Australia’s Energy Shock, Why Petrol Prices Could Stay High

Australia’s Inflation Problem

The critical issue for Australia is that we import roughly 90% of our oil.

At the same time, natural gas prices have jumped sharply as fears grow that this conflict could drag on. Qatar has paused LNG production following Iranian drone attacks, cutting near-term supply by almost 20%. Benchmark LNG prices then surged about 39% on Monday after the QatarEnergy announcement.

That matters for us more than many people realise.

Australia is far more exposed to global energy shocks than we often assume. With inflation and cost-of-living pressures already running high, another spike in energy prices could flow through the economy very quickly.

What makes this even more important is that around 80% of Australia’s gas production is exported, while east coast gas prices remain linked to international markets. So even though we produce gas, we are not protected from global price swings.

LNG tanker crossings have also stopped since February 28, disrupting around 120 billion cubic metres a year of supply from Qatar and the UAE. That is a huge volume, and it is comparable to the gas Europe has lost from Russia.

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Why the RBA Tone Matters More Than the Decision

What Australians need to prepare for now is higher fuel costs.

Commonwealth Bank analysts have already warned that a sustained spike in oil prices could have real economic consequences, and we are starting to see that filter through at the bowser. In Western Australia, average unleaded prices in cities like Perth were projected to reach 188.6 cents per litre from March 4, with some brands climbing as high as 213.9 cents.

That matters because inflation was already becoming more stubborn again.

While inflation has come a long way down from its 2022 peak, the second half of 2025 showed that price pressures can reaccelerate, and this latest energy shock only adds another tailwind. Michele Bullock has made it clear that every RBA meeting is now live, and that a prolonged oil price spike is a real risk to both inflation control and economic growth.

Our base case is still that the RBA holds the cash rate at 3.85% in March, but the language out of that meeting will matter just as much as the decision itself. Markets have recently priced only a modest chance of a March move, while expectations for May remain much firmer.

So for borrowers, this is the real message: even if rates do not move in March, a hawkish tone from the Board could be enough to set up another 25 basis point hike in May.