Conflict Stirs Diesel Supply Fears for Australian Mines
Australia’s coal and iron ore mining industries could be approaching a diesel fuel supply crisis, as the Middle Eastern conflict disrupts crude oil trade flows, exacerbated by panic buying by some Australian motorists.
The alarm has been raised by a wide range of sources including, coal buyers, trade unions and mining executives, although some mining industry bodies have currently declined to comment.
“We heard that diesel stocks in Australia could run out sometime in March,” said one market source familiar with the current diesel fuel situation in Australia.
“Many coal mines in Australia are operating near their break-even level, so there are concerns that a shortage or higher prices of fuel could affect operations and possibly impact supply.”
Association of Mining and Exploration Companies (AMEC) CEO, Warren Pearce, told Australian media that some smaller mining companies had only five days’ of diesel supply.
“The mining industry runs on diesel and an interruption to fuel supply will potentially see mines having to shut down until fuel becomes available,” he reportedly said on 12 March.
The Maritime Union of Australia (MUA) described the diesel fuel supply situation in Australia as critical, and estimated the country has only around 23 days of fuel supplies at current stock levels.
“Global conflict has highlighted the truth our union has been drawing attention to for many years,” said MUA National Secretary, Jake Field, in an 11 March statement.
“Australia is dangerously reliant on foreign tankers and overseas supply chains for something that is as fundamental as the fuel we all use to get to work or to do our work,” he added.
In response, the Australian government has sought to allay concerns about supplies and rising fuel costs for consumers and industry with measures to tackle potential profiteering.
“We are not experiencing a fuel shortage, but rather localised disruption due to significant spikes in demand,” said Energy Minister, Chris Bowen and Treasurer, Jim Chalmers, in a 11 March statement. “Despite global price volatility, Australia’s fuel supply remains secure,” they added.
“We are convening relevant forums, including the National Coordination Mechanism to respond to emerging supply chain issues, the Trusted Information Network, and the National Oil Supplies Emergency Committee,” a statement from Bowen and Chalmers said.
The International Energy Agency (IEA) recommends its 32 member countries, that includes Australia, maintain emergency oil stocks equivalent to 90 days of net oil imports.
The IEA’s members agreed on 11 March to release 400 million barrels of oil from their 1.2bn barrels of strategic reserves to address supply disruption stemming from the Middle Eastern conflict.
“The oil market challenges we are facing are unprecedented in scale, therefore I am very glad that IEA member countries have responded with an emergency collective action of unprecedented size,” said IEA Executive Director, Fatih Birol, in the statement.
Around 20 million barrels per day of oil were shipped through the Strait of Hormuz in 2025, equivalent to about 25% of world seaborne trade, according to the IEA.
Australia’s capacity for producing diesel from imported oil has dwindled, to only two operating oil refineries – Ampol’s Lytton in Brisbane, and Viva Energy’s in Geelong, Victoria. The two refineries have a capacity of 14 bn litres/year (7.5 bn/year for Geelong, 6.5 bn/year for Lytton).
Two other oil refineries were converted to import terminals, BP’s Kwinana in Western Australia in 2021, and ExxonMobil’s Altona in 2023, that together had refinery capacity of 13.6 bn litres/year.
Prior to this, BP had closed its Bulwer Island refinery near Brisbane in 2014, Caltex had shuttered its Kurnell refinery near Sydney in 2012, and Shell its Clyde refinery, also in Sydney, in 2011.
Australian oil refineries have found it increasingly difficult to compete with newer, larger-scale plants in Asia that have lower production costs and higher profit margins, said sources.
The mining industry across Australia consumes 9.6 bn litres of diesel per year, according to the Institute for Energy Economics and Financial Analysis (IEEFA) in a January report.
Open-cut coal mines tend to have the most ‘diesel intensity’ usage, and their consumption has increased by 50% since the 2011 FY because of higher strip ratios, said the IEEFA.
In addition, Australian government regulation such as its Safeguard Mechanism for reducing carbon emissions from mining activity have in practice provided minimal incentives for change.
Mining companies in Australia are entitled to receive a tax rebate on their consumption of diesel fuel, which is estimated to be worth AUD1.5bn/y ($1bn/y) to coal miners, the IEEFA said.
McCloskey contacted several mining industry representative bodies for comment, including Coal Australia, and individual coal companies such as BHP. However, they had yet to respond to McCloskey’s questions at the time of publishing.
“Queensland Resources Council (QRC) and our members are carefully monitoring diesel supply risks. At this stage, there are no immediate impacts to operations,” said a spokesman for the QRC which represents coal mining companies in Queensland in a 12 March response to questions.
In Western Australia, home to the country’s largest iron ore mines, premier Roger Cook said fuel supply to the state remains uninterrupted and that a fuel security roundtable had been held with industrial groups and bodies.
Cook said the state will work with suppliers to ensure timely restocking in regional areas, explore the use of higher-efficiency delivery vehicles and consider prioritising fuel and fertiliser imports through WA ports while monitoring domestic supply chains.
The state hosts some of the world’s largest iron ore operations, run by BHP, Rio Tinto and Fortescue. The volume of Australian iron ore exports in 2025 was 838 mt, the latest figures from the Australian Bureau of Statistics (ABS) show, shipped mainly to steel mills in China, as well as Japan and South Korea.