Diplomatic Push Yields Positive Signals from Beijing

Australia's Foreign Minister Penny Wong's high-stakes visit to Beijing on April 29, 2026, has brought a glimmer of hope amid the nation's deepening jet fuel crisis. Meeting with Chinese Vice Premier Han Zheng, Wong emphasized the mutual dependence in trade, noting that reliable diesel supplies are essential for Australia to continue exporting iron ore to China. China supplies up to 30 percent of Australia's jet fuel needs, making its recent export restrictions particularly painful. Beijing has signaled a potential resumption of exports, with state oil companies applying for permits to ship jet fuel starting in May, potentially easing the pressure on Australian airlines.

This development comes after weeks of uncertainty, as China's mid-March ban on refined fuel exports—triggered by disruptions in the Strait of Hormuz—left Australia scrambling for alternatives. Wong's pitch highlighted that without fuel, Australia's mining and shipping sectors, vital to China's steel industry, could falter. While no formal agreement was announced, early facilitation of sales to Australian firms suggests Beijing is responding to the diplomatic overtures.

The Roots of Australia's Jet Fuel Vulnerability

The crisis traces back to early March 2026, when escalating conflict between the US, Israel, and Iran led to the closure of the Strait of Hormuz, through which 20 percent of global oil flows. Asian refineries, including those in China, Singapore, and South Korea, depend heavily on Middle East crude, prompting production cuts of 2.7 million barrels per day in April alone. China, prioritizing domestic aviation amid soaring demand, imposed an immediate ban on exports of jet fuel, diesel, and gasoline.

Australia, lacking sufficient domestic refining capacity for aviation kerosene (Jet A-1), imports nearly 90 percent of its jet fuel. In 2025, China accounted for 32 percent of these imports, followed by Singapore at 23 percent, South Korea at 18 percent, Malaysia at 11 percent, and Taiwan at 8 percent. Annual consumption hovers around 10 billion liters, equivalent to roughly 146,000 barrels per day, underscoring the scale of exposure. The ban slashed China's monthly jet fuel exports from 2 million tonnes to about 1 million, hitting Australia hard as shipments halted after March 13.

Process-wise, crude oil arrives at Asian refineries, where it is distilled into kerosene fractions, treated for stability, and blended to meet Jet A-1 specs (freezing point below -47°C, low sulfur). Disruptions upstream ripple downstream, with refinery run cuts directly reducing output. For Australia, this means major airports like Sydney and Melbourne—without on-site refineries—rely on pipeline and truck deliveries from import terminals.

Timeline of the Crisis Unfolding

March 7: Reports emerge of China suspending fuel exports.

• March 13: Last Chinese jet fuel shipment departs for Australia; ban confirmed.
• March 29: South Korea caps jet fuel exports at 2025 levels amid domestic airline pleas.
• April 1: Global jet fuel prices double to $195 per barrel.
• April 10: Qantas and Virgin announce flight cuts and fare hikes.
• April 26: Wong announces Asia tour.
• April 29: Positive signals from Beijing on May quotas.

This sequence illustrates how quickly supply chains frayed, with Australian stockpiles dipping to 29 days of jet fuel by mid-April before stabilizing at 30 days.

Immediate Impacts on the Aviation Sector

Australian carriers have been hit hardest. Qantas forecasts fuel costs at $3.1-3.3 billion for H2 2026, up from $2.5 billion, prompting a 1-2 percent cut in domestic capacity and international route reductions. Virgin Australia matched with similar trims and surcharges, while Jetstar axed Australia-New Zealand flights. Airfares have risen 8-15 percent, with fuel surcharges adding $50-100 per ticket. Sydney Airport's CEO warned of rationing if shortages persist. For more on airline responses, see the ABC analysis.

Regionally, Vietnam Airlines canceled 23 weekly routes, and South Korean carriers entered 'emergency mode.' In Australia, this threatens tourism, with Easter travel already curtailed and winter international routes at risk.

Ripple Effects Across the Economy

Beyond aviation, diesel shortages—China and Japan supply 10 percent—affect trucking, which moves 70 percent of freight. Food supply chains face disruptions, with potential 20-30 percent price hikes if trucking slows. Mining exports, reliant on diesel-powered haul trucks and ships, could stall, impacting the $100 billion iron ore trade with China. Fertilizer imports, also affected, threaten agriculture amid dry conditions.

Overall, the crisis adds $5-10 billion to import costs, fueling inflation at 3.3 percent. For detailed economic forecasts, refer to the Guardian report.

Government Stockpiles and Emergency Measures

Australia's Minimum Stockholding Obligation (MSO) mandates 90 days for IEA members, but compliance lags: 46 days petrol, 33 diesel, 30 jet fuel as of late April. The Coalition proposes doubling to 60 days via a 1 cent/liter levy. Temporary excise cuts and MSO releases (up to 20 percent) provide breathing room, with US shipments as a 'band-aid.' Singapore's bilateral deal ensures some flow.

Airlines' Adaptation Strategies

Qantas is grounding older aircraft, optimizing routes, and hedging fuel. Virgin focuses on efficient Boeing 737 MAX. Both pass costs via surcharges. Long-term, sustainable aviation fuel (SAF) pilots ramp up, but supply is tiny (under 1 percent). Efficiency gains—new engines save 20 percent—help marginally.

Path Forward: Resumption and Risks

China's May quota approval (500,000 tonnes, double April) targets markets like Australia. If Hormuz reopens, prices may ease by Q3. Risks persist: prolonged war, further Asian restrictions. Experts urge domestic refining revival and 90-day stockpiles. See expert insights on long-term fixes.

Australia's experience highlights supply chain fragility in a multipolar world, pushing diversification.

Photo by David Syphers on Unsplash

Implications for Australia-China Relations

The episode tests ties post-trade war thaw. Wong's linkage of fuel to iron ore underscores reciprocity. Positive outcome could stabilize relations, boosting LNG swaps. Beijing's pragmatism—avoiding mutual harm—suggests supply resumption, framing it as 'aid' in crisis.