Fuel may get dearer after Ukraine invasion but Government says it won't run out

Friday, 25 February 2022

The war on Ukraine makes it even more important New Zealand retains some tanker capacity, the Maritime Union says.

Energy Minister Megan Woods has given an assurance that Russia’s invasion of Ukraine and any resulting cuts to Russian oil supply won’t affect the availability of fuel in New Zealand.

But Woods has not said whether Russian president Vladimir Putin’s war on Ukraine might prompt the Government to step in to ‘save’ the country’s coastal fuel tankers as demanded by the Maritime Union.

The price of oil has climbed about US$5 (NZ$7.45) a barrel to a little under US$100 a barrel over the past week as a result of the bloodshed in Ukraine.

But analysts are forecasting that may only be the start of a protracted price rise over the next few weeks, with many forecasting oil will top US$120 a barrel.

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Energy Minister Megan Woods has issued a reassurance on fuel supplies in the wake of Russia’s war on Ukraine.

Maritime Union national secretary Craig Harrison said that spot market prices for tanker capacity to ferry fuel internationally had also risen about 20 per cent overnight.

While New Zealand might not be threatened by a fuel shortage as such, it could see fuel supplies disrupted because of the supply chain, he said.

Jobs for about 80 crew will be lost if the country’s two coastal tankers are taken out of service.

New Zealand currently obtains most of its fuels from oil that is imported and refined at the Marsden Point oil refinery, though a significant amount is imported pre-refined.

From April, when the Marsden Point oil refinery is due to close, all fuels will be imported in their refined form.

Woods said New Zealand did not purchase any oil products from Russia so it “would not be directly affected if Russian oil supply is curtailed”.

The International Energy Agency (IEA) had assessed that world oil-production capacity was more than sufficient to meet demand that might result from disruption caused by the situation in Ukraine, she said.

The Maritime Union has called on the Government to step in to reprieve the country’s two coastal tankers, Kokako and Matuku, that currently ferry fuel from the Marsden Point oil refinery to ports around the country for distribution.

The two tankers are due to be relinquished by Coastal Oil Logistics, a joint venture between Z Energy, BP and Mobil, when the refinery closes.

But Harrison said it would be safer to continue to use the two coastal tankers to distribute fuels from Marsden, using that as a hub – particularly in light of the Ukraine crisis and an expected tightening in the market for tanker capacity.

The tankers could be used as emergency storage or to pick up fuel from Australia or Asia in a crisis, he said.

Harrison said he was seeking a meeting with Woods to discuss the union’s concerns.

Woods said New Zealand held strategic reserves “offshore” to manage potential disruptions in the oil market.

“We would expect to take part in any collective action called by the IEA to release strategic oil stocks in order to reduce any disruption in the market and reduce price impacts.

“Strategic reserves of oil are held for exactly this reason; to ensure there is as much fuel security and price stability as possible when there are global disruptions to oil production,” she said.