New Zealand’s road transport sector continues to bear the impact of global disruptions to fuel supply linked to ongoing conflict in the Middle East. In response to these disruptions, the Government has released the National Fuel Plan, designed to scale the extent of government intervention as risks increase or decrease.
The National Fuel Plan is somewhat reminiscent of the COVID-19 response framework, with four distinct phases that respond to different levels of risk to New Zealand’s fuel security.
Just as we saw the impact of COVID-19 rapidly change our ways of working, New Zealand industry may need to quickly adapt to the impact of constrained fuel supplies. For the transport sector in particular, the more restrictive phases of the National Fuel Plan could lead to widespread necessary investment into alternatively-fuelled trucking fleets.
We set out here some general information about what the National Fuel Plan may mean for New Zealand’s road transport sector, and how this may impact the uptake of fleet electrification.
What are the different fuel phases?
In short, New Zealand is currently sitting at Phase 1. This is a “watchful” phase, where fuel stocks are closely monitored, but no actual usage restrictions are in place. Phase 2 would see the Government taking precautionary measures to maintain supply and promote responsible use of fuel across government services, as well as working with key stakeholders to ensure effective regional distribution of fuel. Phase 3 may lead to restrictions on fuel supply based on priority of supply, with Phase 4 potentially putting strict fuel purchase restrictions into action.
When might New Zealand experience a move between fuel conservation phases?
Six official criteria have been determined, with the Fuel Security Oversight Group being required to consider a move in phases whenever any of these criteria change. The criteria include:
- Source refineries introducing or relaxing export restrictions;
- Changes to New Zealand’s fuel stock levels of plus or minus three days since the most recent published update;
- A fuel company informs the government that they are unlikely or unable to fill future orders;
- A breach, or notification of an imminent breach, of the minimum storage obligations;
- Any significant policy changes in Australia or from the International Energy Agency; or
- A significant disruption to regional distribution.
It is also possible that a change in phase will apply to one type of fuel, but not another. For example, petrol may remain at Phase 1, while diesel goes up to Phase 2.
How does the National Fuel Plan impact the transport sector?
At Phase 2, the Government will work with fuel suppliers to prioritise supplies to essential services. At present, fire and emergency services are the primary example of an essential service provided by the government, and little guidance has been provided as to the degree of priority the transportation sector would be afforded at Phase 2. However, it is difficult to envisage a situation where the transport sector would not be classified as an essential service, recognising the necessity of many transport operations such as grocery supply.
The National Fuel Plan would likely start to most noticeably impact the transport sector if it reached “Phase 3”. At this stage, the Government may take steps to help direct fuel supply to customers according to their level of priority. Priority bands, ranked from A – D, outline where the provision of fuel would be prioritised.
The transport sector would see many operators placed in Band B “economically important services”, which are critical transport services such as freight for supermarket and grocery supply chains, international air links, food supply and primary production during time-critical periods. Others may be lower down the chain at Band D, encapsulating “other commercial customers – all other commercial and business fuel uses”.
We note that Phase 3 has not been confirmed and is still subject to consultation, so the way in which supplies are managed for economically important services remains to be seen.
Phase 4, which is also subject to consultation at this stage, would impose strict rules on the supply of fuel. Supply of fuel to life-preserving services would be prioritised (those in Band A of the Phase 3 Bands), as well as food supply.
Fleet electrification impacts
While electric and hybrid light vehicles make up nearly half of the light vehicle market in New Zealand,[1] electric and alternatively fuelled heavy vehicles are still gaining traction. Hydrogen-powered trucks, while proving to be a promising development for the industry, are still in their infancy.
The impact of current global disruptions to fuel supply has been sudden and most road transport operators would have no choice but to bear the brunt of the rapid increase in fuel costs this time around. Many would argue that the technology is simply not yet sophisticated enough to justify the rollout of alternatively fuelled trucks out across their fleet. However, responding to fuel supply constraints may prove to be a thought-provoking exercise for business owners wanting to future-proof their fleet from further disruptions to the fuel supply chain.
It remains to be seen whether New Zealand will work its way up the phases of the National Fuel Plan and be further impacted by fuel scarcity and associated cost increases. As electric and hydrogen-powered heavy vehicle technology develops further, road transport operators might consider prioritising these technologies, to provide future assurance that fuel supply disruptions will not flow through to their business.
Special thanks to Partner Rob Coltman and Associate Olivia Skelton for preparing this article.
Disclaimer: The content of this article is general in nature and not intended as a substitute for specific professional advice on any matter and should not be relied upon for that purpose.
