Australia needs to kick its diesel habit – and a timetable to electrify machines that run on imported oil

The Australian economy still runs on imported oil.

Despite being one of the world’s largest exporters of energy, Australia imports around 90 per cent of its refined transport fuel. The country now has just two operating oil refineries, capable of processing about 230,000 barrels of crude a day – only a fraction of national fuel demand.

Australia spends tens of billions of dollars every year importing oil and refined fuels – money that could instead be invested in domestic energy infrastructure.

In effect, a large part of the Australian economy depends on oil extracted in politically unstable regions and transported through some of the most vulnerable maritime chokepoints on the planet.

Much of the oil refined in South-East Asia ultimately comes from the Middle East. Around one fifth of global oil supply passes through the Strait of Hormuz. 

But we know all this. The latest conflict in the Middle East dominates our media and we are worrying about our oil stockpiles. The question is: what are we going to do about our dependency on imported fuel?

In reality, diesel powers the tangible side of the Australian economy – mining, agriculture, manufacturing and freight.

Road freight alone consumes more than 17 billion litres of diesel every year. Electrifying Australia’s heavy truck fleet would displace roughly 6.5 billion litres annually, cutting fuel imports by about one eighth and saving billions of dollars.

Mining is another diesel guzzler. Australia’s mining sector burns around five billion litres of diesel each year. A single large mining haul truck can consume close to a million litres annually, roughly the fuel use of 700 passenger cars.

Fortescue’s Pilbara operations consume around 900 million litres of diesel each year – roughly the fuel consumption of 600,000 cars. Fortescue is at least doing something about reducing its dependence on diesel, but it remains an outlier in this respect.

So far, the national conversation about the energy transition still focuses almost entirely on electricity generation, as though transforming the power grid were the whole story.

For decades critics argued that electrification might work for passenger vehicles but not for heavy industry. Trucks, mines and farms, they said, would always run on diesel.

That assumption is now clearly wrong.

China has already demonstrated what large-scale electrification of heavy transport looks like. Electric trucks now account for more than one in five new heavy truck sales in China. China also represents more than 80 per cent of global electric truck sales, with more than 230,000 electric heavy vehicles sold in 2024.

The strategic logic is obvious. China imports more than 11 million barrels of oil every day, much of it from Russia and the Middle East. Electrifying transport reduces that dependence.

The shift to electric trucks is not confined to China. Tesla is about to open a factory for its electric trucks in Nevada. PepsiCo and Walmart have already begun using electric trucks. 

California now requires truck manufacturers to sell increasing numbers of zero-emission trucks. It also plans to phase out new diesel truck purchases over the next decade.

Electricity – the movement of electrons – is fundamentally different from oil. Oil must be extracted from specific geological deposits and shipped around the world. Electricity can be generated domestically from many resources.

Countries that electrify transport and industry reduce emissions, but they also reduce exposure to imported hydrocarbons and the geopolitical risks that accompany them.

These changes are not being driven by ideology. They are being driven by economics.

Renewable electricity is now the cheapest source of new power in most of the world. Even in oil-rich Texas, solar power is booming for a simple reason: it is the lowest-cost electricity available. Ironically, oil refineries are increasingly solar-powered.

Australia, meanwhile, continues to behave as though the fossil fuel era will last forever.

The country has some of the best renewable energy resources on the planet. Solar and wind generation are expanding rapidly and already supply a growing share of national electricity.

But electrifying the power grid is only the first stage of the transition.

The next stage is electrifying the machines that currently run on imported oil.

Heavy transport, mining equipment and industrial machinery represent the next frontier of the energy transition. Electrifying them would cut emissions, strengthen national energy security and reduce exposure to volatile global oil markets.

The policy agenda for the ‘industrial transport’ phase of the energy transition looks something like this: end subsidies that encourage diesel consumption, first for big miners and freight companies and then for smaller entities over time. Next, set a timetable for phasing out diesel trucks, and build the electric infrastructure needed for freight, mining and industry.

What about the split between federal and state powers?

Queensland’s current energy debate still seems anchored in the diesel-and-coal economy of the 1950s. Fortunately, most of the policies needed to accelerate the shift away from diesel sit squarely with Canberra, from fuel tax credits to vehicle standards and industrial electrification funding.

The real anathema in the modern Australian economy is not renewable energy, but the idea that our prosperity depends on shipping prehistoric hydrocarbons halfway around the planet to power our economy.

Jeremy Cooper is a strategic adviser on ESG and financial services issues in a range of capacities. He is a former Deputy Chair of ASIC; and chaired the Cooper Review into Australia’s super system.