Executive summary
For the foreseeable future, diesel will continue to be our most strategically important engine fuel. Diesel plays a critical role in food production, transporting essential goods around the country, for emergency services, electricity generation and other essential services.
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For the foreseeable future, diesel will continue to be our most strategically important engine fuel. Diesel plays a critical role in food production, transporting essential goods around the country, for emergency services, electricity generation and other essential services.
Despite its importance for our economy, the days of cover of diesel that we hold in reserve is low compared to jet fuel and petrol. On 1 January 2025, the 'Fuel Industry (Improving Fuel Resilience) Amendment Act 2023' will require fuel importers to hold, on average, 21 days’ cover for diesel, 24 days’ cover for jet fuel and 28 days’ cover for petrol. If there was a major disruption to supply chains, there could be significant harm to our economy if we do not hold enough onshore diesel to ride out disruptions.
The intention at the time of developing the 'Fuel Industry (Improving Fuel Resilience) Amendment Act' was to increase our diesel reserves to 28 days. Last year, the government began the process of investigating Crown procurement and storage of 70 million litres of diesel – roughly equivalent to 7 days’ cover and bringing New Zealand’s diesel reserves to 28 days. However, because of the high capital costs involved, Government decided to stop work on Crown procurement so that it could have a thorough understanding of the benefits and costs of other options.
We are now consulting on options that would increase our reserves to 28 days. These options range from placing the obligation to hold extra reserve diesel solely on fuel importers, through to the Crown being responsible for holding reserves, with a hybrid option of Crown offering other support.
All options will increase costs to consumers at the pump to differing degrees. Holding reserve stocks is expensive. But this needs to be weighed against the consequences of not having enough diesel during a supply disruption, which could be catastrophic to our economy.
We ask a series of questions through this document. Your answers and any additional information you can provide will help us determine what is the best option to ensure New Zealand’s diesel resilience.
The consultation closes on 6 December 2024 at 5pm.