Accelerating fuel efficiency could ease Australian mining’s heavy dependence on diesel, saving 1.15–2.3 billion litres of fuel a year at a time of tightening international supply and spiking domestic prices.
According to a briefing note released today (6 October 2026) by the Institute for Energy Economics and Financial Analysis (IEEFA), the worsening Middle Eastern crisis and potential US export bans create distinct risks of diesel prices exceeding $3 per litre, as well as potential physical supply shortages.
Mining’s diesel consumption has outstripped national demand growth since 2010. This is driven in part by rising diesel intensity levels — fuel consumed per tonne of production — particularly in open-cut coal mining, alongside disincentives for miners to adopt cleaner alternatives.
Mining is Australia’s second-largest direct consumer of diesel behind transport and logistics, accounting for 7.7 billion litres (GL) annually. When accounting for transport and integrated services, mining becomes the nation’s largest diesel-using industry, consuming 11.5GL, or 35% of the national total.
Coal and iron ore operations dominate the sector’s footprint, consuming roughly 80% of its diesel. Rising strip ratios are reportedly requiring operators to burn more fuel to extract the same volume of product.
IEEFA Lead Analyst James Bowen writes that mining is “a key driver of Australia’s atypically large diesel dependency”.
A handful of major producers account for the majority of the sector’s fuel demand, creating an opportunity for targeted corporate and policy interventions. IEEFA notes that technical solutions — including improved mine planning, fleet management, cross-industry transport integration, and generator maintenance — could deliver 10–20% in fuel savings within six months.
“Interventions including improved mine planning and fleet management, cross-industry transport integration, and enhanced generator operation and maintenance could save a combined 1.15–2.3GL of diesel per year,” Bowen writes.
To capture these cost and supply benefits, IEEFA recommends short- and long-term policy measures for government consideration.
These include introducing a 10–20% diesel-reduction target for mining within six months, supported by non-compliance penalties; and mandating diesel-saving plans, regular reporting, and public disclosures for mining operations consuming over 100 million litres of fuel annually.
Recommendations also cover reforming the fuel tax credits system to tie rebate eligibility to fuel-efficiency benchmarks.
IEEFA notes that utilising the ongoing federal Safeguard Mechanism review to set emissions decline rates that reflect global best practice in mining fuel efficiency may be another ‘ideal’ opportunity for reforms.
Write to Paula Fabe at Mining.com.au
Main image: Unsplash
