An extra 90 million litres of diesel storage will be added at Marsden Point in Northland in a Government-approved funding to boost the country's fuel resilience amid conflict in the Middle East.
Senior Ministers signed off on up to $21.6 million from the Regional Infrastructure Fund for Channel Infrastructure NZ Ltd, which owned and operated the former Marsden Point refinery site.
Regional Development and Associate Energy Minister Shane Jones said the funding would allow Channel Infrastructure to recommission storage tanks, increasing diesel storage capacity by about eight days' supply.
"Channel Infrastructure has assured the Government it can do this within two months," Jones said. "This is an ambitious but do-able project which will help ensure New Zealand is well placed to weather the fuel supply issues the country faces."
Jones said diesel was central to our economy, particularly as global fuel markets remained volatile due to ongoing conflict in the Middle East.
"While we are acutely aware of the importance of petrol and jet fuel, it is diesel that is the lifeblood of our economy," he said.
"We know we have a secure supply until the end of May. If opportunities arise for New Zealand to secure diesel supplies over and above what we are expecting, we need to be able to store it."
The additional storage would be provided by refurbishing tanks that have sat largely idle at Marsden Point since the refinery closed.
"Storage of fuel supplies on a large scale is an issue, given much of what we had has been sitting idle at Marsden Point for a number of years," Jones said.
Work on the refurbishment was expected to begin within days, with the Government closely monitoring progress to ensure the tanks were ready to take deliveries as quickly as possible.
Regional Infrastructure Fund money had been set aside for projects that were approved in principle – but unlikely to proceed – and this would be redirected to the diesel storage project.
Why diesel is now more expensive than petrol
Diesel has traditionally been cheaper than petrol in New Zealand, but that long‑standing pattern has flipped due to global fuel market disruption linked to the conflict in Iran.
While petrol prices have risen sharply, diesel prices have surged much faster — driven largely by soaring refining costs rather than crude oil prices alone.
In January, refining accounted for about 14% of the diesel pump price; that figure has now jumped to more than 40%, according to the AA.
Diesel is also harder to substitute than petrol. It is critical for freight, agriculture, construction and food production, meaning demand remains strong even as prices rise.
“What the Government is really worried about is the heavy fleet,” AA policy adviser Terry Collins said.
Despite the price spike, the Government has said fuel supply levels remained normal and New Zealand was not facing a shortage.
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