Maybe no fuel crunch, but a long, expensive squeeze

Saturday, 25 April 2026

Luke Malpass is politics, business and economics editor.

OPINION: When Nicola Willis invited media into her office this week, the staging suggested something straight away.

Off to her right sat a large TV screen, loaded with what she confirmed – casually, in pre-brief chatter – would be a set of slides. A minute later, at the head of the table, laptop open, she was clicking through Treasury modelling: inflation, unemployment, GDP growth.

And oil. And how it wasn’t moving

There were multiple scenarios, many centred on disruption to flows through the Strait of Hormuz – the critical chokepoints in the global energy system since the Iran War. The slides laid out a range of outcomes depending on where oil prices might land.

At the outer edge was the kind of scenario that, not long ago, was being taken very seriously inside government: oil at US$180 a barrel. In that world, inflation climbs to 7.4%, unemployment pushes past 6.6%, and the fragile recovery in the New Zealand economy is effectively extinguished.

But that is not what has happened.

Instead, oil prices have settled significantly below those peaks – roughly US$80 a barrel cheaper than that worst-case track. For a Government that has had a run of unrelentingly bad economic news, it counts as a genuine piece of relief.

For once, the oil numbers are not getting worse. But the economic numbers are not expected to get better either.

The disruption underpinning all of this has not gone away. The blockade of the strait – a byproduct of the ongoing conflict and the involvement of Donald Trump’s administration – remains in place. While a ceasefire appears to be holding, there is no clear timeline for a full reopening.

Even when that happens, the damage will linger. Infrastructure has been hit. The risk of mines remains. Confidence in the route – and in the security of supply chains that depend on it – has been shaken.

These are not problems that resolve overnight.

In the meantime, the global oil market is doing what large, flexible markets tend to do: it is adapting. Supply is being rerouted. More crude is coming from alternative producers, including Russia. Shipping patterns are shifting. Over time, entirely new pathways may emerge to reduce reliance on the strait altogether.

That adjustment, crucially, appears to be happening faster and more effectively than many had feared.

And that is where the nature of the crisis may – stress on may – have changed.

A month ago, there was a very real concern that New Zealand could face physical shortages of fuel. Not just high prices – actual scarcity. The kind that would force the Government into difficult, highly visible decisions about rationing: who gets diesel, who does not, which industries are prioritised, and that is even enforced.

That would have been a full-blown crisis.

It also would have been, in some ways, a simpler political problem: because crises concentrate attention.

That scenario has, for now, receded.

What has replaced it may prove more difficult.

Instead of acute shortage, New Zealand is now staring down the likelihood of sustained, elevated fuel prices – for petrol, for diesel, for aviation fuel – that will ripple through the entire economy. Not for days or weeks, but for months, potentially longer.

There is nothing the Government can do to fix that.

Just a steady, grinding pressure that shows up in household budgets, in freight costs, and ultimately in the price of almost everything else.This is the kind of problem that governments struggle to get political traction on.

Every trip to the petrol station becomes a reminder.

Willis has handled the crisis well. She has been visible, engaged, and willing to put detailed information into the public domain. She challenges officials and answers questions. The use of Treasury modelling – walking through different scenarios, acknowledging uncertainty – is part of that.

It has been, arguably, her strongest stretch as Finance Minister.

There is a confidence that has not always been evident previously. A sense that she has command of the brief and is willing to front-foot it.

But managing the communication of a problem is not the same as solving it.

And the next phase – particularly as the Government moves towards the Budget – will be more challenging. Not least because of the tensions within the coalition itself.

New Zealand First have shown little enthusiasm for the kind of fiscal restraint that the Finance Minister is keen on. The pressure to spend – to cushion households and businesses – is significant and will remain so.

At the same time, the Government’s broader political position is becoming more complicated.

While Willis has been steady, Prime Minister Christopher Luxon has had a markedly rougher period. This week’s decision to call a no-confidence vote in his own caucus was an extraordinary move – designed to shut down speculation about his leadership, but in reality confirming that the speculation had become serious enough to require it.

Luxon emerged from that meeting looking unsettled, blaming the media and declining to take questions.

And it matters because politics does not pause for economic management. It is, at its core, competitive. And National is losing market share.

It is losing ground – to Labour, to New Zealand First, and to ACT, which appears to have quietly begun rebuilding its support after a period of drift.

Those shifts matter not just in aggregate, but in where the votes are moving. There is increasing competition for overlapping pools of support, particularly on the centre-right. And that is starting to place even more strain on relationships within the coalition.

Willis has already begun to sharpen the lines. Her recent rhetoric towards New Zealand First – painting it as unreliable, plainly claiming it might work with Labour – reflects that sharpening. Peters is very happy to comment on the National Party’s problems and Luxon’s judgement on bringing forward the motion of no confidence.

This is the inherent contradiction of MMP.

On one hand, parties are required to build trust and function collectively as a government. On the other, they are competing – sometimes very directly – for the same voters. You need your partners, but you also need to weaken them.

It is a delicate balance at the best of times. Under pressure, it becomes harder still.

For now, the Government looks like the worst has been avoided: The pumps will keep running.

But what has emerged in its place is not a clean resolution, but a more ambiguous, more persistent challenge. One that will not dominate headlines in a single burst, but will instead shape the economic and political environment week after week.

However, the public appears to also be pretty well convinced that it is not the Government’s fault at all. But the the pressure and clamour for someone to blame or to fix the problem may well get louder.

That is the phase the Government is now entering.