The country's biggest fuel supplier says New Zealand has higher petrol and diesel stocks than at any time since the start of the US-Iran war, but warns that the risks for the global fuel system mean there is little margin for error.
By Gyles Beckford of RNZ
Z Energy chief executive Lindis Jones says global supply chains have been resilient despite the immense stress caused by the war, and New Zealand's supplies through to the end of the year are secure with shipments arriving as scheduled.
"We've got more stock in New Zealand and this (Asia Pacific) region than we had in March; however, there's far less room for error with global inventories down and a pretty stressed global supply chain," Jones told a media briefing.
"So the next piece of news could have a disproportionate impact, whatever that next piece of news is."
As of the end of September the country's fuel stocks either stored or in transit were nearly 54 days for petrol, 48 days for diesel and 46 for aviation fuel.
Jones said deliveries have been arriving as expected and are scheduled through to the end of the year.
Higher prices, however, have dented demand through the three months to September with petrol demand falling about 6% and diesel around 3-4%, and on the basis of more recent indications he expected current demand to be even softer.
Price pressures more upwards than downwards
Jones said the Middle East conflict had brought about a second crisis for the global fuel system with more pressure on supplies and deliveries through the Strait of Hormuz and the Red Sea, which meant that prices were more likely to rise than fall.
"I think there's more upward pressure on prices than downward pressure and we see that in the price differential between this part of the world and Europe."
"If stocks continue to decline then sooner or later product will get drawn across to Europe and that will mean higher prices in this part of the world as we need to bid up to keep product in this part of the world."
Jones said even if hostilities ended immediately it would take the best part of a year for the world supply system to correct and repair itself to something approaching its state before the war.
Z absorbs some of price rise
Meanwhile, he said local motorists were being shielded from the full extent of higher prices, with his own company cutting margins to remain competitive because it did not have "unfettered ability" to pass on the full extent of rising prices.
"Our ability to pass on those price increases as input prices increase have been constrained and we have seen our margins be lower than they have traditionally been because of that market dynamic."
He repeated Z Energy's backing for more diesel stocks to be held in the country.
At present the rules require 21 days of diesel stocks, which will rise to 28 days in 2028.
In addition, Z stores and manages about nine days of diesel on behalf of the Government, an arrangement that is due to expire at the end of the year, but which the company is talking to the Government and officials about.
Jones said it was "eminently doable" to arrange extra storage and raise the level of diesel supplies towards the 50 days Australia is now considering.
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