Why Australia Can’t Just “Produce More Fuel”
It’s the most common response to rising fuel prices and supply anxiety.
If fuel is the problem, why don’t we just produce more of it?
On the surface, it sounds logical. Australia is a resource-rich country. We export energy at scale. We have technical capability, skilled workers, and decades of industry experience.
So why not increase supply?
Because the system no longer allows it.
What looks like a simple question runs into a hard reality: Australia’s fuel supply is not just limited — it is structurally constrained. And those constraints have been built over decades.
Supply Isn’t a Switch You Can Turn On
Oil and fuel production operate on long timeframes, not short-term demand signals.
From exploration to first production, new oil projects typically take between 5 and 15 years. That includes:
geological surveying
environmental approvals
investment decisions
construction of offshore platforms and infrastructure
Even in favourable conditions, supply cannot be increased quickly.
This is why global oil markets are volatile. When supply is tight, it cannot respond immediately — and countries like Australia, which rely heavily on imports, are exposed to those delays.
There is also a fundamental misunderstanding at play:
Australia may have resources, but that does not mean it has readily producible supply.
Resources must be:
discovered
proven commercially viable
approved
financed
developed
Only then do they become production.
Australia’s Oil Production Is Already Declining
Australia is not holding back large volumes of untapped, easily accessible oil.
Most of the country’s traditional oil production comes from mature basins such as Bass Strait, which have been in decline for years. According to data from the Australian Energy Regulator and Geoscience Australia, domestic crude oil production has been trending downward over the past decade.
New discoveries tend to be:
smaller
offshore
technically complex
more expensive to develop
At the same time, Australia’s energy sector has shifted heavily toward LNG exports rather than domestic liquid fuel production. That means even where hydrocarbons are developed, they are not necessarily producing the fuels Australians rely on at the pump.
The result is simple:
Australia isn’t sitting on idle supply — it is running out of easy supply.
Even where resources may exist, access to them is tightly controlled and often constrained by overlapping policy frameworks.
Offshore exploration is government-controlled
Australia operates an offshore acreage release system, where exploration areas are nominated and released by government. Companies cannot simply decide where to drill — they must wait for access, then compete for it, then begin a lengthy approval process.
This introduces delay at the very first stage of supply creation.
Major projects have been stopped
The most prominent example is the proposed exploration in the Great Australian Bight.
International energy company Equinor withdrew from its Bight exploration plans in 2020 after regulatory hurdles, rising costs, and sustained political and social opposition.
That decision didn’t just stop one project — it removed an entire संभावित basin from Australia’s future supply pipeline.
Opportunities like this are rare. When they are lost, they are not easily replaced.
State-level restrictions fragment supply
Energy policy in Australia is not unified.
Several states have implemented restrictions or bans on onshore gas exploration and development, including:
Victoria (longstanding moratoriums and restrictions)
Tasmania (bans on onshore fracking)
evolving constraints in parts of Western Australia
While these policies are often driven by environmental or community concerns, their cumulative effect is to reduce flexibility in domestic supply development.
Legal and environmental frameworks extend timelines
Two major federal frameworks shape project timelines:
Native Title Act 1993
Environment Protection and Biodiversity Conservation Act 1999
Both serve important purposes — protecting Indigenous rights and environmental values.
But they also introduce:
extended consultation requirements
complex approval pathways
potential legal challenges
Projects can take years to navigate these processes, and in some cases are delayed beyond commercial viability.
The issue is not any single law. It is the cumulative weight of all of them together.
Oil in the Ground Is Not Fuel in the Tank
Even if Australia could increase crude oil production, that does not automatically translate into usable fuel.
Crude oil must be refined into products like petrol, diesel, and jet fuel.
Australia’s refining capacity has been reduced to just two operating refineries:
Geelong (VIC)
Lytton (QLD)
This is down from eight refineries in previous decades.
That means:
much of Australia’s crude is exported
much of its fuel is imported already refined
Rebuilding refining capacity is not a short-term solution. Refineries take:
billions of dollars
years to construct
long-term policy certainty to justify investment
Without refining, increased oil production does not equal fuel security.
Infrastructure Can’t Scale Overnight
Fuel supply is not just about production — it is about systems.
To increase usable supply, Australia would need to expand:
port capacity
fuel storage terminals
shipping logistics
inland distribution networks
Australia currently holds around 30–36 days of fuel reserves, well below the 90-day benchmark required by the International Energy Agency (IEA), of which it is a member.
This reflects a system optimised for efficiency, not resilience.
Storage, in particular, is a hard constraint. Expanding it requires:
land
approvals
capital
time
You cannot build strategic reserves overnight.
In a Crisis, Nothing Moves Faster
A common assumption is that in an emergency, governments can accelerate supply.
In reality, the opposite is often true.
During global disruptions:
supply chains tighten
shipping becomes contested
producing countries prioritise domestic needs
Regulatory systems do not suddenly disappear. Infrastructure does not instantly expand. Projects already in development cannot skip years of construction.
At the exact moment supply is needed most urgently, the system is least able to respond.
The Constraint Is Structural
Taken together, the picture is clear.
Australia faces multiple, overlapping constraints:
declining domestic oil production
limited access to new exploration
complex regulatory and legal frameworks
state and federal policy fragmentation
loss of refining capacity
insufficient storage and infrastructure
None of these factors alone explains the problem.
But together, they create a system that cannot scale supply quickly — even if the political will existed to do so.
This Isn’t About Choice — It’s About Capability
The idea that Australia can “just produce more fuel” assumes the capability is still there.
It isn’t.
What Australia has today is a system designed for:
global integration
imported fuel
just-in-time supply
Not for rapid domestic expansion.
And that distinction matters.
Because it means fuel vulnerability is not just a temporary issue. It is the result of structural decisions — decisions that have reduced the country’s ability to respond when supply is tight.
The Real Question
The question is no longer whether Australia should produce more fuel.
It is whether it still can — at the speed and scale required in a crisis.
Right now, the answer is no.
And until that changes, Australia remains exposed.