For months, Australians have been waiting for the Iran war to produce one of two outcomes.

Either the fighting would subside and the Strait of Hormuz would return to normal.

Or governments would negotiate an arrangement allowing oil tankers and commercial ships to move safely through one of the world's most important waterways.

Neither has happened.

Now hopes that Monday's regional meeting in Oman might produce a breakthrough have been tempered before the talks have even begun.

A senior Iranian official says the meeting between Iran and Gulf states will provide an opportunity to discuss the Strait of Hormuz and wider regional security — but is not expected to produce a signed agreement governing the waterway.

Iran continues to seek an arrangement allowing it to collect fees from ships using the Strait.

Oman opposes that demand.

Bahrain says it will not attend the meeting.

That does not make Monday's talks pointless.

Getting governments around a table while missiles, drones and ships are being attacked is itself significant.

But Australians should be cautious about assuming diplomacy is about to return fuel prices to normal.

The emerging problem is no longer simply how high oil prices can rise during a crisis.

It is how long the crisis lasts.

Hormuz has become an economic problem

Before the war, roughly one fifth of global oil supplies passed through the Strait of Hormuz.

The geography is unforgiving.

The Persian Gulf contains some of the world's greatest concentrations of oil and gas production.

But much of that energy has traditionally had to leave through a narrow stretch of water between Iran and Oman.

When the waterway operates normally, its strategic importance can be easy to forget.

When it does not, the consequences travel around the world.

The war has demonstrated that dramatically.

Tankers have been attacked.

Ships have been blacklisted.

Mines have threatened navigation.

Insurance costs have soared.

The United States has provided military protection for some commercial traffic.

Ships have altered routes and sailing times.

Some have switched off their tracking equipment.

The Strait has never needed to be completely sealed to cause enormous economic disruption.

It only needs to become sufficiently dangerous that moving through it becomes slower, scarcer and more expensive.

Monday's meeting still matters

Oman has played an important mediating role throughout the crisis.

That makes Monday's planned meeting significant.

Iran says the gathering was initiated by Oman and will provide an opportunity for regional states to discuss Hormuz alongside other security issues.

There is an important positive development simply in the existence of those discussions.

A negotiated maritime arrangement remains preferable to a permanently militarised waterway.

But expectations need to be realistic.

The Iranian official quoted by Reuters says no signed Hormuz agreement is expected from Monday's meeting.

Bahrain has already said it will not participate.

And a fundamental disagreement remains unresolved.

Iran wants an agreement that would allow it to collect fees from vessels passing through the Strait.

Oman rejects that position.

That disagreement is about much more than money.

It goes to the fundamental question of who controls navigation through an international waterway.

Iran wants recognition of its leverage

Iran's position throughout the conflict has reflected an obvious strategic reality.

It cannot match the United States ship for ship, aircraft for aircraft or dollar for dollar.

But it possesses geography.

Iran sits beside the Strait of Hormuz.

That gives Tehran influence over a piece of water extraordinarily important to the world economy.

Iran has attempted to turn that geographic advantage into political and economic leverage.

A formal arrangement allowing Iran to collect fees from passing vessels would potentially institutionalise some of that leverage.

That helps explain why the issue is so difficult.

The question is not merely how much a tanker might pay.

It is whether the international community accepts the principle that Iran should possess such authority over passage through the Strait.

Oman sees the problem differently

Oman occupies the other side of the Strait.

It therefore has its own strategic interests.

It also has a longstanding reputation for maintaining diplomatic channels with governments that do not necessarily speak easily to one another.

Oman's approach has generally been to restore predictable and safe navigation.

Earlier negotiations explored arrangements involving voluntary contributions towards management and security of the waterway rather than compulsory Iranian tolls.

That distinction matters.

A cooperative arrangement between the countries bordering Hormuz is very different from one state effectively asserting a right to charge vessels for passage.

The disagreement therefore goes to the architecture of any post-war Hormuz settlement.

And architecture takes time to negotiate.

Meanwhile the ships still have to move

Diplomats can take months to resolve questions of sovereignty, security and navigation.

Oil markets operate every day.

Ships have to move today.

