Singapore’s warning: the fuel disruption is far from over

Tuesday, 5 May 2026

ANALYSIS | SINGAPORE In a meeting full of optimism and bonhomie, Singapore Prime Minister Lawrence Wong delivered a message that cut through the mood: the fuel disruption gripping global markets is not ending any time soon.

Singapore, which supplies about 30% of New Zealand’s refined fuel, is planning for constrained flows through the Strait of Hormuz to last “at least to the end of the year, perhaps even beyond”, Wong said.

Even if the strait reopened quickly, he warned, the damage is done. For New Zealand, that distinction matters. Supply might be increasingly being secured, but price is not.

Wong’s assessment was blunt. Even in a best-case scenario, there will be “hindrances to ships coming through”, with damaged infrastructure, uncleared mines and fragile shipping confidence all slowing the return to normal.

“Energy and port infrastructure has been damaged … mines along the strait have to be cleared,” he said.

“There is a matter of confidence to be restored. Ships need to be assured that they will not get attacked by any stray drone.

“Insurance needs to work effectively — all these we think take months at least to restore.”

The global oil system, in other words, is not switching back on — it is being slowly rebuilt.

Singapore’s role as a major refining and trading hub means it has already begun adapting. Supply chains are being replumbed, with crude sourced from alternative producers and shipments rerouted along longer, more complex paths.

That is keeping fuel flowing — for now.

But it is a stop-gap, not a long-term solution.

Even with these adjustments, Wong made clear there would be a “residual supply gap” and that Singapore was “bracing ourselves for that eventuality”.

Refiners, he said, are operating with less room to move.

“Their throughput is lower than it used to be, but they are still able to continue production and meet the needs of all their customers.”

That is the key point: the system is holding, but it is tighter, more fragile, and more expensive.

Prime Minister Christopher Luxon, standing alongside Wong, emphasised the obvious priority — de-escalation and resolving the conflict. But the more immediate reality is that governments are now managing the consequences of a shock that has already moved through the system.

The most tangible buffer for New Zealand is the Agreement on Trade in Essential Supplies (AOTES) agreement that was inked earlier on Monday. It effectively guarantees access to refined fuel from Jurong Island, provided New Zealand customers - through importers - are willing to pay market rates.

That is a significant diplomatic achievement. It materially reduces the risk of physical shortages.

It does not, however, reduce exposure to global prices.

Finance Minister Nicola Willis, after being briefed by energy companies and refining executives, was direct about that trade-off.

“They remain confident that they'll continue to source crude oil from alternative sources around the world, but ultimately it's a market,” she said.

“For so long as they pay the price for alternative sources of crude oil, it will be available. They can transport it, they can get it there.”

But that confidence came with a warning.

“They are conscious that if supplies diminish over time … that could put pressure on price.”

“We knew that coming into the visit … so long as the Strait of Hormuz is closed, that creates a global supply pressure.”

The message from both industry and government is consistent: supply can be found — at a cost.

That is where the real risk now lies.

New Zealand’s supply position looks relatively secure, particularly with Singapore locked in. But its broader exposure remains. Roughly half of its refined fuel still comes from South Korea — a supply line that is stable for now, but more vulnerable in a prolonged disruption.

Globally, the picture is clearer still. The oil system is being stress-tested in real time.

The replumbing is real — but it is also temporary. Its effectiveness depends entirely on duration. If disruption lasts months, the system bends. If it stretches towards permanence, it breaks - and will require time and significant investments in longer term changes.

And “break” in this context does not necessarily mean empty pumps. It may mean global demand destruction if the Strait remains effectively closed for another few months.

If a significant share of global oil supply — on the order of 20% — remains constrained for an extended period, the adjustment will come through price. High prices ration demand. Economic activity slows. Growth stalls.

In short: the mechanism that prevents shortages is the same one that drives recession.

That dynamic will not be felt evenly.

In countries such as New Zealand and Australia, the shock will be absorbed and passed through — higher fuel costs feeding into inflation, squeezing households, and slowing economic activity.

But in poorer, more fuel-dependent economies, the consequences are more immediate and more severe. Those economies cannot simply pay more. They consume less, or not at all. And that’s why richer countries can keep getting supply: the pay for it.

That is the unspoken edge of the current crisis: it is global, but its pain is highly uneven.

From that perspective, the conflict in Iran is a lose-lose.

For New Zealand, the immediate outlook has stabilised. The worst-case scenario — outright shortages — appears less likely.

It is not a crisis that will neatly be resolved.

Signals are beginning to accumulate. Shipping costs are rising. Transport operators are passing through surcharges — Maersk’s 27% increase on land transport for imports into New Zealand is one early example.

There will be more.

The current reprieve at the pump will not last. Prices may fluctuate, but the underlying pressure is upward.

When Willis returns to New Zealand, the Budget will be finalised against this backdrop. It will be a fiscal plan shaped not just by domestic conditions, but by the biggest ever global energy shock that is still unfolding.

One thing, however, is clear.

The agreement with Singapore is not just useful — it is strategic. It represents a deliberate effort to hedge against precisely this kind of disruption, and it is now paying off. New Zealand and Singapore have both worked hard for this and it is a new and exciting stage in the relationship.

It may prove to be one of the most important economic safeguards the Government has secured - as the PM said, when the deal was agreed last October, no one thought it would be crucial so soon.