Source: Radio New Zealand
RNZ / Kim Baker Wilson
The government has warned the country’s oil deliveries are in doubt if the conflict in the Middle East rages on.
The closure of the Straits of Hormuz and damage to infrastructure has triggered volatility, fuelling record oil prices.
Prices hikes have stretched beyond the petrol pump, with Air New Zealand raising fares, suspending its earning guidance and warning it may have to cut flights if oil prices continued to increase.
Air Chathams said the rising cost of oil was costing the small airline about $140,000 extra a month in fuel, and could see it cut flights.
Associate Energy Minister and Regional Development Minister Shane Jones told Checkpoint the government was not considering rationing, despite the Australian government looking at contingency plans that included fuel rationing.
He said the government had been assured the physical arrival of the fuel was not under threat in coming months.
“But get to May we’re told by the industry unless things change there’ll be big challenges.”
A newly created ministerial oversight group, announced by PM Luxon late yesterday, will meet for the first time on Wednesday, Jones said.
The group is led by Finance Minister Nicola Willis and included Jones, Minister of Agriculture and Trade Todd McLay, Minister of Energy Simon Watts and Minister of Commerce Scott Simpson.
Key inputs for New Zealand’s fertiliser industry such as urea come out of the Middle East, including from Iran, and the government also wanted to keep an eye on any price gouging, Jones said.
The group would discuss options for relief from spiking energy costs.
The minister would not outline what measures were being considering, and warned such actions always had consequences.
The government was already supporting regional airlines through loans from the Regional Infrastructure Fund, Jones said.
The minister said it was a “great worry” a number of countries with refineries were significantly reducing supply.
Ministry of Business, Innovation and Employment (MBIE) data showed the country had 27 days of petrol in the country, and 22 days worth shipped but yet to arrive, 24 days of diesel, with 29 days on the water, and 28 days worth of jet fuel, with 22 days shipped.
Some oil companies had already declared force majeure – a clause that freed companies from contractual obligations due to extraordinary circumstances, such as natural disasters or wars.
Wise Response Society chair Nathan Surendran said levels of damage across multiple countries meant delays could last weeks or months even if the conflict ended quickly, but the threat went beyond delays.
“The force majeure declarations cascading across Gulf and Asian suppliers did not just mean delays to oil supplies, they void contracts, and could see fuel currently headed to New Zealand diverted to nations willing to pay more,” Surendran said.
There were signs this was already happening, with reports of cargoes being diverted from Europe and Africa to Asia.
The government should take a precautionary approach, signalling possible rationing now, before shortages forced it, Surendran said.
“Australian fuel wholesalers were already rationing supplies to retailers despite Australia holding 36 days of reserves and two domestic refineries – New Zealand has neither,” he said.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
