Fuel price volatility is not new. What is new in 2026 is the scale of the movement, the fact that it is arriving simultaneously with five other cost pressures, and the structural feature of the Australian construction industry that means most of the risk sits entirely with contractors on fixed-price contracts.
When the retail price of diesel rises, most industries pass the cost on. Construction businesses on fixed-price contracts cannot. The price was locked at tender. Every dollar of additional cost that cannot be contractually recovered comes directly out of margin.
Diesel has risen approximately 67 per cent from the 2022 baseline levels used in most project tenders from that period. PVC, HDPE pipe, bitumen, and other petroleum-derived materials have moved between 27 and 36 per cent.
A civil contractor delivering a drainage and road pavement project: 12 machines on site averaging 180 litres of diesel per day each, $2.4 million in PVC and HDPE pipe procurement yet to be placed, freight from a regional supplier adding 18 per cent to materials landed cost.
Fuel cost at tender ($0.87 per litre): $270,072 for remaining programme
Fuel cost at current prices ($1.44 per litre): $447,120
Unrecovered fuel cost: $177,048
PVC and HDPE pipe at tender pricing: $2,400,000
PVC and HDPE pipe at current pricing (28% increase): $3,072,000
Unrecovered materials cost: $672,000
Freight surcharge increase on remaining deliveries: $43,200
Total unrecovered fuel and materials cost: $892,248
This figure does not include labour, debt servicing, or overhead movements.
The fuel crisis would be a difficult but manageable situation if construction contracts included cost adjustment mechanisms as a standard feature. Most do not.
Before concluding you have no protection, check your contract carefully. Rise and fall clauses and cost adjustment mechanisms are sometimes added by special condition and missed on first reading.
Blaze Business & Legal
Need advice on your specific position?
Three fixed-fee services covering your legal, cost, and business situation. Rachelle Hare and Shannon Drew directly.
Also check whether the Superintendent has directed you to use a specific material, method, or programme that increased your costs. That direction may be a compensable variation regardless of whether the contract has a rise and fall clause.
If your contract has no rise and fall clause, your options: /construction-cost-crisis/fixed-price-contract-cost-increases/
Notice obligations across all standard forms: /construction-cost-crisis/contractual-notices-for-cost-increases/
Construction accounted for approximately 26 per cent of all Australian corporate insolvencies in the financial year to February 2026. The businesses that avoid this pattern calculate their real cost position early, understand their contract rights, and act before the cash flow becomes critical.
Why construction businesses are going broke
Blaze Business & Legal
Three fixed-fee services for construction businesses working through the cost crisis. Rachelle Hare and Shannon Drew directly, from the first conversation.
Rachelle Hare is a construction lawyer and business adviser with 25 years of experience, including in-house roles at Thiess, Laing O’Rourke, Acciona, DHA, and UGL. She advises construction businesses on contracts, cost recovery, risk, procurement, commercial strategy, and business structuring across Queensland and Australia.
