The oil crisis isn’t just anything, it’s the only thing

Saturday, 28 March 2026

Associate Energy Minister Shane Jones and Finance Minister Nicola Willis give an update on the National Fuel Plan as the Government seeks to navigate its way through the global fuel crisis.

Luke Malpass is The Post’s politics, business and economics editor.

OPINION: It feels like the phoney war - the eight month period around the beginning of World War II, when war had been declared on Germany but nothing really happened.

The current oil crisis is not dissimilar. Obviously the cost of fuel has shot up, but there is now a sense of waiting for, well, whatever it is that shows up.

That could be prices grinding higher; it could be South Korea or another refined-fuels supplier suddenly deciding it is going to restrict its sales in order to keep a fuel advantage, with New Zealand suddenly left scrambling.

On Friday, Nicola Willis and Shane Jones introduced the updated National Fuel Plan, made up of four phases, which may kick in if any one of six criteria are met:

Those criteria are:

export restrictions;

Prices climb and climb, and in the end are likely to sort out most of the pressure facing the country’s fuel stocks, writes Luke Malpass.

changes to New Zealand’s fuel stocks;
a fuel company reporting it is unlikely to fill future orders;
a breach or imminent breach of the minimum stockholding obligations;
significant policy changes from Australia or the International Energy Agency, and
a significant disruption to regional distribution.

The plan is all pretty clear and officials are still working on what its phases three and four might look like. But it is pretty clear that this is now being taken seriously. Should New Zealand run low on diesel in particular, the outcome would be extremely economically damaging.

In the end, prices remain the best form of rationing because they send messages about scarcity. And ultimately prices will, most likely, sort out most of this.

However.

Wellington being Wellington, there will be significant pressure for the Government to intervene to achieve just and reasonable diesel outcomes, or to ensure that - in the event of an actual physical shortage - those who need fuel get it.

There are different ways of organising this. One would be to let price do the work and subsidise sectors that are considered crucial to buy the fuel at increased prices. Another is to place restrictions on some usage of diesel.

Officials are still working on it. Let’s see where it all lands.

One of the remarkable things about this crisis has been the degree to which markets appear to have not priced in the real world economic shortage and shocks that it has caused. There are moments of what seem like insanity.

Jacinda Ardern’s leadership of the country during the early months of the pandemic were widely hailed, but six years on this Government has developed a weird aversion to anything that might resemble her approach, writes Luke Malpass.

So Donald Trump, in his best mob-boss intimidatory style, gives Iran 48 hours to relent to his demand, otherwise he is going to start bombing their power stations. Then, with a few hours to go, he gives them another five days. Markets rally and oil futures dive.

But none of this has anything to do with the physical constraints being placed on the oil industry by the conflict: the damaged infrastructure, the closure of the Strait of Hormuz and the elevated risk premium for travelling in what is now a very dangerous neighbourhood.

Reporting in the Wall Street Journal is suggesting that Trump wants to end the conflict in the coming few weeks. But it is difficult to avoid the view that, unlike so many other things in his career, the US president is going to struggle to declare victory and walk away, pretending that everything has gone great, if he was to pull the pin at this point.

And if he did, oil and refined fuel prices would be unlikely to drop any time soon anyway. There is still too much uncertainty and damage.

Back here, the Government spent the week gripping up the crisis. There was a press conference on Wednesday in Parliament’s Banquet Hall where Nicola Willis and Prime Minister Christopher Luxon announced some new targeted cash for low income earners with families. A bit of petrol money, limited for the year.

The rest of it was mostly an update. Then Luxon faced a barrage of questions in the House.

The Government also appears to have developed a weird aversion to anything that might look like Jacinda Ardern’s management of Covid-19.

Partly this is for good reason: this is nothing like Covid-19, where limiting people’s movements and telling them what to do, backed up with the force of the state, was a key component to the management of a virus spreading.

However, it is still a crisis, and could be economically more damaging than Covid, especially if diesel supplies begin to run low over the next couple of months.

Keeping schools open and kids coming and going to their normal timetables will be a crucial element of managing the fuel crisis without triggering long-term consequences, writes Luke Malpass.

There has also been a view within this Government, that while Ardern was good at the public stuff, she was a rubbish prime minister who left a terrible legacy.

That’s as maybe, but it is still a dangerous assumption for the Government to be making. Ardern didn’t win 50% of the vote by accident. And, despite the fact that people remember Covid poorly now, her Government did reorient much of the state to face into the crisis.

As well, political leadership matters. Not just managing the situation.

It was not a small effort.

And while there has been a lot of cant and nonsense about the lessons learned from Covid-19, Nicola Willis has clearly learned one very important one: that children should remain at school.

Obviously, this fuel crisis is not Covid-19. No one is going to get sick on account of a lack of diesel, or because of expensive petrol. But there is no doubt that the impact on education was one of the very damaging policies during the pandemic. There is a good argument that keeping children out of school was among the most socially damaging calls made. It was a mistake repeated in many other countries and most inquiries have made essentially the same finding.

The education children received remotely was sub-par - just on account of it being remote - and there were very high levels of absenteeism for years afterwards, as it took years to get some households and children used to going back to school again.

The Government prioritising normal school attendance this time is good policy and good politics.

Even if New Zealand ends up in a situation where people who can are expected to work from home, being able to drop kids off at school will be a boon to productivity compared with Covid and keep life pretty normal.

The politics of the coming weeks are going to be fascinating. The ninth floor essentially wants people to stay calm and to keep a pretty low-key approach to it all, with plans in place if required.

But the political urgency may well step up and it will test both ministers and their officials. And there is very little fiscal headroom to move. The Government cannot throw money at this even if it were inclined to do so.

You may be bored of hearing about it, but this is basically going to be the only thing politically for the next few months.