Iran War: A crisis the Government can grip
Tuesday, 17 March 2026
OPINION: Could the Government have finally found a circuit-breaker that gives it a bit of momentum?
Possibly. Just possibly. And in the unusual – and counter-intuitive – form of an oil price spike that could really drive up the cost of living and squeeze household budgets and business balance sheets.
Since the crisis began with Donald Trump’s bombing of Iran, Finance Minister Nicola Willis has been well across her brief, getting updates and trying to tell New Zealanders not to panic but that this could have a real effect on them. She has, in the political management parlance, gripped it up.
Ill-advised comments about EV car subsidies in Remuera aside, on Monday she gave an in-depth briefing to media in her office detailing the effect of the oil price shock on petrol, diesel, jet fuel, fertilisers and plastics.
Read more:
According to Willis, petrol has gone up 45–50 cents per litre, while diesel is up by 72 cents per litre since the conflict began. Urea fertiliser prices have also risen by 54% compared to a year ago.
She would not rule out the possibility of $4 petrol and kept open the possibility of some sort of targeted assistance to low-income households should the price rise quickly and stay there for an extended period. But it won’t be a cut in the fuel excise – too expensive and not targeted enough.
Demand management (rationing) could be on the table depending on circumstances should the conflict really drag on.
At the same time, Associate Energy Minister Shane Jones has been out and about talking fuel security and the Government standing up its response. He has also been eking out a margin for NZ First by denouncing the closure of the privately owned Marsden Point refinery during the term of the last Government.
Meanwhile David Seymour, currently acting prime minister while Christopher Luxon is out of the country, has been talking about a daily 8am meeting of relevant ministers and officials, while also saying the taxpayer should not be bailing out Air New Zealand if it runs into trouble should jet fuel prices remain elevated.
Christopher Luxon has so far been the less visible partner in all of this, currently on a long-scheduled trip to Samoa.
But everyone in the coalition now has an issue to unite behind and opportunities to demonstrate leadership.
When crises hit they can be politically valuable because they become all-consuming. A response needs only to be moderately competent to confer a large advantage on the incumbent.
That’s because in times of crisis, the public only cares what the Government is doing. The Government is the agent. Ministers and their officials are the only ones who can actually do anything in relation to the crisis. It is in their hands. They have the information, they make the decisions.
Oppositions are often rendered spectators like everyone else. Opposition can be difficult because often there are only one or two credible responses, which either hue of government would have taken. Or they have to argue at the margins ‒ such as Barbara Edmonds talking about emergency food grants and support for food banks on Monday.
As it happens, the Government’s response to the oil price shock so far has been more than competent – it has been good. Willis especially.
She revealed on Monday that inflation could go up to 3.7%. Obviously outside the RBNZ target band. Obviously not ideal.
She also met with the RBNZ Governor Anna Breman and Secretary to the Treasury Iain Rennie over the weekend to get updates and keep across the situation.
But clearly none of this is Willis’ fault or the Government’s. And she was also very clear that if the conflict continues the real crunch for New Zealand may come in about four weeks, when the shortages caused by disruption across the Strait of Hormuz – and the flow-on effects for refined products (oil, diesel, jet fuel) – become apparent.
It is at that point that the fuel companies may start having problems getting their orders filled. Right around the anniversary of Trump’s 2025 “liberation day”, which put confidence on the skids last year.
There is also another concern, which Willis flagged. That refers to the “crack spread” within the market – the difference between the price of a barrel of crude oil and refined products.
In other words, the disruption of crude is driving up refining prices. According to the Australian Institute of Petroleum, diesel has risen from below A$130 per barrel to over A$270.
It is all very early and, like all crises, the political incentives favour more rather than less action. But any extra spending by this Government would have to be borrowed, and philosophically it does not want to tell people how to change their daily lives to use less fuel unless it really has to.
Willis said during her briefing that she was “very reluctant to adopt the role of the school mum telling people what to do with their own lives”.
Nevertheless, this presents an opportunity for the Government. A genuine overseas price crunch is exactly the sort of shock that Willis and the Treasury in particular have been warning about for over a year now.
The whole fiscal posture and branding of the Government is made to look more common sense and good planning in light of this particular squeeze (even if the Government hasn’t actually reached the point of paying any debt off yet).
At the time of writing the price of a barrel of Brent crude was US$104. It has been slowly creeping up.
Even if Trump calls an end to the war tomorrow, this energy crisis likely has a long way to run.