We’ve been left dangerously exposed by the failure to build public diesel reserve

Monday, 30 March 2026

There was the ability to refine enough fuel to get through a crisis at Marsden Point - but successive governments refused to undertake the resilience planning that would have made it possible.

Edward Miller is a researcher at the Centre for International Corporate Tax and Accountability Research.

OPINION: In 2021 and 2022 in my prior role as the researcher at Workers First Union, I spent a lot of time trying to convince the Government there was a compelling fuel security case to intervene in the closure of the Marsden Point refinery, despite Refining NZ’s determination to move rapidly towards an import-only model.

The refinery had been built to handle imported “medium-sour” crude rather than the “light-sweet” oil extracted in Taranaki. These economic decisions were baked in decades prior, meaning you couldn’t efficiently refine Taranaki oil in Marsden Point.

However, refinery engineers explained that in the case of a catastrophic supply chain disruption you could – quite inefficiently – produce a small amount of useable fuel, enough to keep the ambulances, fire engines and food distributions trucks on the road, in perpetuity. This scenario is improbable, but this capability provided insurance against the extraordinarily high social and economic costs associated with a worst-case breakdown.

MBIE not only verified this, but said the efficiency level could be raised when supplemented with a bit of heavier crude, which could be recycled over and over with more Taranaki crude to keep producing more refined product.

We proposed that Government underwrite the refinery’s margins in the short-medium term, while they invest in national resilience capability – getting a plan together, electrifying some (largely diesel) emergency and essential services vehicles, and investing in fuel storage.

Underwriting margins would have been cheap. Australia budgeted $2.3 billion to underwrite two refineries for a decade in 2021. Year one cost $12 million, while years two and three cost nothing because weeks after Marsden Point closed, Russia invaded Ukraine and refining margins went interstellar.

As you might have guessed, we lost the debate. After the fatigue of the pandemic, lockdowns, mandates and the emerging cost of living crisis, there was little appetite within Government to interfere in what was a private shareholder decision.

Successive governments had neglected to undertake the detailed resilience planning needed to fully understand the consequences of closure, and minimal analytical work had been done by the time the decision point arrived.

The refinery was decommissioned.

However in 2022 the government initiated a review to establish minimum stockholding levels to boost our domestic reserves, even if the government was unwilling to require the reluctant fuel companies to actually increase those reserves.

In November 2022 the commercial diesel stockholding minimum was set at 21 days, with an announcement that an additional seven days of public diesel reserve would be held in the Marsden tanks (that formerly held crude), at a cost of about $70-80 million to purchase and about $10-12 million a year to store.

Procurement for the public reserve began in late 2023, and fuel would have hit the tanks by early 2025.

That’s right, “would” have hit the tanks.

The National-NZ First coalition agreement secured a binding agreement to investigate the reopening of Marsden Point and to establish a Fuel Security Plan “to safeguard our transport and logistics systems and emergency services from any international or domestic disruption.”

In 2024 Associate Energy Minister Jones scrapped plans for the public diesel reserve, claiming no money had been budgeted for it. Whether the Labour Government saw the establishment of a public reserve a matter of principle or they simply didn’t think they could make the fuel companies do it, Jones apparently saw no such obstacles.

Problem being, he gave them until 1 July 2028 to comply.

In February 2025 the fuel security study Jones commissioned dropped. It placed a prohibitively expensive $4.9 billion -$7.3b price tag on re-establishing the refinery, concluding that “the most cost effective strategies for enhancing fuel resilience is accelerating the transition to zero-emission vehicles, adding trucking capacity and increasing diesel storage.”

If Jones had wanted to secure extra storage then he needed look no further than the old crude tanks at Marsden Point.

Last week Channel Infrastructure CEO Rob Buchanan told Newstalk ZB he thought they could get two recommissioned crude tanks – which would hold some 90 million litres – ready in two to three months.

Having been told that increased diesel storage was the cheapest option to safeguard resilience, Jones’ failure to pursue that option in the last year has left us dangerously exposed.

You can’t call the insurance company after you’ve crashed your car and request a policy. Your best bet might then be to blame the other driver, which may help explain why Jones has been particularly vocal of late on the question of who is responsible for our precarious fuel security position.

Of course, retaining refining capacity while we increased our storage capacity would have given us greater flexibility to insure against the unfolding crisis.

Either one of these would have been good. Instead, we have neither.