Refineries need crude today.

Australia needs petrol, diesel and jet fuel today.

That is why prolonged negotiations have economic consequences.

The United States has already had to organise protected transit periods for some commercial vessels moving through Hormuz.

That is an extraordinary situation.

One of the world's principal energy corridors is effectively operating, in part, around military protection arrangements.

That may keep fuel moving.

But it is not normal commercial navigation.

And abnormal navigation carries abnormal costs.

Oil above US$100 changes the calculation

Brent crude has recently traded above US$100 a barrel as markets react to the widening Middle East conflict.

But crude oil is only one part of Australia's problem.

Australia imports substantial quantities of refined petroleum.

The ACCC identifies Singapore Mogas 95 as the relevant international benchmark for Australian regular unleaded petrol and Singapore Gasoil 10 ppm as the benchmark for diesel.

Those prices incorporate far more than the underlying value of crude.

They reflect refinery availability.

Regional supply.

Demand.

Shipping.

Insurance.

Currency movements.

And increasingly, war risk.

This means Brent does not need to keep rising indefinitely for Australians to continue experiencing expensive fuel.

If the cost of refining and transporting petroleum remains elevated, Australian prices can remain high even when crude itself stabilises.

Australian prices are already responding

The latest ACCC monitoring shows petrol and diesel prices increased across most Australian locations during the week to September 9 as international refined-fuel benchmarks responded to the latest Middle East escalation.

This is precisely the transmission mechanism we have been watching.

An attack occurs thousands of kilometres away.

International markets reassess risk.

Oil and refined-fuel benchmarks rise.

Tankers become more expensive to charter and insure.

Those costs reach Asian markets.

Australian wholesale prices respond.

Eventually motorists see the result on service-station price boards.

There is usually a delay.

But there is no wall separating Australia from the international petroleum market.

Diesel may matter more than petrol

Petrol prices attract attention because millions of Australians see them displayed beside the road.

Diesel works more quietly through the economy.

Trucks use diesel.

Farms use diesel.

Mining uses diesel.

Construction uses diesel.

Regional businesses use diesel.

When diesel becomes persistently expensive, the effect spreads.

The transport company has higher costs.

The farmer has higher costs.

The mine has higher costs.

The construction company has higher costs.

Some businesses absorb those increases.

Others eventually pass them on.

That is how an international energy shock becomes domestic inflation.

Australia has fuel

This distinction remains essential.

Australia is not presently running out of fuel.

The Australian Government's Fuel Plan says fuel continues arriving in the quantities and at the frequency required.

The latest published national figures show approximately 43 days of petrol, 33 days of diesel and 33 days of jet fuel held against normal consumption rates.

Those holdings are above the averages recorded before the conflict.

Australia also imports fuel from multiple countries and continues domestic refining.

There is therefore no justification for panic buying.

Our immediate vulnerability is primarily price rather than physical availability.

But that does not make the problem trivial.

A country can have plenty of fuel and still suffer economically because that fuel has become substantially more expensive.

The excise cushion has gone

Earlier in the conflict, the Federal Government used temporary fuel-excise relief to reduce the immediate effect on motorists.

That protection has now been restored to its normal settings.

Consequently, another sustained increase in international fuel prices has a more direct route into Australian household budgets.

This creates a difficult policy choice.

Cutting fuel excise again could provide immediate relief.

But it would cost the Commonwealth substantial revenue and would not solve the underlying international supply problem.

Leaving excise unchanged means motorists bear more of the international price shock.

Neither option changes what happens in Hormuz.

Australia is building a bigger buffer

The Government has already drawn a strategic conclusion from the crisis.

Its $14.8 billion Fuel Security and Resilience Package includes a planned government-owned Australian Fuel Security Reserve.

The Government has committed $3.2 billion to establish a reserve containing one billion litres of diesel and jet fuel.

Mandatory industry stockholding requirements are also intended to increase.

These measures address physical resilience.

They are designed to make Australia better able to withstand interruptions in international supply.

But strategic reserves cannot permanently insulate Australia from international prices.

Stocks buy time.

They do not make the global market disappear.

