Finance Minister Nicola Willis says New Zealand has about 50 days of fuel supply, but warns a prolonged Middle East conflict could still push up prices, slow economic growth and, in a "worst‑case scenario", lead to fuel restrictions.
Speaking to Q+A with Jack Tame this morning, Willis detailed how the Government was planning as the US and Israel's war with Iran continues to disrupt one of the world's busiest oil trade routes – the Strait of Hormuz.
Around 20% the world’s oil shipments travel through the chokepoint, and the disruption has already pushed fuel prices higher internationally. Most of New Zealand's fuel comes from refineries in South Korea and Singapore, which import unrefined crude from across the Middle East — much of it travelling through the Strait.
Finance Minister on NZ's 'worst-case scenario' if Iran war drags on - Watch on TVNZ+
Earlier this week, the Government established a ministerial group to oversee fuel security and coordinate the country’s response, with daily situation reports being produced.
On Wednesday, Foreign Minister Winston Peters told Ryan Bridge Today he thought the conflict could "be over much quicker than people are currently expecting", and urged people to be "cool and calm".
Willis told Q+A that officials were preparing for a range of possible outcomes. Asked what a worst-case scenario would look like, she said it could see fuel supplies restricted to prioritise critical services, like emergency services and freight.
“The worst-case scenario would also have those prices continuing to rise in such a way that it affects every family filling up their car at the pump, but also adds costs across our economy,” she said.
"We'd see an increase in inflation, and ultimately a downward impact on growth.
"We also need to consider supply disruptions, what that means for our freight and our exports getting around the world. As a food-producing nation, we also need to keep a critical eye on fertiliser, which is really important for our farmers."
Despite those risks, Willis said New Zealand was currently in a strong supply position.
Including fuel already in the country and ships already on their way, New Zealand had around 50 days of supply, she said.
Since the start of the war, China has asked refiners to suspend fuel exports. Thailand has also moved to ban oil exports.
Willis was asked what there was to stop South Korea from doing the same thing. She said the country had said it would limit exports to 2025 levels, but said: "For New Zealand's part, we're okay, because at those levels we would still be getting what we want."
She said fuel companies had not reported any cancelled orders and that officials were closely tracking shipments arriving in the country.
“We have confidence that the ships that are already on their way will arrive.”
She also said New Zealand had a "very close" relationship with Singapore, and said both countries agreed to prioritise critical resources for each other in a crisis. New Zealand prioritises food for Singapore, and Singapore prioritises fuel for New Zealand.
Fuel rationing was not currently required, she added.
“We don’t need to ration it, because we know we have enough in the country for at least 50 days of provision at normal levels.”
Potential slowdown to economic growth
Even if supply disruptions remain limited, Willis warned the conflict was already expected to weigh on New Zealand’s economic outlook.
Willis said that before the war, Treasury had forecast inflation would fall back into the Reserve Bank’s target band as economic growth rebounded to about 3% this year. Higher fuel prices could push those projections off course.
"Increases to inflation which are likely to occur as a result of these spikes in petrol prices are added to that base," Willis said.
"In a scenario where we are seeing sustained increases in fuel prices, you would expect inflation would be higher than otherwise would have been the case."
“You also have to consider the secondary effects. The first hit is to what happens with petrol prices, but the second hit is how that adds to freight prices, the price of food, and other things across the economy,” Willis said.
She said there were likely to be "lingering effects" on inflation, which would slow growth.
"The latest Treasury forecasts I've received say that actually across a range of scenarios, they would still expect our economy to keep growing this year. Just not as fast as might otherwise have been the case."
Willis acknowledged the conflict posed a significant challenge for the country’s economic recovery.
“Let’s be blunt. This is not good,” she said. “This is not good for prices. This is not good for growth. Uncertainty reigns. No one knows how this is going to unfold.”
Business leaders react
Port of Auckland chief executive Roger Gray described the situation as a "watch and wait", saying the port was working to ensure cargo was continuing to enter the country as normal.
“I know a lot of exporters are looking for alternative markets right now. At this stage, it’s really a watch and wait rather than us doing anything specific,” he said.
“Our best case for us is that this gets wrapped up in another week or so. So far, we haven’t seen any impact on us and certainly not on imports.”
Gray said a "worst-case scenario" would be if the conflict extended beyond six months.
“We could start to see ships going off schedule more, and cargo being blocked in Asian and Australian ports, which would see the reliability of ships coming into New Zealand dropping off,” he said.
Mainfreight group manager director Don Braid said high energy and freight costs had caused several supply chain disruptions.
“Some trade routes are beginning to experience issues for our customers, both imports and exports,” Braid said.
He said Mainfreight’s internal supply chain in New Zealand was “working under stress” as a result.
“If this conflict goes on, we will need all of our supply chain capability to be working in harmony,” he said.
“We’re having to ask customers to book their international shipments as normal, but we’re having to work around the problems with longer transit times, and what they might mean for air freight space.
Braid said a prolonged conflict could bring higher freight rates internationally and domestically.
“We would be encouraging our customers to begin thinking about their supply chains, thinking about ordering and pre-ordering if that was the case,” Braid said.
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