Surging costs, squeezed profits: The impact of Australia’s fuel shortage

With surging fuel prices and supply chain disruptions, it is clear that the vast majority of Australian businesses are having to reshape their operating models to cater for the inevitable increase in costs and drop in revenue.

According to recent data from the Australian Bureau of Statistics (ABS), 72 per cent of Australian businesses have been negatively impacted by fuel prices and supply availability.

Such supply disruptions and fuel shortages severely impact businesses by driving up operational costs, disrupting supply chains, and forcing price hikes for consumers.

Ultimately, these issues result in delays across all industries, with agriculture, manufacturing, and electricity/waste services being the most affected.

In fact, 94 per cent of agricultural and manufacturing businesses, along with 97 per cent of electricity, gas, water, and waste services, cited fuel as a large burden on operating expenses.

As recently reported, business advocates around the country have highlighted the significant impacts that businesses are facing from the Middle East conflict, with many indicating a loss in revenue as well as a reduction in productivity to be the greatest implications of the fuel crisis.

Tom Lay, ABS head of business statistics, said: “[The] data from the Survey of Business Conditions and Sentiments … helps us better understand the economic impacts of the closure of the Strait of Hormuz on Australian businesses.

“Businesses across all industries were impacted by rising fuel costs from global volatility and ongoing supply chain disruptions.”

The report found that one in six businesses experienced disruptions in their supply chain, with transport, logistics, agriculture, and small businesses among those most affected.

However, the fuel crisis fundamentally impacts all workers, with many people travelling large distances to travel to and from work. This led to the International Energy Agency explicitly recommending working from home to cut fuel demand during the ongoing geopolitical conflict.

But, as recently reported, Australia seemed unlikely to initiate a work-from-home mandate, despite being extremely vulnerable to the crisis, given how much the country imports fuel and how limited the reserves are.

ABS found that over 36 per cent reported that revenue had dropped over the past four weeks, with more than 27 per cent expecting revenue to drop across the next month.

Half of all businesses reported operating expenses had risen, with fuel prices and freight and delivery costs the most frequently reported reasons.

Due to the fuel shortages, businesses are conducting changes to their business models, with 60 per cent of businesses in the survey making amendments to business operations.

Further, around 28 per cent of businesses made changes to their workforce as a result of the fuel shortages, including reducing or suspending non-essential travel activities to minimise fuel consumption.

About two-thirds of businesses reported making changes to business operations because of fuel prices or availability in May.

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