New Zealanders could soon face calls to reduce their fuel consumption as the government weighs options to address rising prices at the pump, driven by escalating tensions in the Middle East. Associate Energy Minister Shane Jones revealed officials will brief ministers later this week on potential “demand restraint” measures, though a targeted fuel support package is expected to be announced Tuesday.
The surge in fuel costs – nearly $1 per litre for petrol and even more for diesel in the past month, according to price tracker Gaspy – is linked to disruptions in global energy markets stemming from Iran’s increased military presence in the Strait of Hormuz, a critical waterway for oil transport. Approximately 20 percent of the world’s oil supply passes through the strait, making it a focal point amid the ongoing conflict.
While Finance Minister Nicola Willis has repeatedly stated there are no current plans to restrict fuel usage, citing healthy stockpiles, the possibility of demand restraint signals a growing concern within the government. Ministry of Business, Innovation and Employment data shows New Zealand currently holds roughly 47 days of fuel supply, including 50 days of petrol, 46 days of diesel, and 45 days of jet fuel.
Jones, speaking to Morning Report, emphasized the government’s focus on bolstering supply. “I am focused more on enhancing advancing, broadening and simplifying access to greater levels of supply,” he said. New Zealand consumes approximately 24 million litres of fuel daily, with diesel accounting for nearly half of that amount, petrol for a third, and aviation fuel making up the remainder.
Demand Restraint Options Under Consideration
The nature of potential “demand restraint” measures remains unclear. Jones indicated the upcoming briefing will provide a “granular level” understanding of possible steps. While he didn’t specify what those steps might entail, the possibility raises questions about potential restrictions on fuel employ, rationing, or public appeals for conservation. The government is simultaneously preparing a fuel support package, details of which are expected later Tuesday, intended to provide targeted and temporary relief to those most affected by the price increases. More information on the support package is expected later today.
Marsden Point Refinery Closure Remains a Point of Contention
Jones repeatedly pointed to the 2021 closure of the Marsden Point oil refinery as a contributing factor to New Zealand’s vulnerability, arguing that increased storage capacity would be possible if the refinery were still operational. “The reason we can’t do that at scale is since they closed down the refinery, and I don’t care if you get annoyed with me saying that. I want New Zealanders to bear that in mind. Here’s the consequence of closing down the refinery,” he stated.
However, this claim has been challenged. Refining NZ (now Channel Infrastructure), a privately-owned company, made the decision to cease refining operations and transition to an import-only model. The government considered intervening but ultimately decided against it, based on advice that risks to fuel security were “very low” given that any disruption to refined oil supply would likely also impact crude oil access. Details of the government’s decision-making process regarding Marsden Point can be found here.
Supply Chain Concerns and Alternative Energy Sources
Despite the challenges, Jones maintained that fuel importers, such as Z Energy, have consistently confirmed their ability to deliver supplies. “We have never once been told that they are unable to deliver, or contracts are being terminated,” he said, adding that the government is closely monitoring the situation. The primary concern remains access to sufficient feedstock for refineries owned by companies like ExxonMobil.
The discussion also touched on potential long-term solutions, including the exploration of alternative energy sources. Jones highlighted research into “white hydrogen” – naturally occurring hydrogen – being conducted by the University of Auckland in the Wairarapa region. “There is a source of hydrogen energy in New Zealand…they believe they’ve tapped into a vein of infinite power of a hydrogen character,” he said. However, he acknowledged the significant financial investment required to develop such technologies, raising questions about potential trade-offs with existing energy infrastructure.
Labour leader Chris Hipkins countered Jones’ claims regarding the refinery closure, stating it was a “private decision made by the fuel industry” that wouldn’t have significantly altered New Zealand’s fuel security. “Marsden Point was refining crude oil that was imported from overseas, so the same supply constraints would be hitting us now whether MarsdenPoint was operating or not,” Hipkins said.
What’s Next?
The government is expected to provide further details on the fuel support package later Tuesday. The briefing for ministers later this week will be a key moment, outlining potential demand restraint measures and strategies for bolstering fuel supply. The situation remains fluid, heavily influenced by geopolitical developments in the Middle East and the ability of global energy markets to stabilize. Consumers can expect continued volatility in fuel prices in the short term.
Share your thoughts on the rising fuel costs and potential government responses in the comments below.
