Government steadies itself in fuel crisis while Opposition struggles for traction
Sunday, 22 March 2026
Vernon Small is a former journalist and Labour Government advisor.
OPINION: There’s that old joke about the answer to a tourist asking for directions to Dublin.
“Well, I wouldn’t start here.”
In the same vein, if you were wondering what to do in response to a surge in fuel prices, and looming shortages of petrol and liquefied natural gas, there are some things you wouldn’t start with.
Like increasing road speeds, opting for motorways over cycle lanes, rail, and footpaths, or crashing the demand for EVs by taking away subsidies, charging a high road user charge and dumping the clean car discount.
You might also think twice about making public transport more expensive or telling public servants not to work from home. And you would recoil from funding your tax cuts from a scheme set up to lower emissions from fossil fuels.
As for splashing $1 billion-plus on an LNG import terminal rather than providing incentives for things like rooftop solar and battery storage… well that would be beyond the pale.
But here we are.
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As the news from the Middle East seems to get darker every day, the Government is understandably more focused on the short-term concerns over oil supplies and how to mitigate the impact of higher fuel costs on lower-income household than it is on dwelling on its longer-term strategic failings.
As Prime Minister Christopher Luxon’s new hindsight-free go-to line has it, “we can’t control global events, but we can control our response to them”.
The recollection of past mistakes must wait until tranquillity returns. That will inevitably be months away rather than weeks, even in the utopian scenario of a quick end to the Gulf war and the reversal of the current daily oil price escalator.
In the meantime, top of the agenda are issues of fuel storage, changes – to probably lower – fuel specifications, assessing when the roughly four-week strategic buffer should be drawn on and scouting for other supplies of oil (even refined Russian-sourced crude) if Singapore and Korea, which provide about four-fifths of our refined fuel, cut back.
Luxon and Finance Minister Nicola Willis have set some very narrow limits around the shape of any relief package.
The three-in-one chant is for a solution that is targeted, timely and temporary.
The “won’ts” include a fuel excise reduction, anything with a major impact on the fiscal plan, full compensation for the increased fuel costs, universality, anything that will substantially boost inflation and any new flash new schemes. Also, presumably, anything too bureaucratic that would slow down the arrival of cash in bank accounts.
More will be known this week, but the plan anecdotally outlined by Willis suggests the focus will be on lower-to-middle-income workers who are facing higher fuel costs to get to work. The number of children in a family may not be an issue.
That suggests beneficiaries and superannuitants will not be on the list and that Ministers have an income cut-off in mind. Treasury and Inland Revenue will be central to the policy work, and the focus will be on providing support through the tax-and-transfer system.
With all those caveats, there are only a couple of existing avenues that spring easily to mind, both tax credits for working people: the in-work tax credit and the independent-earner tax credit.
Neither will be cheap if they are to meaningfully help with the rising cost of fuel, with the cost of oil volatile but hovering around US$110 a barrel at the time of writing and 91 petrol costing between $3.06 and up to $3.26 a litre in the capital.
But it will be just another blow to Willis’ Budget planning (and the Government’s November election campaign), which will take have to consider a spike in inflation to perhaps 4% this year, debt servicing costs rising and a slowing economic recovery at best, even if the war ends soon. Not to mention growing fears of stagflation and a domestic and global recession.
This week’s poor 0.2% growth figure for the December quarter, with no per capita growth, set a bad starting point. The March and June quarters – announced in June and September – will be badly affected by the fallout from the Iran conflict.
So if the economy is turning sour, inflation is rising and the big banks are lifting mortgage interest rates, the least you can do politically is make the most of a crisis.
It seems perverse to say it but the Government, and Willis in particular, has had a good week. Whether her performance – and the exile of the “school m’am” tone - has come from self-reflection or media training hardly matters. She has appeared steady, clearly explained the issues, been straight-up and came across as confident yet sufficiently concerned.
At the same time Labour has looked flat-footed and unconvincing.
Saying all options should be on the table is a cliché not a policy.
Yes, the rising cost of living and sluggish economy must surely hurt the Government come the election, but in the shorter-term Labour and the other parties on the Left are learning how hard it is to oppose effectively in a crisis that is not of the incumbent’s making.
Pretty much as the Ardern administration did during the Covid crisis, the Government can act, look decisive and propose solutions while inhaling all the media oxygen.
But with the worst of the economic fallout yet to come, the almost inevitable backlash against the sitting government is just a matter of timing.
Will 2026 be National’s 2020 or 2023?