Fuel panic is spreading and now Australia is tapping into its emergency fuel supplies

Around the world, drivers are flocking to petrol stations over fears fuel prices will skyrocket or shortages will begin to bite as a result of the Iran war.

It is an experience shared by Australians and rising prices are already beginning to impact some diesel-thirsty sectors.

At an international level, moves have been made to release record volumes of fuel from world emergency reserves to help combat shortages.

The aim is to cushion the impact of the fuel crisis caused by the Strait of Hormuz blockade.

"If that shipping route remains effectively closed that will have ongoing consequences for fuel prices, production, supply chains and of course an inflationary impact all over the world," Prime Minister Anthony Albanese said.

To counter that, the International Energy Agency (IEA) has agreed to make available 400 million barrels of oil from emergency stocks in what has been described by the IEA as an "emergency collective action of unprecedented size".

That extra supply will come from stockpiles held by the agency's 32 member countries, including Australia, but on a voluntary basis.

Will this stop bowser shortages?

Energy Minister Chris Bowen has urged people not to panic buy, even with extra supply due to flow through fuel bowsers.

"Get as much fuel as you need, but not less and not more because we're seeing a doubling of demand for fuel since the bombing of Iran," he told Afternoon Briefing on Thursday.

Despite releasing emergency fuel stocks, Mr Bowen was keen to point out that oil and fuel was still arriving by ship into Australia.

"I've said continually that Australia's fuel supply is secure, and it is," he said.

As a contribution to the international agreement, Australia will feed about a week's worth of petrol and diesel into the domestic market from stock it has been holding in case of an emergency.

The intervention is designed to delay the need to ship more oil from overseas.

"We're running down our own reserves and we are contributing to the global problem because that means the fuel that otherwise we would have used from international sources can go somewhere else," said the Grattan Institute's energy program director Tony Wood.

As it stands, Australia has about 36 days of petrol held in reserve, 29 days of jet fuel, and 32 days of diesel, according to Mr Bowen this week.

That is more than Australia has stored in the past, but less than the 90 days' worth the country was obliged to stockpile under the IEA agreement.

"If we have [about] 34 days of onshore storage then it's been as low as half that in the past," Mr Wood said.

Resources Minister Madeleine King said the amount of fuel Australia kept in storage was based on cost and practicality.

"The 90-day fuel reserve would be an enormously expensive undertaking," she said.

"It is estimated to cost about $20 billion if you were to store the suggested amount of fuel.

"We have assessed that what we have, in the billions of litres of fuel that the government has under its minimum stockholding obligation, is more than sufficient for this nation."

While the risk of running out of fuel was a possibility if the crisis continued long term and local reserves were depleted, Mr Wood was confident the government would go to great lengths to avoid that.

"They're kind of having to do a bit of a balancing act," Mr Wood said.

"We've got this dual obligation — one is to not have Australians either running out of fuel or paying too much for it, at the same time as we have the international obligation to contribute to what is a pretty messy situation globally."

But he pointed out that would not necessarily mean a complete absence of shortages, particularly in remote areas.

"This is a big country and our supply chains are long. It doesn't take too much for them to be disrupted," Mr Wood said.

"Diesel is the one that probably has a much bigger impact on the overall economy [because of] how dependent we are on road freight transport."

How are the emergency supplies being used?

The energy minister has made clear that the fuel being released will be a targeted response to the crisis, with regions facing shortages to be prioritised.

In some regions petrol stations started rationing fuel this week as demand increased.

Under the government's emergency supply release, fuel companies will be expected to make sure the petrol and diesel goes where it is needed most.

The expectation is that "they will work within the constraints they have, as cooperatively as they can, to ensure this extra supply flows to the regions of shortage," Mr Bowen said.

But he warned the relief would not be immediate due to the complexity of the supply chain and the vast distances fuel would need to be carted.

Will cracking into emergency supplies reduce prices?

Experts have warned releasing emergency stock will not be a silver bullet to a problem Mr Bowen described as "real, unacceptable supply chain pressure".

"The disruption to the market is still very large, even with this record stock release," said MST Financial's senior energy analyst Saul Kavonic.

About 20 million barrels of oil are shipped through the Strait of Hormuz each day, which equates to about a fifth of the world's oil.

Mr Kavonic estimated the 400 million barrels of oil being released by the IEA would counterbalance just a fraction of that volume.

He anticipated prices would continue to rise and warned the fuel release could actually contribute to more panic buying.

"The signal to the market is that things could still get worse," Mr Kavonic said.

"These volumes that will come from the stock release are going to be very welcome.

"But the other part of this is it's also signalling to the market how serious the situation is in the Strait of Hormuz, and that actually most members of the IEA clearly don't believe the war is simply going to end next week like Trump indicated it might only a few days ago."

Where is all this fuel stored?

Emergency reserves of fuel are stored in tanks all over the country at refineries and storage sites run by fuel companies.

Australia has just two remaining oil refineries, in Geelong and Brisbane, where some of the emergency stockpile is refined and stored.

Other supplies are maintained at import terminals near ports.

But the country's fuel reserves have not always been stored on Australian soil.

Back in 2020 Angus Taylor, who at the time was energy minister, penned an agreement with the United States to store Australian oil stateside.

He said at the time the US storage solution would protect Australia in case of a major global oil disruption.

"The Strategic Petroleum Reserve is the world's biggest emergency stockpile of oil," Mr Taylor said.

"The US is a trusted ally which has been essential for global oil security and we are glad to be building on our strong, longstanding relationship, while ensuring Australia is best prepared to act during a global oil disruption."

Australia contributed to an IEA release of reserve fuel in 2022 and has since moved to boost its emergency supplies held on home soil.

"The only reserve we can count right now is what we have in Australia," Mr Wood said.