New Zealand motorists are facing heightened uncertainty at the pump following a strike on Iran’s largest natural gas field, the South Pars field, by the United States and Israel. The attack has sent ripples through global energy markets, with Brent Crude prices surging to $US110 a barrel by 11am Thursday (NZT), according to reports. The situation is particularly concerning as it marks a shift towards targeting economic infrastructure in the ongoing conflict, a move that experts say could have far-reaching consequences for fuel prices worldwide.
The AA is warning that “all bets are off” when it comes to predicting petrol prices in New Zealand, reversing a sense of stability that had emerged on Wednesday. Transport policy advisor Terry Collins explained that the immediate impact stems from the cost of replacing fuel stocks, but further price increases will depend heavily on how Iran responds to the attack and the resulting disruption to oil production and distribution. This escalation in the conflict, moving from military targets to critical energy infrastructure, is being described as a “strategic elevation” with potentially significant global ramifications.
Escalation in the Middle East and Impact on Oil Supply
The South Pars field, shared by Iran and Qatar, is the world’s largest natural gas deposit. The attack, which reportedly targeted gas storage tanks and refinery infrastructure across multiple operational phases, prompted Iran to vow retaliation, raising fears of further disruption to energy supplies. According to the semi-official Fars News Agency, loud explosions were heard across refinery sites in Asaluyeh, and firefighting and rescue teams were deployed. While the full extent of the damage and any casualties remain unconfirmed, the attack has already halted production at two refineries with a combined capacity of about 100 million cubic meters per day.
Collins emphasized that the United States’ ability to meet its own domestic fuel needs means the brunt of the consequences will likely fall on other nations, including New Zealand. This concern is echoed by Westpac chief economist Kelly Eckhold, who warned that if the crisis continues, the price of oil could reach $US200 a barrel, pushing retail petrol prices in New Zealand above $4 per litre.
How Fuel Prices Respond to Global Shocks
The speed with which petrol prices react to international events is directly linked to how fuel stations replenish their supplies. Collins explained that when the cost of oil increases, stations must charge more to cover the higher cost of their next fuel delivery. “If they’ve got, say, $100,000 worth of fuel in and the price of oil goes up and it’s going to cost them $120,000 to replace it, they will charge that $120,000 so they can pay for the next load coming in,” he said. He added that ideally, prices should fall just as quickly when oil prices decrease, following the same “replacement cost” principle.
Data from the fuel monitoring app Gaspy indicates that 91 octane petrol is already selling for over $3 per litre in many parts of New Zealand. New Zealand’s reliance on diesel is a significant factor, with refining costs for diesel increasing nearly 100 percent in the last 10 days, compared to a 50 percent increase for petrol. This has resulted in domestic price increases of around 45 cents per litre for petrol and 70-75 cents for diesel.
Government Response and Support for Households
Finance Minister Nicola Willis has indicated the government is considering targeted, temporary support for households most affected by rising fuel costs. A potential example cited was assistance for essential workers, such as cleaners with long commutes, who have limited access to public transportation. This proposal has been welcomed by E tū union member Ayesha Paki, who drives 30 minutes each way to her job at Auckland Airport and expressed concern about the financial strain of increasing petrol prices. “Everything is expensive and now the petrol has affected all of us cleaners and low pay workers. We are so worried,” she said.
Willis stated that the government is “anticipating, and to the extent possible mitigating the impact on the New Zealand economy, including what could potentially be acute cost of living pressures for some households.”
The attack on the South Pars field represents the first reported strikes on Iranian energy infrastructure during the current conflict, prompting Tehran to warn its neighbors that their energy installations could be targeted in the coming hours. The situation remains fluid, and the potential for further escalation poses a significant threat to global energy markets and, to fuel prices in New Zealand.
Looking ahead, the immediate focus will be on Iran’s response to the attack and the impact on oil production and shipping in the region. The government will continue to monitor the situation and assess the need for further support measures. Readers can stay informed through updates from RNZ and other credible news sources.
What are your thoughts on the rising fuel prices? Share your comments below and let us know how This represents impacting you.
