by Bonnie Flaws

The Government is not taking the fuel crisis seriously enough, as disruptions linked to the Iran war begin to affect global supply chains, says a petrochemical industry veteran.

While countries like India, Thailand and Bangladesh were already creating drastic demand-side measures to preserve fuel use, New Zealand was “living in a world where nothing is really happening”.

Former managing director of Methanex Harvey Weake told RCR that the overly relaxed attitude was “quite scary”. He said now was the time to conserve fuel.

“All the very discretionary stuff that we are currently doing, we really should be rethinking that now. Right now. Because we don’t know how the Middle East conflict will unfold”.

Weake said that because successive administrations had taken their eyes off the ball when it came to energy security, New Zealand had few options now that a crisis had emerged.

“The only real response that the government can take today, whether the crisis lasts for one month, two months, or who knows how long, is really a tactical demand response. There is no other lever for the government to pull”, he said.

Energy policy consultant Larry Blair said the fallout from the Iran war had only just begun.

“The supply chain is pretty long and we are starting to see crude from the Middle East not arriving in Asia, and that constraint will manifest here”.

Blair said the reduction in shipping from the Strait of Hormuz should be viewed as a “panic button”.

Up to 40 energy installations had been damaged or shut down across the Middle East so far, including a strike on the major Pars gas field in Iran. Repair would take many years, and the knock-on effects would be felt for some time, even if peace broke out immediately.

He said the global chokepoints were diesel and jet fuel, as they did much of the heavy lifting in the global economy. The fact that diesel had reached price parity with petrol demonstrated that.

“The wider context is that we do need to come up with some plans and how you do this is going to be incredibly difficult. You can’t actually reduce demand for diesel that much. It’s incredibly difficult. Tractors still need to be out on the farms, logging trucks still out in the forest … and they all run on diesel. It’s going to be a really tricky one for us to manage I think”, Blair said.

Lester Bryant, a former petrochemical commissioning engineer and energy spokesman for the Freedom and Outdoors Party, said it was “highly unlikely” New Zealand would receive any further shipments of oil for general consumption, although even if it did it would only delay the pain.

He said New Zealand was 100% dependent on oil coming through the Strait of Hormuz, and Iran was not allowing ships allied to the US or Israel through.

Bryant told RCR that “anywhere east of the Persian Gulf is compromised by the lack of that oil … and what’s worse, we are at the end of that pipeline”.

He said if New Zealand could not get aviation fuel and diesel, planes arriving would not be able to refuel to leave, and ships would need to carry return fuel, making New Zealand a less viable destination.

“The probability of what I have just laid out is that we are most likely not to get any fuel”, Bryant said, adding that the situation could become critical since some estimates suggested the Strait of Hormuz may not reopen until the end of September.

Bryant predicted the best case scenario was that New Zealand would not have any fuel at all between May and November. He urged people to prepare as best they could.

However, Larry Blair’s assessment of the immediate situation was a little more optimistic. He noted there were still shipments coming through, which suggested that the Asian refineries were either freeing up cargo for New Zealand through diplomatic relations or they had been able to substitute some of that supply, but probably the former.

“I still think we are in a tricky spot. I’m not sure how long those nations can endure and still ensure export capability. I wouldn’t be sleeping easy but I’m possibly a little bit more positive about it than I was a few days ago,” he said.

Weake said New Zealand's once integrated energy infrastructure ensured energy security, but successive governments over 30–40 years had allowed it to degrade.

He said the Government should consider re-establishing a Ministry of Energy and that power companies should take direction from the Energy Minister to focus on long-term energy strategy, rather than leaving decisions to the private sector.

Weake also recommended scrapping the Emissions Trading Scheme and recapitalising the Huntly Power Station to run on lignite.