Fuel Crisis, Cost of Living Increase and AI:
The Effects on the Engineering and Construction Industry
The Fuel Crisis
Fuel has always been a major cost in construction, but the current instability is unlike anything the industry has seen before. Diesel prices have jumped across the country, with some places paying more than $3 per litre. In Adelaide, prices are sitting around 197 to 200 cents per litre and changing sharply from week to week.
Diesel is essential for almost all civil and construction work, so when prices rise, costs rise immediately.
This affects:
- Earthmoving and excavation
- Transporting aggregates, steel, concrete and prefabricated materials
- Asphalt, bitumen and other petroleum-based products, which have increased 35 to 50 percent
- Road construction and resurfacing
- Freight for regional and remote projects
Councils across South Australia are now seeing 20 to 50 percent cost blowouts on infrastructure projects. Many have had to delay or change project scopes because fuel costs have pushed budgets over the limit.
Australia is especially vulnerable to fuel price shocks. The country imports about 90 percent of its liquid fuel, and most local refineries have closed over the past 25 years. Only two remain, and both rely on government support to stay open. This means Australia depends heavily on overseas suppliers such as Singapore, South Korea, Malaysia and the United States. When global supply tightens, these countries look after their own needs first, leaving Australia exposed to shortages and price spikes.
Regional South Australia feels the impact even more. Long distance freight is unavoidable, and every extra cent per litre adds up quickly over hundreds of kilometres. This makes regional infrastructure far more expensive and harder to deliver within budget.
Cost of Living Pressures
The rising cost of living is creating another layer of pressure for the industry.
Contractors are finding it harder to keep skilled workers as:
- Housing becomes less affordable
- Transport and fuel costs rise
- Workers expect higher wages
- Mining, defence and infrastructure sectors compete for the same labour
This is especially difficult for small and medium sized contractors who already operate on tight margins.
Higher living costs also reduce consumer spending, which slows private development, particularly in residential construction. Developers are struggling with rising material, finance and labour costs all at once, making many projects harder to justify.
In Adelaide, this is leading to:
- Slower growth in housing supply
- Delays in medium density and infill projects
- Higher insolvency risk for subcontractors
Construction insolvencies are at their highest levels in years across Australia, and South Australia is following the same trend.
Artificial Intelligence
AI is adding another major shift to the industry. It brings both opportunities and challenges.
Many engineering and construction firms are using AI to:
- Improve project planning and cost forecasting
- Predict fuel related risks
- Automate paperwork and administrative tasks
- Improve supply chain management
- Support asset maintenance and monitoring
- Enhance safety and compliance
These tools can help reduce costs and improve efficiency at a time when budgets are under pressure.
However, AI adoption is uneven. Smaller contractors often cannot afford new technology or training. Upskilling the workforce takes time, and some administrative or design support roles may decline as automation increases. This is widening the gap between large contractors and smaller local businesses, a trend already visible in Adelaide.
What This Means for Adelaide’s Future
The combination of fuel costs, living expenses and AI adoption is reshaping the industry’s direction.
In the short term:
- Infrastructure projects may be delayed or reduced in scope
- Contractors will face tighter margins and more financial risk
- Housing supply may slow further, worsening affordability
- Regional projects will become even more expensive to deliver
In the long term:
- Fuel will remain a major risk factor in project planning
- The shift to electric machinery, hydrogen and alternative fuels will become essential
- AI will continue to change workflows and skill requirements
- Companies that invest early in digital tools will have a clear advantage
Adelaide’s engineering and construction industry is going through a period of rapid change. Fuel instability, cost of living pressures and AI are not separate issues. They are connected forces that are reshaping how projects are costed, delivered and managed.
The businesses that succeed will be those that adapt early, embrace new technology, plan for fuel risk, support their workforce and build resilience into every stage of project delivery.