Source: Radio New Zealand
Nicola Willis speaks after the latest government update on fuel supplies, 6 April. RNZ / Giles Dexter
The finance minister says she has “never felt so dependent on the actions and feelings of one administration and its leaders”, as concerns grow about the fuel shock triggered by the US-Israel war on Iran.
Few ships carrying stock have been allowed to pass through the Strait of Hormuz since Iran effectively closed it just over a month ago, in retaliation for the attacks. That has triggered a global spike in prices at the pump, and New Zealand – wholly dependent on importing refined fuels – has not been spared.
At the weekend, US President Donald Trump issued an expletive-laden threat at Iran, telling it to “open the F*****’ Strait, you crazy bastards, or you’ll be living in Hell” or its civilian infrastructure would be attacked. He followed that up on Monday (US time) with a claim the “entire country can be taken out in one night”.
The comments come as Foreign Minister Winston Peters heads to the US to meet US Secretary of State Marco Rubio.
Asked about Trump’s comments on Tuesday morning, Nicola Willis first was diplomatic.
“We actually want to see all parties acting with restraint, moving toward a negotiated solution so the crisis can end,” she told Morning Report.
“And it’s simply the fact that the longer the conflict goes on, the more severe the impact. And once again, we call on the US, Iran, all actors in this conflict to uphold international law.”
Asked again, she replied:
“Well, I have reflected that never have I felt so dependent on the actions and feelings of one administration and its leaders as New Zealand is right now. And I see the pain that so many New Zealanders are experiencing as a result of this fuel shock, and I wish for it to end.
“And the sad reality is that it’s not in New Zealand’s hands that lies in the hands of countries very far away.”
Steady as she goes
Willis was resisting the temptation to cut fuel taxes and road user charges (RUC) as prices spiked – particularly for diesel – saying it would make no sense to encourage fuel consumption at the same time as calling for restraint.
According to the Ministry of Business, Innovation and Employment’s (MBIE) latest data national fuel stocks are stable, with sufficient stock levels – for now.
Diesel levels have dipped slightly since the last report, while jet fuel and petrol levels have risen slightly. There is now just 17.5 days’ worth of diesel in the country, with more on ships headed this way – 12 outside our exclusive economic zone and four inside.
“We haven’t had any reports of any issues with those shipments that are in international waters,” Willis told Morning Report. “We would expect to get reporting from fuel importing companies if they were seeing any issues with those. They seem to be safely on their way.”
Gaspy figures show diesel is now more expensive than 91 at more than $3.70 a litre, while its users also have to pay RUC.
“That price is really, really tough on many, many businesses in our economy, and also individuals and families who use diesel,” Wilis said. “We’re used to seeing diesel at the pump cheaper than ’91. And of course, what’s happened internationally is that diesel is the most disrupted fuel, both in terms of getting the refined products, but also in terms of the cost escalations that we’ve seen internationally. It’s very much an international phenomenon.
“What we’ve said is that in the first instance, we don’t want to remove fuel tax or road user charges as a measure because it’s such a broad and blunt instrument, particularly if we could be moving into a phase where we’re calling for demand restraint. It doesn’t make sense to also be reducing the price of fuel if you’re calling for demand restraint.
“And we’re conscious, look, we are in a huge amount of debt as a country. We are running a significant deficit already. We need to be financially responsible, which is why we’ve opted for that targeted relief, targeted at low-income families who are really, really up against us.”
Willis said there were no signs of price gouging, whether by petrol suppliers or retailers affected by fuel price increases, but it was being monitored.
“[Removing RUC] would do nothing to the price of diesel at the pump. I think that’s an important thing for people to remember – that price you’re paying at the pump is just the price of diesel.”
Taking RUC off then applying it again when prices dropped would risk inflation, Willis said.
“I wish as much as anyone else that this conflict occurring in the Middle East wasn’t happening in a way that’s creating so much pain for New Zealanders. But there is a price to be paid for everything. And we really have a choice about short-term pain or long-term deeper pain.
“And we saw after Covid, when we let loose the rule book and spinned up a storm, actually, that results in higher inflation in the medium term, big amounts of debt and it’s a hard thing to dig a country out of.”
She said fuel importers had had success in securing refined fuels from outside the Middle East, and extra storage should be ready at Marsden Point by the end of May.
‘Crunch’ on the way if war not resolved
Soaring diesel prices are forcing some farmers to change what they grow and how they grow it. Some are shifting to crops that use less fuel and have started cutting back on fertiliser, moves that could ultimately lower production and increase prices.
Federated Farmers arable chair David Birkett told Morning Report on Tuesday farmers were adjusting to the new reality for now, but if the war was not over and usual deliveries resumed by the end of the southern hemisphere winter, there would be a “crunch”.
“Initially supply was a big issue and we are still hearing isolated cases where farmers are running out, but in general the supplies are getting through, but they are certainly being delivered in smaller batches.
“The concern now, I guess, as a lot of farmers stored fuel on the farm, that storage has now been used and the full price impact is coming through now. So we’ll start to have an economic impact from now on.”
Farmers were considering switching to crops that use less fertiliser, he said, and using smaller tractors.
“The thing is here, I guess for farmers, is looking at what can they do to make sure that profitability doesn’t drop away. And that’ll be one of the two questions. One, does it reduce the amount of fuel that’s needed? And two, will it impact on the profitability at the end of the day as well?
“Because while some sectors are going well, other sectors are struggling with their profitability at the moment. Price and supply are obviously an issue… At what point do those stock levels become a real operational risk for what you can produce?”
David Birkett. RNZ/Anisha Satya
Birkett said the timing of the shock was “very lucky”, with much of our crops already planted and the quiet winter period ahead.
“Our next peak demand will be springtime. And that’s probably our next area of concern is, what will the price be like come springtime? So we’re talking August. And what will the price be as well? … The next crunch period will be spring, and I would certainly hope that the war is finished by then. But yeah, no, I don’t think anyone’s holding their breath.”
The price of fertiliser in spring remained a big source of uncertainty.
“We know that the Australian prices of fertiliser have already gone up significantly, so that gives us a bit of an idea of where those fertiliser prices will probably get to. So yeah, both fuel and for us here in New Zealand are pretty linked, and they’re the two which we’re keeping a very close eye on.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
