The impact of fuel prices and supply availability on user behavioural change in Australian household travel amidst global turmoil

Abstract

The global conflict in the Middle East is having a significant impact on the availability of oil to many countries, with Australia feeling the impact more than most countries. Fuel prices escalated during the first three weeks of the war (up to the end of March 2026), typically being 30-50% higher than the retail prices at the pump under normal market conditions. Supply uncertainty has also created problems in distribution, especially for farmers, trucking companies and retail outlets. In response to the escalated fuel prices at the pump, the Federal government announced, on 31 March, a reduction in fuel excise for three months (from 52.6 to 26.3 cents per litre) with state and territory leaders agreeing to pass on the additional goods and services tax windfall to motorists (further reducing the total to 20.6c/litre as well as the removal of the heavy vehicle road user charge for the same period (the latter of 32.4 cents per litre is reduced to zero). This paper explores ways in which users of passenger cars have responded to these price hikes and supply uncertainty. A series of questions incorporated in a survey of 1,000 New South Wales (Australia) residents in the first two weeks of April 2026, up to a temporary ceasefire and US blockage of the Strait of Hormuz, sought evidence on behavioural change responses such as modal switching for work and non-work-related travel, changes in car kilometres, car sharing, working from home, purchase of an electric or hybrid vehicle, and switching car use between petrol/diesel and electric vehicles in the current household fleet. These responses are embedded in a number of scenarios that vary fuel prices and fuel scarcity (availability and rationing) to assess the likely behavioural response in the short run and in the longer run if a scenario becomes reality. Overall, the key policy takeaway is that fuel pricing is most effective as a short run signal and selective rationing tool, while long run resilience depends on structural adaptation, especially vehicle technology, income buffering, and access to substitutes.