Questions about next phase of fuel response as more flights cancelled and jet fuel prices jump

Cancelled flights, tighter fuel stocks and rising jet fuel prices are adding to the growing pressure on New Zealand’s fuel supply, as the Government prepares for how it would respond if minimum supply levels were breached.

Jetstar is the latest airline to cancel flights, with 12% of its scheduled flights impacted including between Auckland and Christchurch, and Wellington in May, and some flights between New Zealand and Australia.

It comes as the average global jet fuel price rose 12.6% in last week, up to US$197.00/bbl. The Asia & Oceania price rise was higher, up 16.6% to US$204.95/bbl, which is up 129.8% over just one month. Jet fuel is an airline's biggest cost.

Surges in fuel demand have caused some fuel stations to temporarily run dry. Z Energy has paused its Sharetank feature - which allows customers to prebuy fuel - in light of the uncertain environment. A Z Energy spokesperson said the pause was “to manage fuel fairly across the Z network, while focusing on maintaining continuity of service for all customers”.

The latest Ministry of Business, Innovation & Employment (MBIE) fuel stock update as of Sunday showed 48.7 days of petrol, 46.4 of diesel and 43.4 of jet fuel. Overall, there was 46.6 days’ cover of combined stock - compared to 49 the previous week, and 52 before then.

Last Wednesday, New Zealand had 11 shipments of fuel on the way over the next two weeks. That included 10 vessels coming between March 16-22. As of 11.59pm on Sunday, March 22, there were two ships coming with an overall 5.7 days of petrol, 7.2 days of diesel and 13.6 of jet fuel over the next two weeks.

New Zealand fuel importers must hold minimum fuel levels of 28 days’ of petrol, 21 days’ of diesel and 24 days’ of jet fuel either onshore or on the way in the exclusive economic zone.

Asked what happens if the fuel stocks go under the minimum level, Finance Minister Nicola Willis on Monday said it was an enforceable legal obligation.

But if the fuel supply were to be disrupted enough to affect those levels, Willis reiterated: “It's really important that we keep sending the fuel importers the message” to have enough fuel in the country to meet those obligations.

Willis later said it was important to focus on “where we are now”.

“We've had no notices of disrupted orders from fuel companies, and that will remain the case for some time. However, what the government is also doing is preparing for what different phases of a response would look like if we did assess that there was an incoming risk to fuel security that was higher.”

National Fuel Plan

Part of that is within the National Fuel Plan. The country is currently within phase 1, which is under normal circumstances and short disruptions. It entails the Government monitoring global developments and working with companies.

The situation can see the response escalate up to moderate (2), major (3), to severe (4). Part of that would potentially see the Government enact a range of measures, such as fuel prioritisation or rationing fuel demand, should the situation in the Middle East deteriorate further.

Willis saying earlier this month while the Government would first look at fuel sourcing, other options are on the table as fuel prices climb. That already began this week, Resources Minister Shane Jones announcing fuel specifications temporarily eased to be in line with Australia, with the Government taking advice on allowing sulphur-rich fuel into New Zealand.

The Government will give more details on Friday on the fuel plan about what will happen in the event of a worsening situation.

“We're obviously... preparing for a range of scenarios," Willis said on Wednesday. "And there could be scenarios in which fuel orders for New Zealand are disrupted, and that would be one of the things that we would assess.

“We will take a very methodical, careful approach to assessing the conditions under which we would move to a next response phase. It is our goal not to get to the point where we have to restrict fuel use.

“We want to keep jobs and incomes going. We want to keep our economy going, and that's why we're so focused on ensuring we get a supply of fuel in the country sufficient to meet the country's needs.”