Fuel crisis: Why hasn’t the Govt moved to phase two of its fuel plan?
The Government says there is no need for New Zealand to move to phase two in its fuel plan responding to the global crisis prompted by the US-Israel conflict with Iran.
Prime Minister Christopher Luxon, Finance Minister Nicola Willis and Associate Energy Minister Shane Jones today confirmed a shift wasn’t necessary, despite two criteria meant to trigger a shift being met.
So why has the Government decided against moving up and how close are we to that shift?
What is phase two?
The second phase of the Government’s fuel security plan, announced last week, is the step in between the country’s current position and more strict rationing measures, which Luxon and Willis are trying to avoid.
Willis last week characterised phase two as a situation where fuel was still being supplied, with a “heightened risk” of supply disruption due to the Middle East conflict.
At that point, the Government would increase its communication about fuel conservation, consider ways to improve the flow of fuel consumption information, step up public sector fuel reduction and assess improvement of regional fuel distribution.
Willis suggested households could be encouraged to work from home or increase public transport use. She appeared reluctant to jump to increase current public transport subsidies.
Some potential regulatory changes could be relaxing restrictions on truck movements in city centres to make their travel more efficient.
A move to phase two was intended to prevent the need to prioritise fuel use for certain people and industries.
What could trigger a shift?
There are six triggers that the Government has said would prompt a shift up. They are:
- Any export restrictions imposed on any of the refineries from which New Zealand receives fuel.
- Fuel stocks decreasing by three days’ worth since the last published update.
- Advice from a fuel company that it is unlikely to be able to fill future fuel orders.
- A breach or a notification of an imminent breach of minimum storage obligations.
- Significant policy changes in Australia or from the International Energy Agency.
- A significant disruption to regional distribution of fuel within New Zealand.
Willis has said it could only take one of the triggers to initiate an assessment of New Zealand’s phase.
If met, the assessment on whether to shift would be done over at least two days, to allow consultation with the fuel industry and to receive advice from officials.
Have any triggers been met?
Willis confirmed today two of the triggers had been satisfied.
Today’s fuel update revealed New Zealand’s quantity of jet fuel had decreased since the last update from 53.4 days’ worth to 50.4 days’ worth.
There was also a significant policy change across the ditch with Australian Prime Minister Anthony Albanese announcing the Federal Government would halve its fuel excise tax for a three-month period.
Luxon and Willis have so far opposed a move to cut fuel excise tax, arguing it wasn’t sufficiently targeted and could hike inflation.
Why haven’t we shifted to phase two?
Willis said today the triggers being met did result in “formal consideration” of whether an assessment of a phase shift was required.
However, officials reportedly told her the triggers do not present a “material change to fuel supply”.
As such, they did not recommend the Willis-led ministerial group, managing New Zealand’s action to secure fuel, assess the country’s phase.
Willis said she agreed with the advice supplied.
“A move from phase one to phase two would occur if we believe that there have been material changes that threatened fuel supply more than is currently the case.”
How close are we to shifting up a phase?
Despite the latest update showing fuel stocks increasing, the Government is progressively using a more grave tone when describing the consequences of the Middle East conflict to New Zealand.
Luxon and Willis are quick to note fuel importers are telling them they are seeing no significant disruption to their fuel supply, although Jones today highlighted how the Government had to take importers at their word.
Having two of the triggers met will have pushed Willis closer to confirming a formal assessment of the phases was needed.
In the rationale behind Cabinet considering fuel storage proposals, Willis has argued “the time to take action is now” to protect against being caught out in the coming weeks or months with insufficient fuel levels.
Given the obvious reluctance to engage fuel prioritisation in phases three and four (which Willis described as “communism”), a shift to phase two could be seen as necessary if it could help prevent another shift.
One of the triggers that should be watched is disruption to regional fuel distribution.
In response to anecdotal evidence of hoarding and fuel not being available in some areas, Willis said any developments were being monitored closely.
She referenced one fuel retailer that would be increasing fuel allocated to some regions by 10%, and improving how it informed customers of outages and alternative supply locations.
“If we do see major issues like this continuing to escalate, that would be a trigger for assessing a move in the fuel plan.”
Adam Pearse is the Deputy Political Editor and part of the NZ Herald’s Press Gallery team based at Parliament in Wellington. He has worked for NZME since 2018, reporting for the Northern Advocate in Whangārei and the Herald in Auckland.