National Road Carriers continues to work closely with the Government, providing industry expertise and advice to support planning New Zealand’s response to emerging fuel and supply chain impacts from the Iran conflict.
This week I attended another extraordinary session of the Freight Advisory Council, which is providing direct advice through to the Ministerial Oversight Group chaired by Minister Nicola Willis.
The two key messages I told government were the road freight sector’s essential need for visibility and confidence in fuel supply, and how truck operators have no choice but to pass through the fuel price increases to customers, who need to act in good faith and pay the true cost of transport.
Key takeaways:
- we remain at Level 1 of the National Fuel Plan (as at the time of publishing).
- the fuel supply to New Zealand remains stable, with healthy stocks despite the evolving conflict, and ten ships on the way.
- the Government has said we need to prepare for the possibility of future fuel supplies being disrupted.
With the conflict about to enter its fourth week, here an update of the latest events impacting New Zealand’s transport operators.
Fuel price uncertainty grows, fuel stocks remain stable
Diesel price continues sharp climb
The fallout for New Zealand continues to be price shock rather than supply issues. The price of diesel has risen over 66% this month – a seismic shift close to that seen at the start of the Ukraine war. Diesel has increased by over $1 a litre, approaching $2.90 a litre. This continues to drive severe cashflow pain at the pump for transport operators.
NZ Fuel Supply
Fuel supplies remain stable, with health stocks. Diesel stock on hand has seen a minor reduction due to increased demand, dropping from 49.9 days on hand to 47.1. This reflects a spike in fuel buying rather than reduced supply, with some operators choosing to bulk purchase fuel prior to overnight price hikes.
The government is now moving to twice weekly updates of the fuel stock numbers, starting Monday.
Global oil supply continues to readjust to build additional supply outside of the Middle East. Some interesting datapoints from the last few days that shine a light on global oil supply perhaps being more robust than a full 20% reduction being reported:
- CNN has reported that analyst figures suggest “Iran is managing to ship about 1 million barrels per day (bpd)” through the Strait of Hormuz last week, and “That compares with its average exports of 1.69 million bpd last year”. That tells us that while 20% of world oil goes through the Strait of Hormuz, currently over half of that appears to still being put into the global system.
- Channel Infrastructure CEO Rob Buchanan talked about how the United States, South American and West African oil fields are ramping up oil production, which combined with declining demand because of the fuel price, will start to offset current restrictions from the Gulf.
Fuel companies under increased scrutiny from Commission
Last week the Commerce Commission announced it “is increasing its monitoring and scrutiny of petrol pump prices in response to higher and more volatile global wholesale prices, and will not hesitate to call out unjustified price increases at the pump”.
The Commission said the first report, or “initial aggregate analysis” issued last week raised no concerns. For those questioning the speed of fuel price escalation I recommend checking out the Commission’s Monitoring and Focus Report site.
Justin
