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As the energy shocks that keep reigniting Australia’s fuel-security debate hit harder and more often, firms stuck in short-term firefighting miss the point. In an import-dependent economy, resilience is no longer a volatility issue – it’s a viability one.
Shocked but not surprised. For an economy that imports roughly 90% of its liquid fuel and holds barely a month’s worth of reserves, the Iran crisis is less a new alarm than the same warning lights flashing faster and brighter. Energy vulnerabilities dominated Australian boardroom agendas during the pandemic and in the early months of the Ukraine invasion. Each time the pattern is familiar: sudden price jumps, pockets of shortage and a scramble for short-term fixes. Survival measures like tapping reserves, relaxing standards and cutting excise can take the edge off for households and keep trucks moving, but they leave the underlying exposure largely intact.
Every new shock now lands as a real-time vindication of firms that have taken steps to tackle fuel dependence, from remote mines running largely on renewables to operators reshaping fleets and networks. For business models still hooked on cheap, reliable offshore supply, every price spike is a live stress-test: mid-teens cost increases can quickly turn a healthy year into a loss in road transport, or carve a serious hole in EBITDA for aviation, mining and logistics-heavy sectors.
For boards and CFOs, mitigation-as-usual is no longer good enough. Fuel disruption is part of the operating environment. Businesses that fail to build resilience into day-to-day operations are putting long-term viability on the line. The task ahead is to move deliberately, phase by phase, to rewire contracts, fleets and supply chains so the business can keep investing through the next shock, not just limp through this one.
This quarter: start where fuel costs hurt most.
For most Australian operators, the numbers are already uncomfortable.
In road transport and logistics, fuel typically makes up 20-30% of operating cost on pre-crisis margins of 2-3%. Even small price moves can push a viable operation into the red.
In aviation, jet fuel sits as the largest or second-largest cost item; hedging can smooth a quarter or two but it can’t outlast an extended geopolitical disruption.
In mining, which burns roughly a third of Australia’s diesel, fuel at 10-15% of site opex hits EBITDA directly and can force hard calls on how much, and what, to produce.
In food processing and grocery distribution, fuel-related freight costs typically account for 3-8% of opex, baked into the price of each unit sold. The heaviest pressure is on long-haul corridors - for example, fresh-produce routes between Queensland and the southern states - and vertically integrated meat and dairy supply chains.
Handled badly, that cost pressure erodes already thin margins. Managed well, it becomes a source of advantage over less prepared competitors. To get on the right side of the equation:
- Know your exposure. Quantify how much of your cost base and earnings is effectively indexed to liquid fuels, by segment and business unit.
- Pinpoint hotspots. Identify the routes, assets, products and customer segments where fuel intensity and margin pressure collide.
- Pressure-test resilience. Run simple scenarios: what happens to cash flow, covenants and capex if fuel stays at today’s levels, or steps up again?
Next 6-12 months: stop contracts quietly bleeding profit
In many sectors, the most serious near-term damage isn’t fuel prices per se but how contracts deal with them.
Freight operators without escalation clauses, mining services locked into long-dated fixed rates, or manufacturers absorbing fuel surcharges for key customers are effectively underwriting the whole shock. The first priority is to stop the accidental heroics:
- Find the gaps. Identify contracts that leave you carrying most of the fuel risk.
- Make fuel explicit. Move to clear, benchmark-based indexation using pre-agreed formulas (for example, mechanically adjusting pricing against Platts indices from an agreed base) with regular review points.
- Shorten the bet. Shift away from long fixed-price terms written on outdated assumptions. Use shorter tenors, scheduled reopeners and volume triggers to keep risk within appetite.
Immediate and ongoing: claw back margin, litre by litre
Once contractual leaks have been plugged, the next lever is fuel usage. In logistics, mining and food processing and distribution, there is almost always more slack than dashboards suggest.
- Redesign the network. Re-optimise depot locations, routes and delivery windows to suit today’s fuel economics, especially on long regional corridors.
- Run fuller. Improve load factors, backhauls and cut out empty legs wherever possible.
- Tighten operating discipline. Reduce fuel burn fleet-wide – not just on a few showcase routes – by managing speeds, idling and maintenance.
- Electrify where it already stacks up. Move early on last-mile and depot-based fleets, where electric vehicles now beat diesel on running cost.
Longer-term resilience-building: design for “crisis as normal”
Some operators are already shifting fuel from a cost line to a design decision. Bellevue’s off-grid gold mine in Western Australia, powered mostly by wind and solar, has been largely shielded from the latest diesel price surge. Iron ore producer Fortescue is already building an integrated green mining operation in the Pilbara region – a shift discussed at the Australian Financial Review Business Summit in March – backed by a large renewable energy grid.
These moves show how the fuel equation can be rewritten. Short-term fixes buy time, but the real resilience gains come from reshaping how the business moves, powers and supplies itself.
2-10 years: hard-wire resilience
- Reshape the fleet. Segment assets into “electrify now”, “electrify next” and “hard to abate” and make replacements accordingly.
- Shift modes where it makes sense. Re-examine long-haul corridors (mine to port, north-south food flows) for rail or coastal shipping, keeping road for first/last mile and genuinely time-critical freight.
- Shorten and diversify supply chains. Re-run sourcing on landed cost assumptions with higher fuel built in; in some categories, nearer or more diversified suppliers will now win where they didn’t before.
Ongoing: make fuel resilience “business as usual”
Fuel risk should now sit alongside FX, interest rates and AI adoption on the executive agenda. It needs clear ownership, hard metrics and real influence over key decisions.
- Assign a named owner. Establish clear accountability for an end-to-end fuel-resilience plan.
- Measure what matters. Track fuel intensity, contract coverage, hedging and progress on fleet and network changes as standard KPIs.
- Make big calls fuel-smart. Before approving major investments, fleets or acquisitions, ask explicitly how they shift the business’s fuel dependence.
Closing thought
War-gaming price spikes has its place, but survival shouldn’t be mistaken for resilience. As the shocks come thicker and faster, the edge will sit with companies that stop treating each one as an isolated emergency and get precise about how fuel vulnerability runs through P&L. That clarity then drives exposure-reducing decisions on contracts, operations, sourcing, diversification and demand reduction – while competitors remain fixated on the fuel curve and hope for the best.
If you’re looking to move beyond firefighting and take a more deliberate approach to fuel resilience, we know the levers and the trade-offs. Talk to our practitioner-led team.
