‘I heard it described as the biggest energy shock in the history of the world. It certainly feels like it.

2026-03-28 - 10:34

It’s grape harvest time in Nelson and Marlborough, and vineyard management contractor John Selwood and his 40-strong team are running their heavy harvesters around the clock. “We’re small, we’re predominantly just running two machines. It’s small numbers, but it’s probably costing us around $800 to $900 extra per shift.” The pressure is eased by the fact they filled up the 7000 litre capacity tanks at their base a couple of weeks ago, before prices really soared – but those tanks are now running low. John and his wife Hayley are crossing their fingers they’ll get them through the final days of harvest – and then they can hold off refilling until winter pruning time. “We’re hoping this is short-lived and that we can get through this fuel crisis. We’ve only got two weeks of harvest left, and then we’re tools down. I’m trying to think positively here, that hopefully by June prices will be down again.” “I’m sure that the fuel shock is hurting people that are hurting already. But I don’t think it’s catastrophic for us at this stage.” Transport and agriculture business owners are all following the progress of oil tankers chugging slowly down through the Pacific. “I just saw a photo of a boat coming into Nelson – it’s like, is this a fuel tanker? But afraid not...” Blenheim accountant Anton James, who advises the wine industry, says the grape harvest is probably 75 percent complete now, so the impact is less, but cartage companies and harvesting companies will have borne extra costs over the past three weeks. “I had one contractor query me on whether I had seen harvest companies add a fuel surcharge, but I have not seen it yet.” It’s the nervousness of business operators like these that Z Energy and its chief executive Lindis Jones are hearing, as they talk with customers around the country. Z Energy is the country’s biggest fuel importer. Jones has spoken to Newsroom in his only media interview since the start of the oil shock. JM: Z Energy has a ship called Front Pollux arriving at Marsden Point, probably on Monday morning. But until that comes in with seven days’ worth of diesel supply for the country, we’re going to be running it right down. Have you been briefed on that? LJ: A couple of observations on that. What we’ve seen is a significant increase in demand, and that’s at the retail level. I wouldn’t call it panic buying. It’s just that in the face of increasing costs, customers are bringing their purchases forward. So that’s broadly 10 percent. Add to that growing data that the use of the fuel – that is, vehicles on the road – is declining. So what’s happening is we’re actually filling up fuel tanks, and using those vehicles less. John Selwood at the wheel of a John Deere 5090R, with his nephew Grayson. Photo: Supplied JM: A big upwards turn and then slow usage? LJ: Yes. The other thing is that the public data does not include service station stock where it’s most needed, which is either in the vehicles’ tanks I’ve just mentioned, or service station stocks. And for us, that can be up to another five days of supply. Slightly less because of that demand, but they’re recovering in the last 48 hours. So there’s up to four or five days at retail sites. JM: If I’m correct that the ship that’s coming into Marsden Point on Monday – the Front Pollux – is a Z shipment, then that means that some of your competitors might be looking pretty tight for diesel in the coming weeks. Are they coming to you to buy some of your supply? LJ: So the arrangement of product going to Marsden Point, where I believe that vessel’s going – that’s a shared facility, co-mingled storage with allocation and call-up rules. So that stock will help all of industry. JM: Okay, so it’s not correct for me to call that a Z shipment? LJ: Well, it is. We organise it. But when you’ve got a facility like that, you need to treat the product as co-mingled. That means you’ve got to have what we call ‘call-up rules’, so it depends on your stock ownership, but it will be for the benefit of all of New Zealand, or all of the supply chain in that system. JM: Standard & Poor’s Global has just in the last hour put out a fuel crisis update for Asia-Pacific, with quite grim downgrades of New Zealand, in particular its growth forecasts. New Zealand is the one country that it’s downgrading for all of the next three years. Does this suggest that we’ve kind of gotten almost like a wartime situation, where business and government need to work together in a new way to get through this? LJ: There’s two things, I think, Jono. The first one is the scale of the impact we’ve seen on price and the duration of this. The impact of the Middle Eastern conflict will go beyond just the Strait of Hormuz being opened up. There has been damage to production facilities. There will be an absolute premium on supply security. We’re seeing it with companies, and with countries, we’re seeing hoarding at that level, which both will act to increase price, in particular for diesel, and that’s the product that’s the least sensitive to price and is required for huge parts of our productive sector. So that’s a long way of saying, absolutely yes. JM: And I noticed that the Prime Minister had a chat yesterday with the President of Korea who briefed him on Korea’s plans around a fuel cap. What’s your understanding of how that’s going to impact New Zealand, these Korean plans? LJ: I think if you step back, the impact is most acute in Asia because, disproportionately, the big modern refineries in Asia that we’ve had a long relationship with, take crude oil from the Middle East. And we take a lot of the New Zealand-specification fuel from the Middle East. So by default we are impacted. Where South Korea has been responsible is, on Friday last week, they gave some guidance on how they’re thinking about product exports, where they’ve just asked their refiners to not export more than they have previously, but