Fuel-duty cut off cards
The government says any relief for cost-of-living pressures caused by the war in Iran would need to be targeted and temporary.
The Treasury has inflation reaching 3.7 per cent in a worst-case scenario if the conflict continues to the end of this year.
Shane Jones, the Associate Minister for Energy, says the coalition is waiting to receive advice from the Treasury on whether there should be government interventions.
He adds: “It’s one thing to introduce support measures and another to remove them. We’ve got to be confident that in the event support measures are required we step up and they target people who need the support.”
Finance Minister Nicola Willis, pictured above, ruled out reducing fuel-excise duty on Monday, but has left the door open to other types of targeted support.
Over March, the average price of 91 has risen about 50c a litre, according to price-monitoring app Gaspy. On Monday, it was just over $3 on average nationwide. The average price was $2.49 just 13 days ago.
The situation has been mainly due to the conflict in the Middle East effectively closing the Strait of Hormuz. The region is critical because around 20 per cent of global oil consumption and 20 million barrels normally pass through it daily.
Willis says there’s no need for people to panic-buy. “If international supplies are disrupted, the government has options open to ensure those who most need fuel have access to it, but we are not yet at the point where additional action is required.”
Westpac chief economist Kelly Eckhold says if the crisis were to continue, the price of oil could hit US$200 a barrel, which would take retail petrol prices past $4.
Willis says there will potentially be inflationary effects caused by the war in Iran. The effect on inflation, depending on the length and impact of the conflict, could be between 0.4 and 1 per cent.
The Treasury’s “worst-case” scenario, which based a long conflict, is for inflation to rise from 3.1 per cent now to 3.7 per cent.
In terms of (GDP), the economy is still forecast to grow this year, but by a smaller amount than previously expected. It could be between 0.1 and 0.5 per cent lower.
Possible emergency action
New Zealand’s national fuel plan contains four levels to respond to any fuel supply disruption, depending on the situation.
While government officials are in contact with fuel companies, monitoring supplies and considering options should the situation worsen, the country isn’t at the stage where mandatory measures to limit use are needed
The country is currently at level one of the fuel plan, says the Ministry of Business, Innovation and Employment (MBIE). A spokesman says: “If the situation were to worsen, the government has a range of tools it can use to manage supply pressures and keep essential services running.
“These steps would only be taken if genuinely needed, and would be scaled to match the severity and duration of the disruption. We are not experiencing the types of sustained supply disruption that the national fuel plan enables as emergency measures.”
MBIE has convened the fuel sector co-ordinating entity (Fuel SCE), which “increases lines of communication with the industry and oversight of fuel imports”. It last met on March 16. It adds more than 50 days of fuel stock is either onshore or on its way here.
Level one is the first stage when there is a “minor” impact on the fuel sector but this “may escalate”. This is where New Zealand is currently.
Level two is when there’s a “moderate” impact on the fuel sector and “critical customer prioritisation measures” are invoked. If the country went to this level, people could still get fuel but there is a “risk of shortages to critical fuel customers”.
Measures could include having designated fuel-retail outlets just for these customers, designated lanes at stations or mini-tankers on-site. A decision could be made to direct fuel companies to prioritise these customers.
Level three reflects a “major impact” on the fuel sector with “additional fuel management measures” required. “Serious impact on fuel distribution with severe resource and capacity constraints and multi-region and or major impacts to critical customers,” states the plan.
The government has powers to impose mandatory fuel-demand constraints. These could include opening-hour restrictions for outlets, maximum purchase limit, restricting sales into containers to limit hoarding and more critical customer prioritisation.
Legislation contains provisions to restrict, regulate or ban the use of cars, but the Finance Minister has said this is not currently needed.
Level four covers “severe” impact. “Actions as above, plus fuel companies to supply only critical fuel customers and these customers to be serviced by any supplier,” the plan says.
