Re-examining diesel as a supply chain risk for the mining sector

Diesel forms an essential part of sustaining mining operations. From hauling, drilling, and support fleets to pure baseload or backup power, diesel and HFO gensets have been a cornerstone of mining around the globe. Yet mining companies rarely consider diesel as a core risk factor in their operations. This is starkly present at the moment as global oil supply chains are disrupted, causing price volatility and supply uncertainties.

We assert that the risk factors of diesel – including supply chain risks – should be considered carefully by mines, alongside price, to build operational resilience in an increasingly volatile global context.

Diesel supply underpins both energy and logistics and has a compound effect on mining operations. If diesel runs dry in a mining operation that relies on diesel, production halts, fleets become immobile, and losses build up. And diesel is uniquely exposed during geopolitical conflicts.

The current disruption of the shipping in Hormuz affects between 10 – 20% of global seaborne diesel supplies, equating to millions of barrels per day that are vulnerable to disruption and lack of supply.

The current conflict is predicted to show up especially acutely in African countries, whose supply chain is closely linked to operations through the Gulf, as well as Australia, where fuel imports rely on Asian refining hubs that are sensitive to Middle East crude flows and shipping.

Energy isn’t consumed in isolation: it is embedded into production schedules, fleet operations, uptime targets, and financial planning. When logistics become challenging and unstable, delivered energy becomes unstable with it. And diesel is where logistics risks show up first.

Shipping routes, lead times, freight pricing, and insurance premiums are all vulnerable, with a cascading effect on mining operations. At the moment, this is particularly true in many countries in Africa and Australia, which rely on diesel imports sourced through the Middle East. However, other mining operations are equally vulnerable to possible threats in the future—for example, many Latin American companies rely on US-export diesel. Should this supply be interrupted, these mines would find themselves in a similar predicament.

Most operators can respond to high fuel prices through efficiency, operational changes, or commercial pass-through mechanisms. But logistical volatility is a different challenge. It forces reactive behavior: emergency procurement, premium freight, higher inventory buffers, and costly operational workarounds. These are the hidden costs and risks that mining operators face in times like these. In volatile environments, the best energy strategy isn’t only cost minimization; it is risk management.

Hybrid, distributed energy systems, led by renewables and battery storage, present a more resilient option for the mining sector. Once these systems are built, their supply is consistent, reliable, and free of shocks for many years. When companies procure energy-as-a-service (EaaS), the picture is even better: consistent pricing, agreed over a significant timeline, allowing accurate, unchanging energy cost forecasting.

This is no longer a fringe option dependent on companies’ commitment to reducing carbon emissions. Renewable energy systems can now beat the cost of diesel on a kWh to kWh basis, especially in the remotest regions of Africa or Australia. The benefit is simple: a consistently priced, reliably available energy supply without the need for reactive or expensive logistical workarounds. Why, then, do many mines hesitate?

The answer is typically intermittency. This is a valid concern when considering renewable energies, since the sun and wind aren’t always consistent. However, the cost and sophistication of battery technology are improving exponentially, meaning that solar/BESS solutions can now provide baseload power at a cost comparable to diesel—without the supply chain risk.

Using EaaS provides an additional layer of security and predictability for mines. The costs are predetermined, often with fixed escalation rates, and performance guarantees ensure that reliability is baked into the contract. Moreover, procuring energy from an energy service provider removes the resource burden of power plant maintenance and operation from mining teams, meaning that mines can focus exclusively on their core revenue-generating activity.

We’re proving this with our baseload solution for Kamoa Copper S.A., supplying Africa’s largest copper mine with 30MW dispatchable power, day and night. These behind-the-meter power solutions should now be part of core infrastructure conversations. Mines that procure energy from us today know exactly what each kWh will cost in 15 years. That can’t be said for diesel costs or the utility grid. The companies that signed power purchase agreements with us before this shock can be relieved that their tariffs are set and no cost surprises are waiting to derail their OpEx budgets.

Whichever way mines look at it, budgeting for diesel cost volatility is only a small part of a much larger picture. As current events are now proving, the risks of the diesel supply chain paint an even more compelling picture for on-site hybrid power, supplied by experts.