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With the price of fuel still rising steeply and shortages appearing across the country, what can we learn from how Australia fared during previous fuel crises?

In the quarter century after the second world war, cheap oil was one of the foundations of global economic stability. This changed suddenly in October 1973 when the global price of oil rose dramatically. The 1970s oil shock had its origins in the 1973 Yom Kippur war between Israel and its Arab adversaries. When western countries supported Israel, the Organization of Arab Petroleum Exporting Countries (OAPEC) reduced oil production and suspended deliveries to the US, the Netherlands and Portugal.

The Arab oil embargo was lifted in March 1974, but its consequences lasted more than a decade. In Australia, it led to a three-year hiatus in the mining boom that had begun in 1960. It also led to the end of two decades of low unemployment and low inflation that had characterised the golden age of capitalism in the western world.

Australia, along with most other western countries, experienced “stagflation”, a period of simultaneously high unemployment and inflation. Fuel prices jumped by 25% and inflation peaked at nearly 18%. Later in the decade, the rate of inflation still hovered over 8%. At the same time, the rate of unemployment, about 2% in the early 1970s, doubled by the mid-1970s and peaked at over 10% in the early 1980s.

Australia protected by self-sufficiency in the 1970s

But in many ways Australia was shielded from the full reverberations of the 1970s oil shock. We had achieved nearly 70% self-sufficiency in oil by 1973 due to the discovery of oil and gas in the Bass Strait. The Fraser government’s introduction of Import Parity Pricing (IPP) in 1978 was an early carbon tax that generated revenue for the Treasury and helped to conserve and prolong Australia’s supplies of its own oil.

Only after a further spike in oil prices in 1979 after the Iranian Revolution was a limited form of petrol rationing introduced.

Australia will not be as fortunate with this oil crisis. In 1973, embargoed oil only accounted for about 7% of consumption of global oil and affected not Australia but a handful of other nations. This year, closer to 20% of global oil supplies and 30% of Australia’s refined oil are threatened with no end to the war in sight.

The scale of Iran’s closure of the strait of Hormuz and damaged infrastructure in the Persian Gulf are simply not comparable with the 1970s crisis. Around 20m barrels travel through the strait each day, roughly one-fifth of world consumption and nearly a third of all seaborne oil trade.

The current crisis, moreover, is not only of oil but of liquefied natural gas). Qatar, which accounts for about a fifth of global LNG supply, has declared force majeure on exports (an inability to fulfil contractual obligations to export gas). The International Energy Agency predicts that the full closure of the strait will pull more than 300m cubic metres a day out of the global gas market. This is twice what the Nord Stream carried under the Baltic Sea at its peak before it was sabotaged in the Russo-Ukraine War in 2022. Furthermore, it is not just oil and gas affected by the Iran war but nitrogen fertilisers (for agriculture), aluminium, helium (used in magnetic resonance imaging) and pharmaceutical precursors and the like.

Australia now almost entirely dependent on imports

Australia no longer has the buffer of a healthy production of its own oil to soften the blow from a global crisis that may deepen into recession or even depression. Whereas Australia produced roughly 70% of its petroleum needs in the 1970s, domestic production of oil plummeted after 2000, and Australia now imports 90% of its liquid fuel requirements. In the 1970s, Australia’s refining industry could turn locally produced light crude into fuel, lessening our need to import refined products. This is no longer the case. Six major refineries were closed after 2003 because they could not compete with those in Singapore, with only two remaining.

After the Whitlam government’s defeat in 1975, Australia abandoned the idea of establishing a sovereign oil and gas company. This has meant that we have less control over our natural gas reserves than countries such as Saudi Arabia and Norway. Australian LNG is mostly exported by lightly taxed multinational companies and Australia only established a gas reservation policy on the east coast in 2025.

Unless the war concludes quickly, Australia may be forced to introduce stricter petrol rationing than that introduced in 1979, such as the measures adopted during the second world war. Indeed, the coordinated commonwealth and state intervention necessary to manage the fallout from the 2026 crisis will more closely resemble that mobilised during the Covid crisis of 2020-22.

• David Lee is Associate Prof of history, University of New South Wales, Canberra. He is a member of the Australian Historical Association