The current fuel crisis – triggered by the February 2026 escalation of the United States–Israeli conflict with Iran and the associated risk to the Strait of Hormuz (which handles around one‑fifth of the world’s seaborne oil) – has pushed Australian fuel prices to levels not seen since the 1970s. Diesel hit $3 per litre in March 2026, and petrol prices across Melbourne, Sydney and other capitals regularly exceed $2.80–$3.10 per litre. Panic‑buying fuel has led to localised shortages; in NSW more than 80 fuel stations ran out of diesel and 40 had no petrol, while independent retailers struggle because they lack long‑term supply contracts. The federal government has released fuel from emergency reserves, relaxed fuel standards and appointed a national coordinator, but ministers warn that the nation’s stocks only cover around 36 days of petrol and 32 days of diesel.
Impact on the NSW construction industry
Rising costs for materials and logistics
The cost of fuel has a direct effect on construction materials. An internal email from Iplex to Reece Plumbing customers (obtained by The Nightly) reveals that the prices of petroleum‑based piping are set to surge from 17 April 2026: PVC products up 27 %, polyethylene (PE) up 36 % and polypropylene (PP) up 31 %. The supplier also warned of up to 10 % increases in freight charges because global petrochemical supply chains face “significant cost escalation”. These materials are ubiquitous in plumbing, drainage and infrastructure, so even modest increases can add thousands of dollars to the cost of a new home.
Simon Croft from the Housing Industry Association (HIA) reports that builders have recently received notices about price increases across concrete, steel reinforcement, PVC and other plastic plumbing pipes. He notes that high fuel costs are a major driver of these hikes because delivery levies and surcharges flow straight into material prices. Builders operating under fixed‑price contracts risk being squeezed if they cannot activate cost‑escalation clauses, though NSW, Queensland and other eastern states allow such clauses in some contracts. According to the Master Builders Association, builders are “increasingly alarmed” by rising transport surcharges, and the sector is urging governments to consider a fuel carve‑out or rationing scheme to ensure building work can continue.
Housing targets at risk
Australia’s National Housing Accord aims to build 1.2 million homes in five years, but the surge in fuel and material costs threatens this target. The Urban Development Institute of Australia forecasts a shortfall of 380,000 dwellings by 2030 and a 11 % drop in housing production in 2026 because rising costs and labour shortages are deterring developers. Master Builders CEO Denita Wawn warns that higher costs “will harm productivity and affordability at a time when we need a dramatic increase in housing supply”. In 2025 alone there were 3,596 building industry insolvencies, illustrating how fragile the sector is before the latest fuel shock.
Cash‑flow challenges for small builders and trades
Independent builders and tradespeople often operate on thin margins and rely on utes and trucks for daily work. Rising diesel prices add immediate costs to commuting and transporting tools. A NSW plumbing business owner told The Nightly that surging material and fuel costs will “affect us heaps” and slow down the building industry, with higher prices passed on to “everyday battlers”. Without relief, small subcontractors may delay projects, renegotiate contracts or cut back staff to cope.
Potential restrictions and rationing measures
The federal government insists that Australian fuel supplies remain sufficient for now and urges drivers not to panic. However, experts warn that prolonged disruption to the Strait of Hormuz could force Australia to introduce fuel rationing for the first time since the 1970s. During previous oil crises, Australia used odd‑even number plate rules, allowing cars with even number plates to buy fuel on one day and odd numbers the next.
Energy policy scholar Professor Samantha Hepburn notes that the current war has caused the largest supply disruption in the global oil market’s history, and she expects countries will have to switch to rationing if the conflict persists. She emphasises that diesel would be the first fuel to see restrictions because military, emergency services and agriculture must be prioritised. Retired air vice‑marshal John Blackburn argues that Australians will need to adjust their consumption and “immediately switch to rationing” if the Middle Eastern conflict is not resolved.
The International Energy Agency (IEA) has issued a 10‑point plan to reduce oil consumption, which may foreshadow restrictions Australia could adopt. The recommendations include:
| Recommendation | Rationale |
|---|---|
| Work from home | Reduces commuting fuel use. |
| Reduce highway speed limits by at least 10 km/h | Lower speeds save fuel. |
| Encourage public transport | Shifts trips from private vehicles to buses and trains. |
| Alternate private car access to roads on different days (number‑plate rotation) | Cuts fuel‑intensive driving. |
| Increase car sharing and adopt efficient driving practices | Improves vehicle occupancy and eco‑driving. |
| Efficient driving and maintenance for commercial vehicles | Optimises loads and reduces diesel use. |
| Divert LPG use from transport | Preserves LPG for cooking and essential needs. |
| Avoid air travel when alternatives exist | Eases pressure on jet fuel markets. |
| Switch to electric or alternative cooking solutions | Reduces reliance on LPG. |
| Leverage petrochemical feedstock flexibility and short‑term efficiency measures in industry | Frees up LPG and reduces oil use. |
These measures could be introduced progressively to lower national fuel demand. In a worst‑case scenario, states could impose formal rationing by limiting weekly fuel purchases or prioritising supply for essential sectors such as construction, agriculture and transport. Master Builders Australia advocates for a fuel carve‑out to ensure construction projects can continue even if rationing occurs.
Coping strategies for construction businesses
- Revisit contracts and include cost‑escalation clauses. Builders should review contracts to ensure they contain escalation provisions for unforeseen costs. In NSW and most other states, such clauses can be used when conflict‑related price spikes occur.
- Improve fuel efficiency on site and in logistics. Simple measures such as reducing equipment idling, scheduling deliveries efficiently, using modern, fuel‑efficient machinery and maintaining vehicles properly can cut diesel consumption. Adopting digital route‑planning tools helps reduce mileage for delivery trucks and utes.
- Consider alternative fuels and electrification. Battery‑powered tools, hybrid or electric vehicles, and solar‑powered site equipment reduce dependency on diesel. While upfront costs may be higher, the current crisis highlights the long‑term value of diversifying energy sources.
- Engage with suppliers early. Communicate with material suppliers about pricing and lead times; factor in potential surcharges and rationing measures in project quotations. HIA advises builders to be proactive in factoring current pressures into future quotes and to discuss long‑term supply arrangements.
- Explore insurance and risk‑mitigation products. Contract works insurance policies can include escalation endorsements and inflationary protection clauses. These increase the insured value to account for unexpected cost increases (including fuel) during the construction period and indemnify the policyholder for higher costs due to inflation when project completion is delayed. Such strategies provide a financial buffer when fuel volatility is extreme.
Longer‑term considerations: toward energy resilience
The current crisis exposes Australia’s vulnerability: the country imports roughly 90 % of its liquid fuel and operates only two refineries. Experts argue that bolstering strategic reserves, diversifying fuel sources and accelerating electrification are critical. Fuel standards have been temporarily relaxed to add 100 million litres of fuel per month to domestic supply, but this is a short‑term fix. Over the longer term, researchers say geopolitical disruptions typically cause sharp but temporary price spikes; strengthening energy system resilience through improved supply chain planning and diversification is essential.
For the construction industry, investing in renewable energy and low‑emission equipment could offer long‑term stability. Governments may need to support the sector with incentives for electric heavy machinery, improved public charging infrastructure and training for workers. In the meantime, cooperation between builders, suppliers and regulators is vital to navigate the immediate challenges posed by high fuel prices.
Conclusion
