Choked Red Sea doubles threat to NZ fuel supplies

According to Ministry of Business, Innovation and Employment data reported for September 13, New Zealand had approximately 51 days of petrol, 48 days of diesel and 42 days of jet fuel. At first glance, that might be reassuring.

The key caveat is that these figures combine fuel already in New Zealand with cargoes still in transit. Fuel on a tanker counts on paper, but it is not yet available to consumers, and ships can be delayed, diverted or rejected because of a quality problem.

New Zealand therefore has a buffer, not a fortress.

The global fuel crisis is becoming more dangerous because it’s no longer concentrated around a single supply route.

The Strait of Hormuz is the main exit point from the Persian Gulf, while the Bab el-Mandab, at the southern entrance to the Red Sea, connects the Gulf of Aden to the Suez Canal route. They are geographically separate but economically intertwined.

As disruption at Hormuz has increased reliance on Saudi Red Sea export routes, threats around the Bab el-Mandab have become more consequential. 

Two Middle East chokepoints drive up crude oil prices

This creates a “two-chokepoint problem.” Disruption at the first chokepoint increases dependence on the second. If the second is then threatened, the effects reinforce one another.

The latest International Energy Agency assessment estimates that observed global oil inventories have declined by approximately 507 million barrels since February.

Global refinery throughput in August was around 4.2 million barrels a day lower than a year earlier. Gulf diesel and gasoil exports were only about one-quarter of their pre-war level, while disruptions to Russian refining further reduced available supply.

The problem is therefore not simply a lack of crude oil. It’s the loss of the routes, refineries, tankers and inventories needed to turn crude into usable fuel and get it to market.

NZ can be affected without using the Red Sea

Tankers carrying fuel to New Zealand don’t travel through the Bab el-Mandab, but that doesn’t mean that Houthi attacks or Red Sea disruption aren’t relevant.

When vessels avoid the Red Sea and instead travel around the Cape of Good Hope to our refineries in Asia, it takes longer. Effective global shipping capacity falls even when the number of ships remains the same.

Insurance premiums and freight costs increase. European buyers seek to buy fuel from refineries farther east. Asian cargoes that might have been available to New Zealand face competing bids from much larger markets.

This produces a displacement effect: Europe’s shipping disruption can become Asia’s fuel shortage problem.

That is a defining feature of an integrated commodity market. New Zealand doesn’t need to import through a disrupted chokepoint to pay the price of its disruption.

The ‘last cargo’ matters more than the last litre

Public discussion of fuel security tends to focus on a dramatic question: when will New Zealand run out?

That’s the wrong question.

A country rarely moves overnight from normal supply to empty tanks. Pressure usually appears first through higher prices, declining commercial inventories, delayed deliveries and shortages of particular fuel grades in particular locations.

The more useful question is, how difficult will it be to get the next replacement cargo?

This is New Zealand’s “last cargo problem.”

The country doesn’t become vulnerable only when the last litre of oil is used. It becomes vulnerable as the next cargo becomes harder, slower and more expensive to secure.

A reported 48 days of diesel cover is not a 48-day guarantee. New shipments continue to arrive and demand changes in response to price. But some of the reported fuel remains at sea. And a national aggregate says little about whether diesel is in the correct region or whether jet fuel is accessible to Auckland Airport.

Fuel security depends on quantity, location, fuel type, and how quickly it can be delivered. A country can appear well supplied nationally while experiencing regional or product specific shortage.

Price is the first rationing mechanism

For now, New Zealand’s most likely outcome is very expensive fuel rather than no fuel.

High prices suppress demand and attract cargoes from alternative suppliers, rationing fuel before governments need to step in.

Diesel costs are transmitted through freight, farming, construction and food distribution. Jet fuel costs affect tourism and international connectivity. Households ultimately pay for much of the shock even when they don’t use large fuel quantities directly.

But high prices help explain why a global supply disruption does not immediately become a physical stock-out.

New Zealand’s current statutory minimum onshore holdings are 28 days for petrol, 24 days for jet fuel and 21 days for diesel. The diesel obligation for large importers is scheduled to increase to 28 days from July 2028. This will buy time, but they can’t replace a functioning international supply chain indefinitely.

What could cause an actual shortage?
A physical shortage would happen if incoming fuel remained below consumption long enough to exhaust the accessible domestic buffer.

The most plausible scenario is not one isolated failure, but a compound shock: continuing disruption at Hormuz, sustained Houthi attacks or threats near the Bab el-Mandab, further damage to Saudi bypass infrastructure, and the delay or diversion of cargoes ultimately intended for New Zealand.

A domestic failure could then become the tipping point. Problems at port, terminal, pipeline or a rejected cargo (because it doesn’t meet New Zealand fuel specifications) would be far more serious when replacement supplies are scarce.

Diesel would need especially close attention. It powers freight, agriculture, food distribution and emergency generation. A diesel shortage is more than an inconvenience for motorists and can impair supply chains.

Before a nationwide stock-out, we would probably see regional shortages, commercial allocation, voluntary demand reduction and priority access for emergency and essential services.

Resilience is about surviving the second shock

The current global fuel system is still working. Cargoes are moving, refineries are operating and New Zealand continues to receive fuel.

But the system is operating with less redundancy. Inventories have been depleted, some refineries are running extremely hard, shipping journeys are longer and alternative export routes are themselves exposed to conflict.

The real test of resilience is not whether a system can survive the shock everyone is already watching. It is whether it can survive the next shock while the first remains unresolved.

New Zealand’s current stocks provide time. They do not provide independence from global markets. In a world where Hormuz and the Bab el-Mandab can be threatened simultaneously, the country’s fuel security ultimately depends on keeping multiple routes, suppliers, ports and distribution options available.

The danger is not that New Zealand will suddenly run out of fuel. It is that each disruption will remove another fallback option, until the next cargo has nowhere to come from, no affordable ship to carry it, or no reliable route to get here.