Australia's remote airlines pay more for jet fuel than global competitors

Every time an Australian airline fills its tanks, it pays prices set by global markets thousands of kilometres away. Unlike oil used for heating or petrol at the pump, jet fuel (kerosene) moves through a specialised supply chain where distance, refinery location, and geopolitical events all push costs higher for carriers operating from Australia. This shapes what you pay for a ticket to Sydney, Melbourne, or anywhere beyond.

The global jet fuel supply chain

Jet fuel comes from crude oil refined at major facilities worldwide. The largest refineries sit in the Middle East, Europe, and Asia, not Australia. A refinery produces several products from a barrel of crude: petrol, diesel, kerosene, and industrial fuel. Jet fuel (aviation turbine fuel, or Jet A-1) is one of these streams, and global demand from airlines competes with demand for all other refined products.

Airlines don't buy directly from refineries. They source through fuel suppliers who purchase from refineries or trading companies. These suppliers deliver fuel to airports via tanker trucks and pipelines. The price they charge is pegged to a global benchmark, usually based on crude oil costs plus regional variations and the supplier's margin.

Why distance costs Australian carriers more

Australia's location creates structural disadvantages. Fuel suppliers need to ship aviation fuel across long distances to Australian airports, adding transport costs and time. Refineries closest to major Asian aviation hubs (Singapore, South Korea) can deliver cheaper fuel to those airports than to Perth or Darwin. A carrier fuelling up in Singapore pays less than an Australian airline buying the same fuel in Australia.

Australian airlines often fuel their aircraft at international airports where they stop over, because it is cheaper to buy there and carry extra fuel than to buy at Australian prices. This practice, called fuel tankering, is economic because Australian fuel costs more. It exists nowhere else at this scale.

Price volatility and distance amplify costs

Jet fuel prices swing with crude oil, geopolitical events, and refinery disruptions. When oil prices spike globally, Australian airlines feel the shock immediately. Unlike carriers in the United States or Europe, which benefit from multiple competing nearby refineries, Australian operators have limited options. Refineries in Australia are small and decreasing in number, leaving the country dependent on imports.

Currency movements add another layer. Global fuel prices are quoted in US dollars, so when the Australian dollar weakens, fuel costs more in local currency. A carrier hedging fuel costs faces exposure to both crude prices and exchange rates simultaneously, a complexity that compounds the distance problem.

The infrastructure gap

Australia has few large oil refineries and no major aviation fuel production hubs serving regional demand. Refineries on the east coast operate at lower capacity than historical peaks. Fuel must often come from refineries in Asia or be imported as finished product, adding supply chain friction that other regions avoid. Some Australian airlines maintain fuel storage agreements at Asian hubs to lock in cheaper supplies, effectively side-stepping the Australian market.

What it means for Australia

Higher jet fuel costs for Australian carriers translate to higher ticket prices, especially on domestic and regional routes that cannot be absorbed by international competition. The cost advantage enjoyed by airlines based in Singapore, Dubai, or London directly undermines the competitiveness of Australian carriers on routes where Australians have few alternatives. A passenger flying from Brisbane to Tokyo pays more than a passenger flying the same distance on a Middle Eastern airline partly because of where fuel is sourced.

The distance premium also affects domestic aviation. Regional routes from Brisbane or Perth to Sydney incur longer journeys and higher fuel costs per seat, making small-airport connections more expensive than routes operated from hubs closer to major refineries elsewhere. Over time, this influences route planning and connectivity for Australians outside capital cities.

The bottom line

Australia's distance from global refinery centres, combined with small domestic refining capacity and volatile global fuel markets, creates a permanent cost disadvantage for Australian aviation. Airline fuel is a global commodity, but Australia's location means paying a premium. This cost flows directly into ticket prices and shapes which routes are profitable to operate. Understanding this explains why flying in and out of Australia remains structurally more expensive than equivalent journeys from hubs closer to the world's refineries.

This article was compiled by AI and screened before publishing. See our editorial standards.