The alternative routes are under pressure too

Normally, the obvious response to disruption at one chokepoint is to go around it.

That has happened during the Iran war.

Saudi Arabia has moved oil across the country towards its Red Sea terminals.

Ships have altered routes.

Other producers have increased their importance.

But those alternatives have also come under pressure.

Saudi Arabia temporarily shut its East-West Pipeline after attacks.

Iran-aligned Houthi forces have advanced around the Bab el-Mandeb Strait.

Red Sea shipping has consequently become another strategic concern.

This has progressively weakened the assumption that the world can simply bypass Hormuz indefinitely.

Redundancy works when the alternative route is independent of the original problem.

The Middle East conflict is increasingly threatening both.

The danger is duration

This is why Monday's Oman meeting matters so much.

A short energy shock is painful but manageable.

Governments can use reserves.

Companies can absorb temporary costs.

Consumers can defer expenditure.

Supply chains can adjust.

A six-month or year-long disruption is different.

Businesses begin incorporating higher fuel costs into contracts.

Freight companies adjust prices.

Airlines alter fares.

Consumers change spending.

Inflation expectations can change.

Governments have to reconsider energy policy.

Central banks have to decide whether an external price shock is beginning to spread through the domestic economy.

Temporary disruption gradually becomes part of the economic environment.

That is the danger Australia now faces.

The RBA cannot reopen Hormuz

The Reserve Bank of Australia illustrates the dilemma.

The RBA cannot produce oil.

It cannot escort tankers.

It cannot negotiate with Iran.

It cannot repair Saudi infrastructure.

And it cannot make international fuel cheaper.

If higher energy prices produce a temporary increase in Australian inflation, the Bank can potentially look through some of that movement.

But if higher fuel costs persist and begin spreading into wages, freight, services and inflation expectations, monetary policy becomes more complicated.

The external shock then begins influencing domestic interest-rate decisions.

That is how events in the Strait of Hormuz can ultimately reach an Australian mortgage.

Diplomacy remains the cheapest solution

There is a larger lesson here.

Military forces can protect ships.

Minesweepers can clear waterways.

Governments can build strategic reserves.

Oil companies can reroute cargoes.

Refiners can change suppliers.

All of those measures increase resilience.

But they are expensive substitutes for something much simpler:

a waterway through which commercial ships can safely travel without expecting to be attacked.

That is why Monday's talks remain important even if no agreement is signed.

Negotiations have to begin somewhere.

If Iran, Oman and the Gulf states can eventually establish predictable navigation arrangements, insurance premiums can fall.

Shipowners can regain confidence.

More tankers can return.

Freight costs can decline.

Refineries can receive more predictable supplies.

Markets can remove some of the geopolitical premium built into energy prices.

That is the pathway towards cheaper Australian fuel.

Not another military escort.

Not another tanker route.

Normality.

The Times View

Australians should not expect Monday's meeting in Oman to make expensive fuel disappear.

The differences surrounding the Strait of Hormuz remain substantial.

Iran wants recognition of a role that includes collecting fees from passing ships.

Oman opposes that proposition.

Bahrain will not participate.

And months of war have created security problems that cannot be solved in a single meeting.

But the fact that talks are occurring matters.

The alternative is a Strait of Hormuz whose normal operation depends upon military escorts, restricted transit windows, expensive insurance and the willingness of crews to enter a combat zone.

That is not a sustainable definition of normal international commerce.

For Australia, the greatest danger may no longer be a sudden shortage.

Our stocks remain substantial.

Fuel continues to arrive.

The greater danger is duration.

If the Hormuz crisis persists, expensive petrol and diesel stop being a temporary inconvenience and begin becoming an embedded Australian business and household cost.

That affects freight.

Agriculture.

Mining.

Aviation.

Consumer spending.

Inflation.

And potentially interest rates.

The world can adapt to disruption.

It has demonstrated that repeatedly during this war.

But adaptation costs money.

Ultimately, there is only one development capable of removing most of that cost:

Hormuz must cease being a battlefield and become an ordinary commercial waterway again.

Monday's meeting may not achieve that.

But after more than six months of disruption, it is increasingly clear why somebody must.