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As conflict in Iran continues to escalate, we are already seeing the consequences falling outside the bounds of the Middle East.
The ongoing escalation of war in Iran may soon shape the everyday economic realities facing Australians at home.
Despite being thousands of kilometres away, the war is already being felt through economic uncertainty and renewed pressure on our national struggle with the cost of living.
But most critically of all, oil.
It’s a complex, interconnected industry that is difficult to explain in one article, but what is easy to understand is the quick way that one mishap in crucial shipping areas can have global, immediate impacts.
Why is this affecting Australia?
Geographically, Iran is one of the most strategically important countries in the world.
The Strait of Hormuz sits between the Persian Gulf and the Gulf of Oman and is the only shipping sea passage in the region.
It is responsible for exporting a quarter of the world’s oil every single day.
At just over 50 kilometres wide, the passage sees tankers carrying crude from major Gulf producers such as Saudi Arabia, Iraq, Kuwait, and the United Arab Emirates to international markets.
Because so much of the world’s energy supply depends on this single passage, even the mere threat of disruption in the Strait of Hormuz can quickly send shockwaves through global markets and push oil prices higher – not to mention the fearmongering and panic buying that follows.
Obviously, more than the threat of disruption has occurred and the strait is practically inoperable as missiles and drone strikes continue to batter all countries that border the region, as well as direct attacks on oil fields and production sites.
Last week, Saudi Arabia halted operations at the largest oil refinery in Ras Tanura following an Iranian drone strike.
As of 9 March, Iraq’s main southern oil fields are reportedly down 70 per cent in exports, with an official from the Basra Oil Company saying, “Crude storage has reached maximum capacity and the remaining output after the major cut will be used to supply the country's refineries.”
How will this affect Australians?
Over the weekend, it was clear that the impact was already being felt, with major lines and queues forming at petrol stations across cities all around the country, and reports of panic buying in regional communities.
The Australian market recovered slightly with prices falling on Tuesday after US President Donald Trump insisted that the war would be over “very soon”.
However, hours later, he posted on Truth Social, saying, “If Iran does anything that stops the flow of oil within the Strait of Hormuz, they will be hit by the United States of America 20 times harder than they have been hit thus far.”
Clearly, the situation is very fluid and unpredictable, and for the average Aussie just wanting to fill up their car on the way to work, it is far from an ideal situation.
But the actual reason (rather, one of many) of why this is so impactful to us is due to the fact that the majority of Australia’s oil is stored offshore in these countries that are currently battling war and have shipping route closures encroaching as a major threat.
The Maritime Union of Australia (MUA) has called on the government to take action, saying this situation is the precise reason Australia needs to localise fuel storage and limit reliance on foreign supply.
“The closure of the Strait of Hormuz during the recent attacks on Iran is a stark warning of the volatility of Australia’s access to global fuel supply chains,” said Jake Field, MUA’s national secretary.
“We mustn’t gamble our economic stability on uninterrupted access to foreign fuel markets.
“We cannot assume that geopolitical tensions will always resolve before our reserves run dry.”
On Tuesday during question time in Parliament, Prime Minister Anthony Albanese said that “Australia is fuel secure right now”.
“We have as much fuel through our ports now as we did before the war.”
Energy Minister Chris Bowen said the increased pressure on the supply chain only increases demand, yet fuel is flowing into the country.
“This is an international crisis, not an economic opportunity or political opportunity.”
However, Minister Bowen has called for an urgent meeting with ministers and fuel industry leaders to discuss concerns for critical fuel-reliant industries such as farming and agriculture.
With the Middle East producing 45 per cent of the global supply of fertiliser, agriculture concerns are booming by the day as farmers begin to plant winter crops, with Victorian Farmers Federation president Brett Hosking stressing the urgency of this.
“We want to see some level of government intervention to ensure robust supply chains, and that agriculture is treated with a degree of importance because we only get one window to plant a crop,” Hosking said.
The Sydney Morning Herald reported that independent fuel suppliers have had challenges in orders and stock fulfilment.
Final thoughts
When something goes wrong, the effect on the oil industry is a slippery slope, no pun intended.
Overnight, fear can set in, even if the threat of fuel insecurity has been confirmed by the government to be improbable and unlikely.
Critical industries like farming and agriculture do need that assurance from the government that they will be able to do their jobs successfully and that everyday people can get to work and school in their cars without spending an arm and a leg.
But my main concern lies in the fact that now that Australia has essentially gotten involved in the war by sending surveillance aircraft and missiles to the UAE, this is going to see Australian taxpayers’ dollars going towards funding a foreign war, where thousands of innocent civilians are likely to suffer.
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