Future storage and costs of fuel – Transporting New Zealand

In News4 MinutesBy Nick LeggettMarch 4, 2022

Russian President Vladimir Putin’s assault on Ukraine is sending shock waves around the world.

As is always the case with war, supply chains will be impacted and there will be fuel price volatility.

In New Zealand, the fuel cost is approaching double what it was 12 months ago and the Russian moves are likely to add more stress on international supply.

The Government has made two announcements about this. On 25 February, Energy and Resources Minister Dr Megan Woods said Russia’s invasion of the Ukraine and any resulting curtailment of Russian oil supply, won’t affect New Zealand’s fuel supply.

“New Zealand does not purchase any oil or oil products from Russia so would not be directly affected if Russian oil supply is curtailed,” Megan Woods said.

In a later media release (2 March), Minister Dr Megan Woods advised she had joined her International Energy Agency (IEA) counterparts to condemn Russia’s invasion of Ukraine and agreed to measures to ease uncertainty about what it means for global energy supply and prices.

Dr Woods agreed to contribute to a voluntary release of 60 million barrels of oil from global emergency stocks held by IEA members to ease uncertainty in the market. A process is now underway to determine what voluntary contributions member countries can make.

We know the fuel bill is one of the biggest expenses for road freight transport operators and that it is a cost you can’t easily pass on immediately. We offered some advice on that earlier this week.

What is happening now, makes our submission this week on the Ministry of Business, Innovation & Employment consultation paper on Onshore Fuel Stockholding timely.

With factors such as geo-political instability and New Zealand’s susceptibility to earthquakes and other natural disasters, it is important for the country to have a clear strategy in place to be resilient to a disruption in fuel supply.

As Refining NZ switches to an import-only terminal and ends refinery operations at Marsden Point, the Government is looking at the option of increasing minimum levels of fuel stock held in New Zealand, in order to improve our fuel security.

The Government is also looking at whether it should set up a new stockholding agency, which we oppose in our submission. We do not need more Wellington bureaucracy. Creating a new agency will only increase costs to the consumer at the end of the line and we can little afford that.

We believe wholesale fuel suppliers are well placed to manage the logistics of an increased onshore fuel reserve, and they should simply be held accountable for meeting these minimum levels.

The proposed requirement is for minimum onshore fuel stockholding levels similar to what has been proposed in Australia, namely 28 days of cover for diesel and its biofuel equivalent, and 24 days of cover for petrol and jet fuel. It is important to note that diesel is the fuel of choice for most emergency and essential services and we believe for this reason, it should be further weighted as a priority over petrol.

Things we think haven’t been given due consideration, but should, include:

  • Plans for distribution of fuel in a significant distribution event, which will determine where stock should be held and what infrastructure will be required to move it; and
  • In a significant event, how fuel will be brought from Australia to New Zealand.

You can find our submission to MBIE here.

By Nick Leggett, CEO, Transporting New Zealand