Prime Minister Christopher Luxon says the government's latest moves to increase fuel stocks are about ensuring maximum flexibility if the situation deteriorated in two months time.
Luxon says New Zealand's fuel stocks remain strong, but Cabinet has today discussed the option of pursuing further commercial opportunities to add to current supplies.
Luxon gave an update on the national fuel plan during today's post-Cabinet media conference along side Finance Minister Nicola Willis and Associate Energy Minister Shane Jones.
Luxon opened today's briefing by saying the New Zealand government was still "gravely concerned" by the ongoing conflict in the Middle East.
"Every day New Zealanders are waking up to news of developments in the Middle East, but what we are yet to see is a move towards a negotiated settlement and solution.
"The longer it goes on, the more the impact, whether that's the human toll in the Middle East, and also the economic pain and suffering being caused around the world."
He said the government's first priority in the situation was maintaining fuel supply.
"That's mission critical to protecting our economy. Without supply, there are serious impacts to jobs and incomes."
Today's briefing after the weekly cabinet meeting follows the latest data released from the Ministry of Business, Innovation and Employment (MBIE) showing total fuel stocks in the country have increased since the last update on Wednesday.
Luxon said he could assure New Zealanders the country was in a good position, with "healthy stocks" of fuel, and the fuel companies had made changes ot their allocations to support demand over the coming weeks, including through Easter and the upcoming school holidays.
He said this meant New Zealand remained in phase one of its fuel response plan.
"But we are continuing to prepare for a move to phase 2 if we need to."
He said the Cabinet today discussed the option of pursuing further commercial opportunities to add to the current level of fuel security.
"Obviously any option we pursue has to be affordable, practical and timely, but officials are pursuing options with urgency."
Luxon told reporters they were right to identify the tone shift from last week, saying what was being discussed today was even more assertive.
He said the government could rest on its laurels given there were no signs yet of any challenges or issues from oil importers, but instead he wanted to be in a "much more aggressive, assertive position."
Luxon said it was about ensuring maximum flexibility if the situation deteriorated in two months time.
He said he would rather have the "embarrassment of an abundance of fuel" than be "under-sorted".
"I've been through fuel crises before in my former life, I can tell you, it ain't pleasant trying to run an airline with 30 percent of the fuel you need for several months."
Finance Minister Nicola Willis.
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Willis said the government was now actively seeking proposals for New Zealand-refined fuel imports on arrangements that would support additional purchase of stocks through to June.
"The proposals would involve the government working with industry partners to deliver additional fuel from offshore to manage the risk of a shortage of supply. An insurance policy, if you will."
She said the government had already been approached by some parties with unsolicited proposals to increase supply, commercial assessment of those proposals was now being urgently carried out.
She said this could see additional supplies for New Zealand stored offshore, and that the government needed to take additional measures now.
"The biggest risk that we face is actually having to move to the sorts of measures contemplated in phase three and four of the fuel plan – a world in which we are having to limit fuel supply to certain users of fuel in the NZ economy is a world we want to take every step possible to avoid.
"The time to take those steps isn't several weeks from now when a fuel supply problem could potentially emerge, the time to take action is now. So that if those fuel supply issues did emerge in the future, we are already prepared, so what we are taking is a proactive, prudent step."
Willis would not provide an updated forecast on how high inflation could peak due to the impacts of the war. She had earlier provided a forecast from Treasury that it would peak at 3.7 percent, but said that was "very unusual practice".
Now, a broader range of scenarios was being prepared.
"What I don't want to do is, at this particular point in time, ahead of finalizing budget forecasts, point to a set of figures that could be quickly outdated in the coming days, given how fast developments are occurring in the Middle East."
Luxon added that what the government was focused on was "in the real world," pointing to securing fuel supply for New Zealanders.
He said government decisions were focused on minimising impacts on inflation and debt, "that's the big learning out of Covid".
"We're not repeating those mistakes again. As I've been saying to people, it's not Covid 2.0 – we are not doing that again."
Associate Energy Minister Shane Jones discussed New Zealand's "virtual fuel" in the form of "tickets", which he said would take time to come to be realised as real fuel.
Willis had explained this as a proposal to swap tickets "we currently hold" as part of the International Energy Agency obligations.
"We hold tickets to different types of crude oil as well as some refined products.
"We have assessed those, and very few of them are actually suitable for use in New Zealand."
There had been an "unsolicited proposal" Willis said, from a commercial entity that had said "let's do a swap".
"We'll exchange you what you've got an option on in exchange for a particular volume of refined fuel that could be used in New Zealand."
That swap would see crude oil and other stocks converted into usable fuel stock suitable to New Zealand's needs, potentially stored offshore, she explained.