at the same time they need to supply at least 90 percent of demand. So the cap and the collar was relatively transparent, in terms of that guidance from government to the supplying companies in Korea. JM So the statement from the President of Korea describes it as a fuel price cap, which sounds a little bit like a euphemism to me. It is a fuel supply cap, isn’t it? LJ: What I think has provided the strongest signalling to the market round supply, given their important role of supply into this part of the world, was the news on Friday and the guidance their government’s provided to refiners around export. My understanding – correct me if I’m wrong – was that price cap was about domestic price caps. They’re not capping the price to New Zealand! JM: So basically, the effect of this for New Zealand is that we can only buy 90 percent of what we bought at the same time last year from Korea. LJ: No, they have restricted exports to no more than the same month last year. And at the same time, they’ve required that refineries support 90 percent of domestic production. So they can reduce domestic supply to a certain extent, but only to 90 percent of previous demand, and neither can they export more than they traditionally have. So they’ve provided an operating window for guidance for how refineries think about supplying domestic and international markets. JM: I’ve got the captions of Parliament’s question time going on my screen to my left, and I see Shane Jones answering questions about diesel as we speak and accusing the previous Government of not sufficiently protecting New Zealand’s diesel supplies. Is that a view you share or disagree with? LJ: I’ve heard it a lot. I can understand the perspective that having the refinery could provide more fuel security, if you didn’t understand the industry. But the key thing there is having a refinery in the middle of our fuel supply system that produced 75 percent of our needs, that was increasingly unreliable, uncompetitive, would have been expensive, and we still would have had the complexity of getting crude oil into the thing. So we’ve got a more diversified supply chain that’s storage-focused, and we’ve seen that in particular for jet fuel, where we’ve got a hang of a lot more storage than we ever had. JM: Should we have been putting higher stockpiling requirements for diesel? LJ: There’s tens of millions of litres there. And just in our import programme alone, there’s well in excess of 150 million litres of product on the water coming to New Zealand ... It’s the uncertainty about events that may happen further into the future that is on my mind. JM: What is Z doing differently around pricing, for instance, in this oil shock. Is it slowing down the pass-through or anything like that? LJ: If you look at the price increases, the landed cost of petrol and diesel has increased by well in excess of a dollar. Our net profit margins are about three cents a litre. So our ability to slow that down or not pass them on is absolutely limited. And those price increases are huge, so I absolutely recognise the impact on Kiwi and Kiwi businesses, but with profit margins of three cents, the ability to slow that down or accommodate those price increases is absolutely limited and actually immaterial, given the scale of those price increases. JM: If I go down to the petrol station today,is the price I pay reflective of what you’re paying in Korea and Singapore today? Or does it reflect what you’re paying on the oil that’s landed in Marsden Point or wherever, today? Or does it reflect what the cost of the actual oil that you probably purchased a month ago? LJ: Yes, so the answer to that one is, the way that we price reflects the cost if we had to go and procure that product today. It’s a replacement cost basis. The markets have become so messy and volatile that it would actually be slightly less than that, given the premium of buying product today. But that’s the model. The reason that’s important is that it enables the clearest view of the profitability of industry. It’s the way governments throughout the world monitor margins and profitability and it’s the way that performance is managed. Because otherwise you get huge gains or swings in margins based upon inventory gains or losses. So it’s the most transparent, obvious way to assess margins and from a cash perspective, that pricing enables the funding of replacement cargoes today. Because we have to go into the market and buy products now. So it’s the most transparent way of monitoring margins and profitability. It’s absolutely required to fund the purchases of future cargoes. John Selwood works a New Holland Braud 9060L down a row of grapes. Photo: Supplied JM: Tell me a little bit about what you’re hearing from your customers about their experience at present, both private and business customers. I mean, it’s grape harvest in Marlborough. And you know, suddenly those guys have got a whole lot of tractors and whatever combined harvesters or whatever else to run. LJ: It points to the importance of diesel to a lot of our productive sectors. You could contrast that with some other harvests. I was talking to farmers from Canterbury a couple of weeks ago, and they’re just grateful that they’re through the great majority of their harvest. That’s different from the grape harvest or other intensive diesel-intensive sectors like forestry. So you know, the impact is absolutely widespread and different across the different sectors. JM: Have you had a chance to talk to any commercial customers, or indeed, private customers in the last few days, as things get worse, LJ: Yes, I have reached out to quite a few of our commercial customers and will keep on doing that. I need to do more of that so to make sure I stay connected with their world, not just imagining it. And I have spent time at retail sites. And I think the thing that I’m most grateful for is the way that Kiwi are treating our retail sites. It’s not their fault that prices are where they are. They’re the last people