Cutting fuel excise is a sugar hit – we need a plan to slash dependence on imports

As fuel prices spike, many Australians are understandably anxious. Photos of empty bowsers, long queues, and high prices create the impression of a system under strain.

What we are seeing isn’t a collapse of Australia’s fuel supply chain. Shipments are still arriving and most deliveries continue as planned. While some cargoes have been disrupted, governments and industry have actively secured alternative supplies. What this crisis shows is the lack of a clear, long-term strategy to reduce dependence on fuel shipped from conflict zones thousands of kilometres away.

Because Australia is so reliant on trucks running on imported fuel, rising diesel costs are now flowing through the economy and pushing up the cost of freight, food and everyday goods.

The federal government has moved to underwrite fuel imports, relax fuel standards and tap reserves. The government has also flagged the possible need to ration fuel if supplies keep shrinking in its new fuel security plan.

These are sensible responses to a disruption more complex and potentially longer-lasting than first thought. But they are not a long-term plan to end reliance on importing fuel in a very uncertain world.

No unifying strategy

Australia’s plans for the future of transport include a national electric vehicle strategy and the New Vehicle Efficiency Standard.

These steps are necessary. The problem is, they tend to exist in silos. There’s no clear roadmap aimed at a practical outcome: reducing dependence on imported fuels and strengthening our long-term energy security as part of the transition to net zero.

Electrification at scale

Every kilometre travelled using electricity is one that didn’t depend on a tanker arriving from overseas. Unlike oil, renewable energy is not exposed to global supply disruptions in the same way.

Electric vehicles aren’t just a question of consumer choice. Electrifying transport is a full system transition.

Waiting for households to gradually switch to electric cars will be slow. Working to electrify high-impact segments such as urban freight, commercial fleets, buses and government vehicles will be much faster. Over time, this should reduce the hundreds of tanker shipments needed to keep the country moving each year.

Fastest response? Reduce demand

The quickest way to cut fuel dependence is to reduce how often we drive.

Around the world, governments and businesses are already encouraging reduced travel, flexible work and more efficient use of transport.

These temporary measures should become a core part of long-term strategy, as they can deliver immediate and lasting reductions in fuel use at very low cost.

Public transport as resilience

Every trip taken by train, tram or bus reduces demand for imported fuel. The same applies to walking, cycling and micromobility options, such as electric bikes or scooters.

Victoria and Tasmania have moved to make public transport free – and reduce demand for fuel.

If Australia had an integrated transport system in which public transport, cycling and other alternatives get a boost, it would give people viable alternatives when driving becomes more expensive or difficult.

Rethinking fuel reserves

The International Energy Agency requires member countries to hold 90 days of fuel reserves. Australia has long struggled to meet that benchmark.

Decades of economic stability left Australia underprepared for fuel security challenges. Australia has long relied on continuous global supply of fuel, stocks held by the private sector and relatively lean inventories. While efficient under normal conditions, this system has little buffer when supply becomes uncertain.

To boost fuel security, authorities should expand onshore storage, diversify import pathways, and strengthen distribution networks so fuel can reach crucial regional sectors and communities when supply is disrupted.

Policy coherence matters

Even as Australia’s power grid runs more and more on renewables, policymakers continue to approve more and more investment in fossil fuels.

With one foot in each camp, it’s hard to have a coordinated strategy to shift rapidly to forms of transport that don’t rely on long fuel supply chains.

Policy discussions around reducing incentives for EVs and introducing distance-based road user charges for EV drivers risk sending mixed signals to consumers and industry.

A credible transition to a new technology requires a clear sequence: first, give incentives and support, and move to pricing reform only once the adoption trend is established.

Avoiding ‘quick fixes’

In every energy crisis, bad ideas come back from the dead.

The move to temporarily halve the fuel excise is one such idea.

The move will lower petrol and diesel prices by around 26 cents per litre. While this provides short-term relief, it also weakens the price signal. Making fuel cheaper will simply encourage people to use more of it – a bad idea in a supply crunch.

Economists are warning the move could push fuel consumption higher and prolong inflationary pressures.

Other countries are already reducing fuel dependence

China has linked industrial policy, renewable energy and EV deployment into a coordinated transition, demonstrating how scale and coordination can reduce reliance on imported fuels.

Singapore has taken a whole-of-system approach, linking energy, transport, land use and infrastructure into a coordinated transition to reduce emissions, manage demand and limit reliance on fossil fuels.

Japan maintains large fuel reserves well beyond minimum requirements, equivalent to 254 days of domestic consumption.

None of these models is perfect. But they show reducing fuel dependence is a matter of economic resilience and national security, not just environmental policy.

A moment to reset

The modern world has long been built on oil. This crisis shows how fragile that system is.

Despite widespread fears, Australia isn’t running out of fuel. But even this tightening of supply shows how quickly global disruptions can affect us. Short-term interventions won’t be enough, while sugar hits such as cutting fuel excise will have the opposite effect.

Policymakers should use the crisis to build a transport system less exposed to less reliable supply chains, built on locally produced electricity and aligned with a low-carbon future.