Implementation and evaluation
Increasing our diesel reserves would require investment into additional storage. New tanks will need to be built or existing tanks would need to be converted and updated to meet modern standards.
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Increasing our diesel reserves would require investment into additional storage. New tanks will need to be built or existing tanks would need to be converted and updated to meet modern standards.
All options to increase reserve diesel would need regulatory change:
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Options 2 and 4 increase the stockholding obligation on fuel importers, which would require amendments to regulations made under the 'Fuel Industry (Improving Fuel Resilience) Amendment Act'.
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Option 3 would likely use Levy funding, which would likely require an amendment to the Energy (Petrol, Engine Fuel, and Gas) Levy Regulations 2017 to increase the Levy rate.
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Option 4 may also require an increase to the Levy rate to fund any government financial support.
It is possible to stagger implementation to reduce impacts on affected parties. For example, if Option 2 (full obligation on industry) was preferred, we could consider increasing the diesel MSO to 24 days as an interim step before raising it to the full 28 days several years later. For Option 3, which would involve the Government taking responsibility for procuring diesel and its storage, tanks could be filled incrementally to avoid sharp increases in the Levy rate.
The trade off with staggering implementation is that New Zealand would be exposed to the impacts of a supply disruption for a longer period. These risks are considered to be very low, but as previously noted, the consequences could be severe.
Consultation questions
19. Do you have a preference for how quickly we implement increasing our diesel reserves?
20. If we increase the MSO for diesel, would you prefer a staggered approach? If you are a fuel importer, would this make a difference to how you invest in additional storage?
Monitoring and Evaluation
A key component of the fuel resilience policy package was ensuring that the Government was able to collect enough information to give it a clearer oversight over New Zealand’s fuel resilience. The 'Fuel Industry (Improving Fuel Resilience) Amendment Act' enables regulations to be made that allow for information to be collected. These regulations will be gazetted before the end of 2024.
The regulations will allow for information to be collected from bulk storage facilities and reported to MBIE on a regular basis. The regulations will ensure that more granular data is collected, including at specific locations. MBIE will be able to monitor diesel stockholding levels at a regional level.
The fuel security study will be concluded in early 2025. It is possible that the study will identify that New Zealand needs to hold different levels of diesel reserves than the 28 days that the Government has already agreed to. MBIE will be considering the findings of the study when providing advice to the Government on final policy decisions for reserve diesel.
The 'Fuel Industry (Improving Fuel Resilience) Amendment Act' requires that the Minister must review the stockholding obligation within five years of the stockholding obligation commences – meaning a review must happen before 1 January 2030.