that want to be selling their loyal customers high-priced product. The behaviour of Kiwi to our site staff has been great. There’s been no uptick in abuse or anything like that. That was something I was worried about. But the best of Kiwi has come out, thankfully, despite the impost on them of high prices. JM: And what about your staff? Some of them must be pretty stressed as well. LJ: There’s a lot of people doing a hang of a lot of work, planning for a set of circumstances that haven’t happened yet. There’s been really high prices, and that has caused demand to be brought forward. And there have been stock-outs, but we’re talking about a few hours, as it stresses the system, so that part of the team has been busy. And then the broad organisation has been busy preparing for a set of circumstances that may not happen yet around interruption of our planned import program, developing options of how might we get products from elsewhere in the world? So a lot of work behind the scenes, absolutely. JM: What about frontline service station staff? Are they finding it stressful? LJ: Of course, we’ve worried. But they deal day in, day out, with loyal customers. And so how they feel is determined a hang of a lot by that experience. As recently as yesterday, I spent time on sites in Christchurch, and unanimously the feedback was that their customers have been great. And I’m hugely grateful for that, because to protect thousands of frontline staff is a challenge that’s pretty difficult. JM: Are there any outside-the-square logistics solutions you’re exploring in terms of sourcing supply? For instance, drop-in diesel or alternative suppliers, or, for that matter, outside-the-square solutions for managing demand. LJ: We’re confident about managing demand in the short term, because we’re seeing the use of the product decline. So there’s less traffic on the roads, as people respond to those larger fuel bills. So in the short term, there’s nothing that we’re doing. But looking further into the future, which is our role, absolutely looking at options. You mentioned biofuels: one of the things that we will be looking to do is, at the right time, look at fuel specifications. For instance, diesel in Europe has a higher allowance for inclusion of biofuels than the New Zealand specification. So that’s the sort of thing that makes a big difference. There are very large amounts of products traded globally that we’re excluded from because of New Zealand’s fuel specification. So the announcement earlier this week around alignment with Australia gives us a whole lot more optionality. And hopefully we don’t have to use it, but that makes a real difference. And then I think coordination with Australia more broadly. We have very similar supply chains, so to actually have harmonized fuel specifications – buying the same fuel for two markets makes a big difference. JM: Is there any potential to increase the proportions of biofuel, the mix of biofuel, LJ: It’s a pretty limited pool globally, and it’s pretty much tapped out. So the ability to build a biofuels plant in the timelines we’re talking about is not really feasible. JM: And finally, just any conversations you’ve had with ministers or MBIE leadership about working with government to manage the shock. LJ: Yes, a lot of coordination. And one of my key roles is to make sure that they’ve got as much information as they need, as quickly as they can get it, so they can do their job. There’s lots of things that only the Government can do. For instance, engagement with other governments around Strategic Petroleum Releases, fuel specifications, and they’ve also got to manage the wider impact – so at least daily contact across all the different agencies. JM: Okay, I have ran an article yesterday morning, which is getting very well read today about the tankers that are on their way across the waters. We mentioned the Front Pollux, which is the biggest one arriving this weekend. If I hit you with a few more names, are you able to confirm which ones are Z tankers? Yeah. LJ: We can chase tankers around the world – which, in the case that the normal supply chains get interrupted, we will. But I think that’s going to cause potentially more uncertainty and confusion. So there’s product coming to this part of the world from Europe and America now, and that will change quite a lot. JM: Because I don’t think anything from Europe or America, direct to New Zealand, has embarked yet. If so, it hasn’t registered with the New Zealand ports yet. The only ones they’ve got are coming from Asia. LJ: There’s definitely products scheduled to come to this part of the world, from the east coast of America. John Selwood’s team loading a hopper of freshly-harvested grapes into a truck to the winery. Photo: Supplied JM: The tankers that we know are yours are Amasya, Oriental Aquamarine, both ex-South Korea, and Front Pollux, which is coming into Marsden Point this weekend. And those are all quite big ones. I think. But there’s more coming from the east coast of the States, you think? LJ: To this part of the world, absolutely. JM: Yeah, cool. Okay, look, thank you very much for that. You must be enormously busy, and I hope you actually get a chance to have something to eat and sleep at some point. LJ: There’s a hang of a lot of people working hard on this one, and they’re doing a bloody good job. And we can do better with our customers. But I heard it described as the biggest energy shock in the history of the world. It certainly feels like it. Shipping details were correct at the time of the interview, but the company says it’s exploring all options. “At this stage, Z is able to continue supplying fuel to our customers. However, global energy markets remain highly volatile and, if the situation in the Middle East remains unresolved, further pressure on global fuel supply chains is possible. Z sources fuel from a range of established markets, primarily in Asia, and continually reviews sourcing options as part of standard supply‐chain management.”