Willis said the government was assessing the proposal to see if it was commercially a good deal.
In terms of that proposal taking time, Jones said 45 days "on a good day" was how long it took to get fuel from America.
"If we do not act now, we could find that we're in a mad, frenzied rush in the event that there is a gross shortage of feedstock into the refineries that our importers rely upon."
He said to those who might say the government was interfering with the market, "well folks – the market's been completely molested by a war in the Middle East," so it was not a threat, rather "building a sovereign buffer for Kiwis."
On whether the government was moving too quickly, Jones contrasted it to Covid-19.
"There was a situation where the last government did not move to secure vaccines. We are not going to repeat that perfidy."
He acknowledged it represented risks and a fiscal burden, "but you'll be the first people complaining in the event that an unexpected sour range of events take place, and we hadn't been proactive".
On Friday last week, the government gave more detail on updates to its 2024 fuel plan.
That laid out what would trigger a change from the current phase 1, to higher phases; more specifics about what each phase would mean, and how different sectors would be prioritised for fuel if it came to that.
Luxon told Morning Report on Monday said as long as phases one and two of the national fuel plan are effective, people won't have to worry about phases three and four.
"At this point in time we've had no indication that our fuel importers who we talk to daily, multiple times a day, have had any cancellation of their forward orders," Luxon said.
He said the government's utmost priority was ensuring that the country had fuel – even if that meant fuel suppliers paying additional Iranian tolls.
Luxon said he was leaving it to fuel importers and distributors to organise how to allocate fuel.
"There needs to be a reworking of the allocations which is what the importers and the distributors need to work out this week, and it's up to them to do so."
Latest figures from MBIE show total national fuel stocks have increased since the last update with movements remaining within expectations. Stocks continue to be robust across petrol, diesel and jet fuel.
Overall, New Zealand has 59.3 days of petrol, 54.5 days of diesel and 50.4 days of jet fuel available. This is as of 11.59pm 25 March.
This fuel is either in New Zealand, within our Exclusive Economic Zone (New Zealand waters) – which includes ships with fuel unloading, ships at berth yet to unload, and ships moving between ports – or on water outside the EEZ up to 3 weeks away.
There is currently no indication of fuel supply disruption, and fuel continues to flow normally into New Zealand.
Supply chain data from US investment bank JP Morgan earlier reported the last shipments of fuel from Gulf Oil are likely to arrive in New Zealand on 20 April.
Westpac chief economist Kelly Eckhold told Monday's Morning Report the government would be wise to start prioritising diesel allocation now, and that the situation is only getting worse.
He expected 91 to cost an average of $3.70 per litre by the end of the week.
"New Zealand is at the long end, at the end of a very long supply chain, and basically mid-April is looking like when it lines up for when there will be challenges here.
"Diesel that we burn now could be diesel that we need in three or four weeks.
"You can get on the bus, you can drive your EV to work, but in the end, if we want a farmer to be getting our food off the land, then he needs that diesel."
But the deputy prime minister told Checkpoint he was cold on the idea of prioritising straight away where diesel is going.
David Seymour said the government can move to rationing as part of its four phase response, but its goal is to not need to get to phases 3 or 4 which allow for prioritising.
"So while I can understand the argument… we are thinking about it and we're taking a slightly more balanced approach," Seymour said.
He said the government had set out a programme that used pricing.
"And one of the things about interrupting the pricing mechanism is that while people obviously don't like paying higher prices, one of the things that it does is it means that people who have the product have an incentive to bring it to New Zealand because we are paying higher prices for it."
When asked about cuts to excise tax in Australia, Seymour said Australia had every right to do that.
"The reason that we haven't is twofold, number one is that the cost of it is enormous and it would come out of the National Land Transport Fund, we had 15 months of reductions in fuel excise tax during Covid, one of the outcomes of that was less roads and more potholes," he said.
"We don't want to go down that track if we can avoid it but the other thing about it is that if you reduce the price, then at the margin you get more consumption so you're actually undermining the price signal that you want to operate to ensure we don't run out.
"None of these things are easy," he said.
Seymour said an untargeted scheme "that gives probably more to wealthier people than it does to people who are really hard up" was inferior to the approach here.
He said the government's emphasis was "on the supply side".
"And we're out beating the bushes, talking to our friends around the world about keeping supply coming to New Zealand," he said.
Seymour said the government has prepared for the possibility of moving to phase 3 or 4 with "heavy-handed" restrictions, but the hope was not needing to.
"What we're doing as a government is watching every day not just the ships that are immediately close to New Zealand but those that are moving towards the refineries that are supplying us as well, so that we have a sense of not what's happening just today and next week but the week after and next month."
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