This is a pragmatic short-term scramble but carries serious strategic risks.

The Deal

Foreign Minister Penny Wong's recent trip to Beijing secured Chinese government facilitation for state-owned refineries to engage directly with Australian businesses on jet fuel sales. China had previously curbed refined fuel exports (including jet fuel) to protect domestic supplies after the Strait of Hormuz disruptions. This "breakthrough" aims to ease Australia's tight reserves, especially for aviation.

Australia imports ~90% of its refined fuels. China supplied around 30-32% of Australia's jet fuel in 2025, making it the largest single source for that critical product.

The Current Crisis Context

The 2026 Iran war (triggered by US/Israeli strikes in late February) led to Iran closing/mining the Strait of Hormuz and US blockades. This chokepoint carries ~20% of global seaborne oil. Result: global fuel shortages, spiking prices, and export restrictions by Asian refiners (who rely on Middle East crude). Australia's reserves are thin:

~36-44 days petrol

~29-33 days diesel

~29-30 days jet fuel

This is barely above minimums and vulnerable to further shocks. Wong's diplomacy ties it to mutual benefits: Australia continues iron ore, LNG, coal, and food exports to China.

Where Does China Get Its Fuel/Oil From?

China is the world's largest crude importer but better insulated than most:

Heavy reliance on Russia (pipelines + seaborne, now top supplier).

Iran (often disguised/relabelled, significant volumes despite sanctions).

Middle East (Saudi, Iraq, UAE, etc.) — but diversified with overland routes from Russia/Central Asia.

Massive strategic stockpiles (hundreds of millions of barrels) and domestic refining capacity.

China weathered the Hormuz crisis better than Japan, South Korea, or Australia because of pipelines, Russian supply, and hoarding. It can refine and export jet fuel when it chooses — but prioritises its own needs first. This makes any "alliance" conditional on Beijing's goodwill.

Key Problems with Relying on China for Fuel

1.Strategic Vulnerability & Leverage: China controls the tap. In a real crisis (e.g., Taiwan), Beijing could cut exports instantly as economic coercion — as it has done before with coal, barley, etc. Australia would be handing a key adversary leverage over military/aviation fuel.

2.Reliability in Crisis: China already banned/restricted exports earlier in the Hormuz crisis to secure domestic stocks. Today's deal is reversible. Australia's low refining capacity (we closed most domestic refineries) leaves us exposed.

3.Geopolitical Alignment Risk: This fits a pattern of the current Labor government's softer approach to China (restoring trade ties post-Coalition tensions). Critics see it as prioritising short-term economic calm over long-term security.

4.Opportunity Cost: Better alternatives: rebuild domestic refining, boost reserves to 60+ days (as Coalition proposes), diversify suppliers (US, Singapore, Japan, Korea, Middle East where possible), or accelerate alternatives like sustainable aviation fuel.

In a Taiwan War Scenario: Where Would Australia Stand?

Australia would not be on China's side. Official policy under both major parties supports the status quo across the Taiwan Strait, opposes unilateral change (i.e., Chinese invasion), and maintains strong US alliance ties via AUKUS/Quad.

Australia has hosted US Marines in Darwin, sells weapons-relevant tech, and participates in freedom-of-navigation ops.

In a hot conflict, Australia would likely provide basing/logistics support to the US, intelligence, and possibly direct involvement (as in past conflicts).

Public and elite opinion leans against neutrality if the US is fighting.

However, heavy economic dependence (China buys ~30-40% of exports) and now fuel reliance would create massive pressure. China would weaponise trade/fuel immediately. The government would face a nightmare: choose between alliance obligations and economic survival. Wong/Albanese's current diplomacy signals a desire to keep options open and avoid provoking Beijing — which fuels criticism that Australia is hedging too much toward China.

Bottom line: This fuel deal is a symptom of policy failure — decades of under-investment in energy security + high reliance on imports + thin reserves. Turning to China for jet fuel in a crisis driven by Middle East chaos highlights the risks of strategic dependence on a rival. Australia needs urgent diversification, reserve building, and domestic capacity — not deeper entanglement with Beijing. The sunk-cost-style megaprojects (like Snowy 2.0) don't fix this core vulnerability.

https://www.macrobusiness.com.au/2026/04/australia-and-china-forge-fuel-alliance/