In a nation where every third house has solar panels, electric cars are no longer a novelty and the power grid is growing greener by the day, the era of “Big Oil” can feel like a fading memory.But Australians are now getting a lesson in real time on just how oil-dependent we still are. The conflict in Iran has cut off vast volumes of the commodity off from the global market, triggering the worst supply crunch in history, and sending oil prices surging. Because oil is the natural resource thats refined into fuels, this has made petrol and diesel considerably more expensive. At service stations across the country, the average price of regular unleaded briefly hit an all-time high of $2.50 a litre, a 50 per cent increase on pre-war levels. Diesel rose more than 70 per cent from $1.80 a litre to touch $3.19.While the modern home has long since swapped kerosene lamps for light bulbs, and oil’s role in the electricity sector has been almost phased out, a closer look at energy usage statistics across the broader economy tells a different story: we are still consuming more than 1 million barrels of oil a day – more than ever before. When viewed as a percentage of all energy sources, including coal, natural gas or renewables, Australias use of oil has dipped from its 1970s peak of 50 per cent of the mix. But still sitting at 40 per cent, it remains the biggest slice of the pie. And as our population has grown, so too has the overall need for energy.It won’t be this way forever. BP, one of the worlds biggest oil companies, forecasts that Australias oil consumption will be cut in half by 2050, driven mostly by declining use in road transport.But for now, as Australians battle elevated fuel price rises and the government takes emergency steps to head off supply shortfalls, whats clear is that even a nation making major strides toward cleaner energy is not immune to a global oil shock in the 21st century.At stake could be more than just a painful period of higher transport costs – a protracted Middle East war that keeps oil prices high could supercharge inflation, tip the economy into recession and even force the government to implement the first fuel-rationing measures seen in generations.Australia consumed 63 billion litres of refined oil products in 2025, which converts to 394 million barrels.paragraphtitle:ImportsIn 2025, Australia imported 52 billion litres of refined petroleum products and 10 billion barrels of crude oil and other ingredients, including liquids and chemical blending agents that are needed to produce finished products.Most of Australia’s petrol and diesel imports come from Singapore, South Korea, Malaysia, Taiwan and India.https://www.smh.com.au/interactive/modules/flourish-embed/index.html?resizable=true&dataSrc=visualisation/28640590?2236949; size: mediumhttps://www.smh.com.au/interactive/modules/flourish-embed/index.html?resizable=true&dataSrc=visualisation/28640898?2236949; size: mediumMost of Australia’s crude oil and other refinery feedstocks come from Malaysia, the US, Vietnam, Brunei, Nigeria and New Zealand.Australia produced 14,235 million litres of crude oil and condensate, a light hydrocarbon byproduct of crude oil and gas production, in 2025. Australia produced 14,134 million litres of total refined fuel products.How that is broken down: Australia produced 5836 million litres of petrol, 4608 million litres of diesel, and 1422 million litres of jet fuel. The remainder includes LPG, fuel oil and other products.paragraphtitle:Where a shortage would biteShould the supply crunch deepen, these are the sectors that represent the critical pressure points in Australia where the economic impact will be felt most acutely. Because our national stability relies on the movement of food, the continuity of essential services and revenue earned from exports, the government’s emergency fuel security framework has designated some of these sectors as priority users to receive fuel in the event that the supplies begin running dangerously low and rationing is required.paragraphtitle:What happened to local refining?Worsening Australia’s exposure to this year’s energy shock has been a major contraction in our ability to produce and refine our own oil reserves.For more than half a century, vast reservoirs of crude oil beneath Bass Strait and off Western Australia were hidden engines of the economy, producing enough of the commodity to feed a network of domestic oil refineries that kept the country supplied with fuel.But local oil production peaked around the year 2000, when hundreds of thousands of barrels of crude were being extracted every day. Now, 26 years later, crude production volumes have fallen 40 per cent, as major oil fields have dried out with scant new projects coming online to replace them. Six of the eight refineries in Australia at the turn of the century have now closed down too, as the local sector has struggled to compete with larger competitors across South-East Asia. The most recent were ExxonMobil’s Altona refinery in Melbourne’s western suburbs and BP’s Kwinana plant in Perth, both of which decided to close in 2021, when travel bans to arrest the spread of COVID-19 infections wiped out fuel demand. This has left Australia with just two local refineries – Viva Energy’s Geelong oil refinery and Ampol’s Lytton refinery in Brisbane, both of which are receiving taxpayer-subsidised lifelines to stay open.ai2html:australian-refineries; size: largeToday, Australia relies on imports for more than 80 per cent of its liquid fuel needs, mostly from the mega-refineries of Asia, which source much of their crude oil from the Persian Gulf but are now in a race to secure replacement supplies before their inventories run dry. For now, Australia’s fuel supplies remain steady. Our refiners are delivering all that they can, the government and importers are paying whatever it takes to continue booking enough new fuel shipments from overseas, and the industry has more than a month’s worth of reserves in storage tanks.But the longer the war in Iran continues, the bigger the risks will become for a nation sitting at the end of one of the world’s longest supply chains in an increasingly volatile global market.