Aviation oil shock: Rising prices and cancelled flights as jet fuel hits US$200 a barrel
Tuesday, 7 April 2026
Paul Callister is an economist. Robert McLachlan is Distinguished Professor of Applied Mathematics, Massey University
OPINION: The sudden rise in the price of oil and the prospect of shortages has led many people to reflect on how we can cut back on oil for transport. How can this be done fairly, and with the least disruption? And how did we get into this situation?
Twenty per cent of New Zealand’s oil consumption takes the form of jet fuel. Since the war in Iran began, the international price of jet fuel has risen even more sharply than that of crude oil – up from US$93 (approximately NZ$163.50) to US$200 a barrel.
Ticket prices are certain to rise significantly and flights to be cancelled. The global aviation industry, which only last year was celebrating a return to perpetual exponential growth, is going to take a hit.
New Zealand is particularly exposed here. We are one of the 30 countries in the world in which more than 10% of CO2 emissions come from aviation; most of the rest are either transit hubs, like Singapore, or small island states even more heavily dependent on tourism than New Zealand.
Read more:
Supply of new power industry workers not keeping pace with forecast demand, report warns
Jetstar cuts domestic services and to Australia as fuel costs soar
Iran war: Diesel price rise adds a $7 million cost to NZ a day, trucking body says
In the short term there are few options. If we reach Phase 4 of the National Fuel Plan, in which the Government “ensures that fuel is distributed fairly”, which flights would be judged fair use? Due to decades of underinvestment in trains and buses, there are few alternative options for domestic flights, and none at all internationally.
The previous government had begun work on decarbonising aviation. But, just as for land transport, most of that work has now been stopped or reversed. The current coalition Government has:
Scrapped the tourism/environment task force, whose work was half-completed;
Stacked the newly established public-private group Sustainable Aviation Aotearoa with airline industry representatives, and then mothballed it entirely;
Cancelled the relevant parts of the first Emissions Reduction Plan, including the requirement to develop a domestic aviation decarbonisation plan and a Sustainable Aviation Fuel mandate;
Stopped work on the State Action Plan that each country is to submit to the International Civil Aviation Organisation, describing their country’s approach to the goal of net zero aviation by 2050; and
Rejected the Climate Change Commission’s advice to bring international aviation and shipping into our 2050 target.
Some private work is continuing. A three-year project to explore the production of synthetic jet fuel from green hydrogen at Marsden Point is expected to reach investment decision this year. But without any requirement for airlines to use such (expensive) fuel, it is unlikely to go ahead.
A refreshed response must start by reviving all those projects. We should also invest in low-carbon land transport including a seamless, connected national network of electric trains and buses.
During an earlier oil crisis, one of the responses was to electrify a section of the North Island Main Trunk railway. That work has proved its worth. Today, KiwiRail is working on a business case to electrify the Golden Triangle from Auckland to Tauranga. That project should be funded and then proceed to include electric passenger rail as well.
For now we are left with the default response of rationing flying by price. Many people will find that they can manage with less flying. Yes, the tourism industry is very large, but during the complete halt to international tourism resulting from Covid, it fared surprisingly well. Domestic tourism took up the slack to a degree that few had expected.
Perhaps, five years after Covid, people will find they are ready for another holiday closer to home.