‘Worst-case scenario’
The government is looking at how it could prioritise access to fuel as the Middle East conflict limits global supply and pushes prices at the pump even higher.
The news comes with the Treasury releasing its latest inflation scenario for the war. The CPI rate could reach 3.1-3.2 per cent in the year to June 2026. That’s higher than the 2.7 per cent it had been predicting, assuming a three-month conflict.
Prime Minister Christopher Luxon, pictured, and Finance Minister Nicola Willis are putting the dampener on Kiwis’ expectations about the government’s ability to offset fuel-price hikes, adding any financial support would be focused on households most in need.
They say the coalition is now planning its response over the next two to three months as the effective closure of the Strait of Hormuz restricts the source of about 20 per cent of the world’s oil supply. Luxon says: “We’re preparing for the worst-case scenario.”
Willis has outlined a three-pronged approach. This includes considering “domestic prioritisation measures”. She will be engaging with fuel suppliers to investigate options and will provide an update next week, which is when she will expand on what would require the country moving up from level one in its fuel-emergency level system.
The government’s current position is any rationing or prioritisation measures are unnecessary because New Zealand has enough fuel in storage or being shipped, totalling about seven weeks’ worth of petrol, diesel and jet fuel.
Report into fuel prices
The Commerce Commission has published its latest fuel-monitoring report in response to what’s happening in the Middle East.
Its latest analysis up to March 18 shows while retail prices are still rising, retailers do not appear to be increasing prices faster than their costs.
Refined fuel costs have stabilised at elevated levels, and national retail prices have continued to climb by around 55 cents per litre for petrol and 90c for diesel since the start of the conflict.
Deirdre Robert, principal adviser, says: “Overall, the steady pace of these increases suggests that, at a national level, fuel retailers are not overreacting to spikes in costs.
“The commission has increased its monitoring and scrutiny in response to higher and more volatile global wholesale prices, and will not hesitate to call out unjustified price increases at the pump.”
The regulator’s reports analyse retail-fuel price movements and compare them with changes in the cost of importing fuel.
Car industry in Japan
The chief executive officer of Toyota Motor Company warns Japan’s car industry faces potential material shortages and disruption to vehicle deliveries.
The country sources about 70 per cent of its processed aluminium and naphtha – a feedstock chemical for plastics, resins and rubber – from the Middle East.
Speaking as its chairman, Sato Koji says the Japan Automobile Manufacturers Association (JAMA) cannot yet gauge the full impact of the conflict. Japan exports about 800,000 units a year to the region, valued at about NZ$26.73 billion. “This is a very important market.”
JAMA’s assessment comes after Ivan Espinosa, CEO of Nissan, said the war is disrupting the distribution of its products across the afflicted region, which is the marque’s number two export market.
Japanese marques are big players in the Middle East where SUVs, such Nissan’s Patrol and Toyota’s Land Cruiser, have a loyal following.
“Regarding logistics, delays are beginning to emerge due to the fact ships cannot enter the Strait of Hormuz,” says Sato. “The challenge is how to secure transport routes to deliver manufactured goods to destinations.”
Nissan and Toyota are trimming production in Japan to account for possible interruptions in shipping stock to the region. The former is reducing domestic manufacturing by 1,200 units a month. Toyota is cutting production by as much as 40,000 vehicles up to the end of April.
Mitsubishi Chemical Group, a major supplier to carmakers, is raising plastics prices because of a tight supply of naphtha, which is also used in tyre production.
Carmakers and suppliers globally are re-examining supply chains as the conflict threatens access to aluminium, semiconductor materials and logistics.
Disruptions in aluminium trade have pushed some Japanese and South Korean automotive suppliers with Russian giant United Co. Rusal International.
Sato says: “If the situation drags on, procurement challenges will arise. We are making every effort to address this, including shifting procurement to multiple routes. Our response will depend on how long this situation persists.”
Berstein Research, a global equity research and brokerage firm, says Asian marques, such as Toyota, Nissan, Hyundai, Nissan and their Chinese rivals, face mounting risks from the conflict with disrupted shipments and rising oil prices threatening to crash automotive sales beyond the region.
It adds: “If the situation were to persist, carmakers would likely mitigate disruptions by redirecting export volumes and rerouting shipments as needed. The region’s high mix of profitable SUVs still warrants close monitoring.”
