Finance Minister Nicola Willis yesterday said the country was three or four weeks away from the possibility of serious fuel supply disruptions.
In other words, we are at the edge of a possible crisis.
To underline that she held an astonishingly frank 45-minute media briefing and is promising more updates before the end of the week.
However she was very clear that though she is planning more briefings they would not be a repeat of those infamous media sessions during Covid of the former Prime Minister, Jacinda Ardern.
Willis said she would not be claiming to be speaking from the “Podium of Truth”.
Ministers are receiving written updates twice a day from officials, and they meet daily to update on the situation and its potential implications for New Zealand.
The Ministerial group includes Willis, Shane Jones, Simon Watts and Brooke van Velden, while Chris Bishop sat in on yesterday’s meeting.
“We’re also going ahead with a weekly strategic meeting at which further decisions are being taken,” she said.
This idea of a group of Ministers rather than a formal Cabinet Committee heading the Government response is similar to what Labour eventually did in March 2020 at the beginning of the Covid outbreak.
It also brings the Department of the Prime Minister and Cabinet into the role of the coordinating agency rather than either Treasury or the Ministry of Business, Innovation and Employment (MBIE).
Willis was reluctant to forecast how the full Cabinet, which includes both ACT and NZ First Ministers, might react to proposals for major measures such as targeted financial relief.
“When I hear that figures (petrol prices) may go much higher, when you hear speculation of the number kicking up past $3 towards $4, I know that that is really frightening for people who are worried about how they’ll meet their budget, and so I want to be able to give them some more clarity about if that were to occur, how quickly we would expect that to occur and at what point the government would say, here’s some temporary support to help you through that,” she said.
“I am working with the Treasury, and we will have a range of options.
“And of course, I’m mindful that any advice I receive on this, I will discuss with my cabinet colleagues before I progress.”
Willis clearly believes that “acute cost of living pressures for some households” will require the Government to step in with assistance.
“Very clear in my mind is the mother potentially living in South Auckland, who has no choice but to use her car each day to get to her cleaning shift at the airport, there is not a bus available for her at that time, and who is facing acute income pressure,” she said.
“We need to make sure that we have in mind those New Zealanders who face the most acute cost-of-living pressures, rather than having blanket responses, which tie up a lot of others.”
At present, petrol prices have yet to reach the levels they did in 2022 after Russia invaded Ukraine.
Then they went to $3.15 a litre for 91; last night the Gaspy app was showing an average maximum price of $3.01 for 91.
However, Willis believes they will go higher because it will become more difficult to secure supplies.
“It is reasonable to assume they could go higher,” she said.
“If the conflict is prolonged, there could be a point in the future at which fuel importers do face challenges securing orders.
“That is because the Asian fuel refineries, from which New Zealand imports most of our fuel, do typically rely on the Middle East for their stocks of oil.
“In the first instance, we would expect those fuel refineries to be seeking supplies from elsewhere, as well as our own fuel importers seeking other supplies.”
She believes this point is not far away.
“I don’t anticipate moving to a higher level in the (National Fuel) plan until we see any actual disruption in ships being able to come to New Zealand,” she said.
“I’m advised that further mitigations under the Plan are at least three to four weeks away.”
Those “mitigations” would include the Government having the power to declare a State of Emergency, and for the fuel companies to start prioritising customers.
The fuel crisis is different to Covid because Covid required much more elaborate organisation on the ground, since it affected a complex matrix of medical facilities and personnel, the police, and ultimately every household.
Though the impact of the fuel crisis will be near-universal, the frontline will mostly be the country’s 1,300 retail fuel outlets.
So the Government is already working very closely with the oil companies.
“We’re really closely working with these fuel companies,” she said.
“We want to work in a way with them where they’re giving us information that New Zealanders need and that is useful, but also making sure that they are thinking strategically, they’re thinking ahead, they are focusing on fuel imports.
“We’re trying to do this in a way that doesn’t create bureaucracy, but does get you the information you need.”
There are particular problems.
Air New Zealand is up against it on both financial grounds and the possibility that sourcing jet fuel will become increasingly difficult.
Willis said the airline maintaining its schedule was “non-negotiable”
Nevertheless, asked specifically whether the company had a strong enough balance sheet to withstand a period of high fuel prices, she said, “The advice that I have received both from Air New Zealand itself and also the Treasury checking their homework is that for the foreseeable future they are in a position to withstand these price increases.”
A bigger problem is fertiliser.
Nikkei Asia News reported that up to 463,000 tonnes of urea are currently stuck in the Persian Gulf on the eve of the East Asian rice planting season.
New Zealand produces only about 30 per cent of the urea it needs; the rest is imported.
With pressure on supplies across Asia, prices will go up, if product can actually be found.
That question about whether there will be fuel and fertiliser available for import is now the big question.
“If the conflict is prolonged, there could be a point in the future at which fuel importers do face challenges securing orders,” said Willis.
“That is because the Asian fuel refineries, from which New Zealand imports most of our fuel, do typically rely on the Middle East for their stocks of oil.
“In the first instance, we would expect those fuel refineries to be seeking supplies from elsewhere, as well as our own fuel importer seeking other supplies.”
Associate Energy Minister Shane Jones told POLITIK that there are already lessons to be learned from this crisis.
“I think one thing that we’re going to learn out of this episode is that we are going to have to revisit national security and economic resilience,” he said.
“The just-in-time model may work for a host of countries that live next door to each other, but we’re a distant trading open economy, we’re at the end of the railway track.
“We have enough fuel, and we’re operating within the statutory parameters of our fuel security. But we’re only as good as the refineries are.”
Jones believes we should not only be using the surplus storage capacity at Marsden Point for ourselves but also for other countries seeking immediate storage.
“We do have a tremendous amount of redundant storage space up at Marsden Point, probably double the capacity of what’s currently used,” he said.
“It’s highly likely that other fellow-minded nations who already are looking at improving their storage capacity may very well be interested in working with New Zealand because we have 300 million litres of empty storage capacity.”
Jones said New Zealand was going to have to rely on its relationship with Singapore, its global and Southeast Asian diplomatic connections, and, in particular, South Korea.
“Our diplomats are working incredibly closely and regularly with Australia.
“So, we’re miles away from a Goldilocks scenario. Rather, we’re being scratched by three bears, Iran, Israel, and America.”
What stood out in Willis’s briefing, apart from her sober view of how the crisis is likely to unfold, was her low-key political approach.
She is usually one of Parliament’s most combative MPs, ever ready to sledge Labour.
But yesterday she was displaying some fine political antennae, though it was obvious who she might have had in mind when she said she had just read the Covid report.
She was asked whether she would consider demand management tools, such as lowering speed limits. (as was done in the 1970s fuel crisis)
“I’m very reluctant to adopt the role of the school marm telling people what to do with their own lives,” she said.
“People will make their own choices.
“People’s circumstances vary considerably, their budgets vary considerably, their needs vary, their work obligations vary, and their family obligations vary.
“People are mindful, and New Zealanders are sensible.
“I think most Kiwis understand that if you’ve got less stuff in the back of your car, you don’t need as much petrol; if you don’t drive as fast, you don’t need as much petrol; and if you want, you can carpool with a neighbour.
“They don’t need me giving them a lesson on that.”
Perhaps even more pointedly, she ended her briefing, not committing definitely to the next one, saying, “There’s going to be no podium of truth.”
Nevertheless, the Government believes this crisis has a long way to go yet and that things are likely to get worse before they get better.
