Nicola Willis: NZ must fight for fuel security
Saturday, 14 March 2026
Finance Minister Nicola Willis says the Government may have to rewrite parts of the May Budget as war in Iran drives up oil prices and raises the prospect of fuel shortages in New Zealand.
In an exclusive interview with The Post, Willis said ministers had been asked to prepare plans for three different scenarios in case the Government needs to mount an economic response to the conflict, with fuel rationing among the possibilities depending on how the war unfolds.
“We can't deliver a Budget at the end of May that was designed for the conditions we were experiencing in January.
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“It needs to respond to the world as we see it now.”
At the time of writing Brent crude was about $US100 a barrel — a jump of roughly $US32 since just before the bombing of Iran began. Earlier in the week, the price briefly spiked as high as $US120 a barrel. If those levels were sustained, the price of 91 petrol in New Zealand could approach $3.50 a litre.
New Zealand currently holds about 50 days of fuel reserves, although Willis said high prices were already acting as a form of rationing.
“I think someone suggested there might be car-less day proposals. We certainly haven’t had that suggestion come through to us — yet,” she said.
“But in any market when the price goes very high, some people stop using the product. It's also the reality that not everyone has a choice. There are some things for which using fuel is essential.”
‘We will be fighting to get that fuel security’
Said Willis: “This is a time when New Zealand has to put its interests first and fight hard for our interests.
“I recall during Covid-19, there were discussions about where we were in the queue for vaccines, and some magnanimous comments saying we didn’t need them as much because other countries were worse off.
“Well actually, New Zealanders need fuel. It's critical to our economy. And as ministers, we will be fighting to get that fuel security.”
Willis, along with Associate Energy Minister Shane Jones, has emerged as a key figure in the Government’s response to the crisis and said she is determined to get ahead of events as officials model what the economic environment could look like in 30 days’ time.
She said she had been surprised by how muted the initial market response had been to the conflict, which began when the United States launched Operation Epic Fury against Iran on February 28.
“You know, I had that feeling from day one,” she said.
“I think the more it unfolds, the more we are seeing that some of the scenarios that people hoped wouldn’t eventuate have been eventuating.”
On Friday, Iran’s new supreme leader, Mojtaba Khomeini, issued a statement affirming the regime’s intention to stop ships travelling through the Strait of Hormuz and warning the world to prepare for oil prices as high as $US200 a barrel.
Analysts say the Strait of Hormuz, through which about a fifth of the world’s oil passes, is the key chokepoint. Any disruption could send prices even higher than the current spike, with knock-on effects for transport, manufacturing and much else in New Zealand and around the world.
While Willis stressed it was possible the current conflict could end relatively quickly, she warned that economic ramifications could linger.
“I think we can all understand that there will be ramifications even if the initial conflict is over,” she said.
“We have to be extremely mindful of that as we put our Budget together. It does change very much the context for some of those decisions.”
Willis arrived to the Post’s interview half an hour late after Parliament rose for the week on Thursday evening. She was apologetic — with the fuel crisis unfolding, her diary has become even more stretched than usual.
The interview had originally been arranged shortly after the attack on Iran began and was intended to be a more standard pre-Budget discussion. Instead it took place at the end of a week marked by the delivery of the Covid Royal Commission’s final report, which, among other things, outlined lessons for managing major shocks.
Ensuring New Zealand can secure fuel supplies in the event of a crisis is now high priority. She said the Government is also watching fertiliser supplies closely, with much of New Zealand’s nitrogen fertiliser sourced from the Middle East.
“We know we have cover for autumn, but fertiliser is an essential input for the New Zealand economy. We are food producers and we need to make sure that supply isn’t disrupted,” she said.
Balancing the books
The crisis has arrived at a delicate moment in the Budget process. Ministers are currently preparing Budget bids, but there is little new spending available. The operating allowance — the total pool of ongoing new spending — is capped at $2.4 billion. Once pre-commitments are taken into account, the amount available for new initiatives is closer to $1 billion.
Willis said she had asked ministers to prepare three versions of their spending proposals in case the Government needs to adjust quickly.
“I’ve quite openly said to them: I need an A, B and C option,” she said.
“What’s your minimum viable option if we’re really up against it? What’s your B option if we have a bit more space? And what’s your C option if you get everything you think is essential?
“Because there may be situations in the next few weeks, as we lead into the Budget, where we say there is this initiative here that we need to fund as part of our economic response to events unfolding in Iran.”
Any potential Budget change affects multiple sectors. Ministers are weighing everything from healthcare and education spending to infrastructure projects. Some proposals might have to be postponed if the Government needs to redirect funds to secure fuel or respond to price shocks.
Until recently, the economic outlook had been improving. Just before the conflict, Treasury forecasts suggested conditions were starting to look more positive for the first time during Willis’ tenure as finance minister. That optimism has now been clouded by the prospect of a global oil shock.
Earlier this week, Willis said she had an “in-depth” discussion with Reserve Bank Governor Anna Bremen while the governor attended meetings of central bankers in Basel. Central banks around the world are grappling with the implications of a potential supply shock.
While Willis said that the general consensus was there was likely to be “generalised inflation” depending on the duration of the war, growth could also be hit.
“But they’re also considering what it might mean for demand in the economy. If consumers are hit with higher prices, what will that mean for their confidence and spending?”
On the international stage, Willis said New Zealand is watching other nations’ responses. Europe has activated emergency fuel reserves, and the United States has warned Iran against interfering with tanker traffic.
NZ can’t throw money at the problem
Despite the potential economic shock, Willis said she remained determined not to abandon the Government’s fiscal strategy.
“Yes, in a major shock New Zealand should always be prepared to consider borrowing more money,” she said.
“But we are already up against it. Treasury said in 2022 that 50% of GDP is about as high as you really want debt to get.”
She said the Government could not simply throw out the fiscal rulebook every time a crisis emerged.
“We’ve been working really hard as a government to bend that debt curve down so that we get off the trajectory we were on as a country,” she said.
“And I’m very mindful that there are only so many times a country can declare a crisis and spend its way through it.”
Willis said she was determined to make the Budget responsive without compromising long-term economic stability.
“I'd put to you that New Zealand is still paying the price for the overspending that happened during Covid. That price is both how long it's taken to unwind our cost of living crisis. It's also in the sheer magnitude of debt that we're having to repay.
“And so I don't want to repeat that mistake.”