From fuel price shock to fuel resilience: What councils need to do next

This article has been updated to reflect recent developments in the Fair Work Commission’s review of the Road Transport Contractual Chain Order (RTCCO).

The risk beneath the price movement

Diesel prices have fallen from their April peak, and the Commonwealth has announced a major fuel resilience package. But for councils and the waste sector, the recent price shock has exposed a more enduring issue: whether essential waste services are contractually, operationally and financially prepared for the next disruption. 

The story has moved off the front page. Service stations are restocked, and headlines have moved on. For many households and businesses, the immediate pressure appears to have eased. For councils and the waste sector, however, the recent disruption has left a more practical question: are essential waste services sufficiently resilient if fuel markets tighten again? 

Diesel sits at around $2.32 a litre, 28 per cent below its April peak, but still 31 per cent above the pre-conflict baseline, and above the $2.00 threshold that keeps the new Road Transport Contractual Chain Order (RTCCO) in force. The temporary fuel excise cut and the heavy-vehicle road user charge waiver both expire on 30 June.

Since publication of the initial RTCCO, the Fair Work Commission has commenced a formal review and proposed targeted variations following early implementation, reinforcing that regulatory requirements in this area continue to evolve.

Proposed changes include:

• Requiring diesel prices to remain below $2.00/L for four consecutive weeks before the RTCCO ceases
• Clarifying that obligations apply to both existing contracts and new arrangements
• At least fortnightly price adjustments.

These changes are not yet finalised and public consultation is now open, with submissions closing at 4 pm AEST on Thursday 4 June 2026.

The Commonwealth’s $14.8 billion Strengthening Australia’s Fuel Resilience Package is the largest single fuel security intervention in Australian history. The response focuses on several areas: refineries, strategic reserves, critical minerals, low‑carbon liquid fuels, interest-free loans for manufacturers and logistics, and expanded stockholding obligations. It does not directly address the waste sector, despite it being an essential, diesel-dependent service that is contractually exposed and explicitly named in the RTCCO.

Refineries, strategic reserves, critical minerals, low-carbon liquid fuels, NRF loans for manufacturers and logistics. The waste sector is not in the response.

 

Three exposures that remain despite price relief

The recent disruption was most visible through price. The more important lesson for councils is that fuel exposure spans contracts, fleet operations, supply chains, and service continuity, and those exposures do not disappear simply because the diesel price has eased. 

First, the structural exposure remains material. Australia still relies heavily on imported refined fuel, with national diesel cover improving under the new diversified import strategy but remaining below the 90-day IEA obligation. For councils, the practical issue is not national fuel policy in the abstract; it is whether local collection, transfer, processing and disposal services can continue operating through a constrained fuel market. 

Second, the disruption travelled through more channels than oil. Hormuz is also the route for around one third of seaborne fertiliser trade and roughly a fifth of global LNG. The fertiliser channel is not food-only, urea is also AdBlue, and modern diesel trucks cannot run without it. The shipping disruption hitting fuel imports is the same disruption hitting MRF commodity exports and equipment parts inbound. One event, several channels, all of which touch a fleet that picks up bins. 

Third, waste is essential in practice but not explicitly addressed in policy. It is not formally designated as a priority fuel user in any Australian jurisdiction. In a stable market, the informal arrangement holds, but in a constrained one, it’s less certain. 

30 June and the contract exposure question

The timing of these exposures is critical. From 1 July, the excise returns in full and the heavy-vehicle road user charge resumes. Even if no other price moved, the effective cost of diesel rises overnight. The Federal Budget did not extend either measure. 

At the same time, the Fair Work Commission’s Road Transport Contractual Chain Order has been in force since 21 April, and covers the waste management industry by name. It requires parties in the contractual chain to adjust transport rates at least fortnightly to recover fuel cost movements. The order includes a price-linked mechanism connected to the AIP national diesel terminal gate price. Subject to legal confirmation, the practical effect appears to be that the fuel adjustment requirement applies while diesel remains above the relevant $2.00 per litre threshold, rather than the order itself necessarily ceasing below that level. It is sitting above that today and was reviewed for the first time by the Commission on 25 May. 

Most of the waste contracts now operating across Australia were written in 2019, 2021 or 2022, in a stable-energy world. They were not designed for fortnightly adjustments, evidentiary disputes, or a regulator review cycle. Existing rise-and-fall clauses may satisfy the obligation, but fixed-price contracts almost certainly will not. 

Many current waste contracts were procured or negotiated in a more stable energy environment. They were not necessarily designed for rapid fuel price movements, fortnightly adjustments, evidentiary disputes or regulatory overlay. Some existing rise-and-fall clauses may be sufficient, while others may need review. Fixed-price arrangements are likely to require particular attention.

 

The next step: translating fuel security into council service resilience 

The federal fuel security response is significant. It includes:

• $7.5 billion for a Fuel and Fertiliser Security Facility 

• $3.2 billion for a one-billion-litre Strategic Reserve 

•  $1.1 billion for a Cleaner Fuels Program tied to low-carbon liquid fuels and sustainable aviation fuel 

•  $1 billion in interest-free loans through the National Reconstruction Fund 

• Expanded minimum stockholding obligations 

•  A 20 per cent domestic gas reservation from July 2027.

The broader policy narrative has shifted from “renewable energy superpower” towards “energy sovereignty”.

For councils, the immediate issue is that many of the relevant resilience levers sit outside the headline fuel package. These include local fuel access arrangements, depot-level contingency planning, contract price adjustment mechanisms, fleet transition pathways, regional collaboration and the use of waste levy or infrastructure funding to strengthen essential service continuity. 

The national fuel security agenda is now moving, creating the most actionable opportunity for the waste sector yet. Councils, regional organisations and the waste sector have a window to define what fuel resilience means for essential waste services, and to make that case before the next disruption forces the issue. 

From forecasting to resilience

The temptation, having lived through the price shock, is to focus on forecasting: what will diesel cost next quarter, where is the floor, and will relief measures be extended? Those questions matter, but they are not enough. The more important resilience question is: what happens if conditions are worse than expected? 

The right question is the one the crisis itself just asked: what happens if conditions are worse than expected? The contracts signed in the next four quarters, the capital decisions made about fleet, depot and processing infrastructure, and the procurement settings locked in for the next five to seven years will largely set the sector’s resilience through to 2030. The work now required is contract architecture, business continuity planning, scenario-aware capital decisions, and coordinated advocacy.

What this means for councils 

The fuel shock did not just increase costs, it revealed how waste services respond under pressure. Strengthening resilience now requires coordinated action across contracts, operations and regional planning. The next disruption will not be defined by whether diesel prices rise again, but by whether councils have:

• Contracts that can adapt in real time
• Operators that can maintain service continuity under constraint
• A clear and agreed approach to how risk is shared across the supply chain.

For many councils, these settings were not designed for this kind of environment and are now being actively reconsidered.

How BDO can help

BDO’s project & infrastructure advisory team is currently working with councils, regional organisations and waste operators across several areas:

• Reviewing contract structures and fuel adjustment mechanisms, including RTCCO implications

• Stress-testing business continuity under fuel and supply chain disruption scenarios
• Supporting regional coordination and advocacy on fuel access for essential services
• Advising on fleet transition pathways and infrastructure decisions in a volatile energy environment.

As the national fuel security agenda continues to evolve, there is a clear opportunity for councils to define what resilience looks like for essential waste services, and to embed those settings before the next disruption occurs. Contact us if this article prompts a question for your council, executive or contractor relationship.