but they meet less than 20 per cent of national consumption and source their crude primarily from Southeast Asia and Africa, not the Gulf.
The important point is that Australia doesn’t need to import directly from the Middle East to be affected by a Middle Eastern supply disruption. The refineries that make our fuel depend on Gulf crude. When those refineries cut output, the fuel available for export to Australia shrinks — regardless of where the crude originally came from.
At the household level, the effects flow through three channels. The first is the one you feel directly: the cost of filling your car and heating your home. Even with the excise cut now in place, petrol prices are likely to remain well above the $1.80 to $2.00 range that Australians had grown accustomed to over the past year. The excise relief lasts until 30 June, and unless the Strait reopens or refinery capacity recovers substantially in that window, prices will likely rise again when it expires.
The second channel is less visible but equally important: the cost of everything that moves by truck, ship, or plane. Diesel is the fuel of logistics. When diesel prices rise by 30 or 40 per cent, the cost of transporting food from farm to warehouse to supermarket rises with it. So do the costs of construction materials, online deliveries, and any product that travels a significant distance before reaching the consumer. These increases don’t appear on a fuel receipt — they appear as higher grocery bills, more expensive building quotes, and rising prices for goods and services across the economy.
The third channel is the one that connects the fuel crisis to your mortgage, your super, and your savings rate: inflation, and the Reserve Bank’s response to it.
From the bowser to the cash rate
The RBA has already hiked the cash rate twice in 2026 — from 3.60 per cent to 3.85 per cent in February, and again to 4.10 per cent in March — reversing the three rate cuts delivered in 2025. In its March statement, the Board noted that the conflict in the Middle East had resulted in sharply higher fuel prices, that short-term inflation expectations had already risen, and that there was a material risk inflation would remain above target for longer than previously anticipated.
Energy prices feed directly into the Consumer Price Index. Petrol is one of the most volatile components of the CPI, and because it affects transport costs throughout the supply chain, its inflationary impact extends well beyond the “automotive fuel” line item. The RBA’s concern is not just that fuel is expensive right now — it’s that sustained fuel price increases could become embedded in broader price expectations, making inflation stickier and harder to bring back to the 2 to 3 per cent target band. Fuel is not the only factor in the RBA’s calculations — wages growth, housing costs, and services inflation all play a role — but the energy shock has added a layer of pressure that was not in anyone’s forecasts six months ago.
For households with a variable-rate mortgage, the connection is immediate. Each 0.25 percentage point increase in the cash rate adds roughly $75 to $80 per month to repayments on a $600,000 loan. Two hikes in two months means an additional $150 to $160 per month on top of the fuel and grocery cost increases already hitting the household budget. If the RBA hikes again — and futures markets are pricing in a meaningful probability of at least one more increase — the cumulative pressure is substantial.
For savers, rising rates have an upside: deposit rates have followed the cash rate higher, with some savings accounts now offering above 4.5 per cent. For retirees drawing income from account-based pensions, the effect depends on the portfolio — rising rates tend to support cash and short-term fixed income returns, but can weigh on bond prices and growth assets in the short term.
The key uncertainty is duration. If the Strait reopens relatively quickly — through a ceasefire, a negotiated arrangement, or a military resolution — fuel prices would be expected to normalise within months, and the inflationary pressure would prove temporary. In that scenario, the RBA would likely hold or even reverse course once it was clear that inflation was falling back toward target.
If the disruption persists into the second half of 2026, the picture is harder. Sustained high fuel prices would keep upward pressure on inflation, limit the RBA’s ability to ease, and extend the squeeze on household budgets. Businesses that rely on transport — agriculture, construction, retail logistics — would face margin pressure that could flow through to employment decisions. The combination of high fuel costs, high interest rates, and high grocery prices is the scenario that worries economists most, because each element reinforces the others.
What no one can predict — and what you can plan for
Nobody knows how long the Strait of Hormuz will remain closed. Geopolitical forecasting is not a skill that belongs in a financial planning newsletter, and anyone claiming certainty about the timeline is guessing.
What is worth recognising is that regardless of how this particular crisis resolves, Australia’s dependence on imported refined fuel is a permanent structural feature of the economy. The country closed five of its seven refineries over the past two decades. It holds roughly 29 days of petrol reserves and 25 days of diesel — thin by international standards. When the global refined product market tightens, Australia feels it quickly and has limited domestic options to cushion the blow.
That doesn’t mean households should plan around worst-case energy scenarios. It means that the kind of cost-of-living shock we’re experiencing right now — one that arrives suddenly, through a supply chain most people never think about — is the type of event that financial resilience is designed to absorb. Emergency savings buffers, manageable debt levels, diversified income sources in retirement, and the flexibility to adjust spending when external costs spike: these are the fundamentals that matter most when the world delivers a surprise.
If you’re feeling the squeeze right now, you’re not alone, and you’re not doing anything wrong. Petrol at $2.50 a litre and interest rates at 4.10 per cent is a combination that would test any household budget. The excise cut will help at the margin. The rest comes down to the plans, structures, and buffers that are already in place — or that this moment might prompt you to build.
References
• Teh, Jason. “The refinery problem: A different kind of energy crisis in 2026.” Firstlinks / Clime Investment Management, 25 March 2026. Analysis of crude vs refined product market dynamics, Strait of Hormuz throughput, and Asian refinery run cuts.
• Reserve Bank of Australia. “Statement by the Monetary Policy Board: Monetary Policy Decision.” 17 March 2026. Cash rate increased to 4.10 per cent; inflation assessment and Middle East conflict commentary.
• Australian Institute of Petroleum. Retail pricing data and weekly reports. aip.com.au.
• NRMA. “Weekly Fuel Report.” Late March 2026. Sydney average regular unleaded 257.8 cents per litre; diesel 322.8 cents per litre.
• Prime Minister of Australia. “Fuel excise halved for three months.” Media release, 30 March 2026. Excise cut from 52.6 to 26.3 cents per litre, effective 1 April to 30 June 2026.
• International Energy Agency. Oil Market Report, March 2026. Strategic reserve releases and supply disruption estimates. (Cited via Firstlinks analysis.)
• Wood Mackenzie. Asian refinery run cut estimates, March 2026. (Cited via Firstlinks analysis.)
