farmers need to buy huge amounts of diesel to keep our food secure
- Written by: Amanda Craft, Lecturer in Accounting and Personal Financial Planning, Western Sydney University
Over recent weeks, Australian drivers have watched as petrol and diesel prices have soared, raising concerns about wider price shocks to come.
But at the same time as urban motorists see rising prices, something else often happens in rural Australia. Farmers begin filling their diesel tanks. This behaviour can look like hoarding, or even panic buying. But in many cases, it is simply practical farm management.
If we want to keep our food supplies secure, understanding what farmers need in diesel supplies now, and in coming months, will be crucial.
How farmers buy diesel – and why it matters now
On Friday, the Australian Competition and Consumer Commission said it was:
concerned about petrol and diesel availability in some regional and rural locations, and has heard concerns from residents, businesses and primary producers about the potential impacts of this situation.
Diesel shortages or higher prices can have a heavy impact on farmers, as I’ve seen up close.
I’m an academic expert in accounting and financial decision making. But I’ve also observed farm operations firsthand, through time spent on a family farm in regional New South Wales.
Many farms keep large diesel tanks on their properties. These tanks supply tractors, harvesters, irrigation pumps and trucks. During busy seasons such as sowing or harvesting, farms may use thousands of litres of fuel.
Because diesel is a key production input, farms treat it differently from household fuel purchases. Under the relevant Australian accounting standards for inventories, inputs used in production can be recorded as inventory until they are used. This means fuel bought today can sit on the farm’s balance sheet as an asset until it’s consumed.
If a farmer expects to use the fuel anyway, buying earlier can reduce exposure to future price increases. Research on agricultural risk management shows farmers often bring forward input purchases when they expect costs to rise or supplies to tighten.
Winter sowing is coming, meaning diesel is vital
Farmers and other off-road industries can claim refunds for fuel excise through the Fuel Tax Credit scheme.
The program lowers the effective cost of diesel used in activities such as agriculture and mining. This makes bulk purchasing more viable for businesses that already have storage tanks.
Farm income is also seasonal. Revenue often arrives after harvest, while many costs occur months earlier during planting and preparation. Bringing forward purchases of inputs, such as diesel, can therefore help manage cash flow.
When distributors warn fuel prices may rise, many farmers will try to fill the tanks they already have. This is especially common as farms prepare for winter sowing in southern Australia – now just months away.
‘Just-in-time’ supplies
Australia imports most of its refined fuel. Much of it comes from refineries in Asia, particularly Singapore.
Prices in that wholesale market can change daily, and those changes quickly affect what Australian retailers expect to pay for their next delivery.
This reflects a broader supply strategy used across many industries. Since the 1980s, companies around the world have adopted what is known as “just-in-time” inventory management. The system was developed by Toyota in Japan and later spread globally through manufacturing and logistics systems.
Under just-in-time systems, businesses keep inventories low and rely on frequent deliveries, rather than storing large stockpiles. The goal is to reduce storage costs and avoid tying up money in unused goods.
Research in operations management shows this approach can improve efficiency when supply chains are stable.
Australia’s fuel system works in a similar way. Rather than maintaining very large national fuel reserves, the country relies heavily on regular shipments of imported fuel through major ports. Government data shows Australia imports a large share of its petrol, diesel and jet fuel.
This system is efficient during normal times. But when geopolitical tensions push oil prices higher, price expectations can move quickly through the supply chain.
Fuelling our food future
All of this highlights a much broader issue: Australia stores relatively little fuel compared with some other developed countries.
For many years, the country struggled to meet the International Energy Agency requirement that member nations hold emergency oil reserves equal to 90 days of imports.
Most fuel storage is concentrated near major coastal ports. Australia could strengthen energy security by building more inland fuel storage.
Regional logistics hubs – such as Parkes or Dubbo in New South Wales, Toowoomba in Queensland, or Kalgoorlie in Western Australia – already sit on major freight routes.
Building new fuel storage is expensive and heavily regulated. That’s where the government could step in, funding new regional storage infrastructure through grants, low-interest loans or tax incentives.
Keeping Australia’s public emergency reserves in the same tanks used by private companies would help keep these facilities economically active, rather than sitting unused.
There’s an opportunity here – to use this experience to make Australia’s fuel and food security harder to disrupt in future.
Authors: Amanda Craft, Lecturer in Accounting and Personal Financial Planning, Western Sydney University
