From January to September, petrol prices rose 24.3 percent and diesel 55.8 percent. Food prices rose just 2.4 percent, but that restraint will probably not last.
"You may not be interested in war, but war is interested in you," runs a saying doubtfully attributed to Russian revolutionary Leon Trotsky. Kiwis are learning the hard way that geographical isolation offers little protection from the economic consequences of distant conflicts.
Why do pump prices rise when not a single tanker arrives directly from Saudi Arabia? The answer lies in refining.
Marsden Point, our only refinery, closed in 2022. We now import all our petrol, diesel and jet fuel, about four litres in five from South Korea and Singapore, refined from crude bought internationally, including from Gulf producers.
Even a litre of diesel from Singapore carries the Hormuz risk. Keeping Marsden Point open would not have spared us, since crude and refined prices move together. It would matter only for physical supply, if a closed strait threatened the flow itself.
Saudi Arabia pipes some of its crude across the peninsula to Yanbu on the Red Sea. But that escape route is fragile too. The pipeline has been struck repeatedly by Iran and by drones launched from Iraq. Its outlet lies within range of the Iran-backed Ansar Allah, better known as the Houthis, who declared a naval blockade on Saudi Arabia in July and threaten the Bab el-Mandeb strait at the Red Sea's southern end.
Unless you are a farmer, you can be forgiven for never giving much thought to urea. It is the nitrogen-rich fertiliser that keeps our grass and crops growing. Its production depends on natural gas, which the Gulf has in abundance.
In 2025, New Zealand imported close to half a million tonnes of urea – more than half of it from Saudi Arabia. Saudi urea is made in plants on the Gulf coast and leaves by ship through Hormuz. Some is now trucked to Yanbu instead – straight into the Houthis' range.
By law, fuel importers must hold at least 28 days of petrol, 21 of diesel and 24 of jet fuel. Urea has no such requirement. Our only urea plant, at Kapuni in Taranaki, makes about a third of what we use, but it has run on short-term gas deals since its long-term contract expired in 2025. A shortfall of nitrogen slows grass and crop growth within weeks.
Urea may not even be our greatest exposure. Nearly half the world's seaborne sulphur, a by-product of Gulf oil and gas, normally passes through Hormuz. Sulphur is the basis of superphosphate, on which our pastures depend. Its price has roughly doubled this year; China has restricted phosphate exports and Morocco has cut output. Soils hold phosphate reserves for a year or two, so the damage comes slowly. But it comes, and it cannot easily be replaced.
New Zealand cannot influence the war, but it is not powerless against its fallout.
For fuel, the minimum-stock mandate makes sense. Petrol prices are highly visible, and when they spike, the political temptation to cap prices or commandeer supplies is strong. Few importers would pay to hold stock that might be taken from them.
Fertiliser is different. Its buyers are farm businesses, and its main importers, Ballance and Ravensdown, are co-operatives owned by those same farmers. Those who would suffer from a shortage also own the stocks. Farmers spread most of their urea in spring, and a shipment delayed by weeks may cost a season's growth. Urea can be stored for months, though not easily, as it absorbs moisture from the air. Security of supply rests largely on long-standing contracts with overseas producers.
Instead of mandating stocks, the Government should make them worth holding. It should commit now not to cap prices, ration supply or redirect stocks to "priority" users in a crisis. It should also keep trade open: our Singapore agreement bars export restrictions on essential goods. Similar commitments with fertiliser suppliers would be a sensible next step, though in an acute shortage they may not be honoured. And it should recognise that Kapuni's future, and with it a third of our urea, depends on the domestic gas market. Prudence means preparing for a protracted war, not a short shock.
We cannot affect what happens in either strait, but we can prepare for the consequences. As an old Arabic saying warns: "The greatest fires begin with the smallest sparks." The fire in the region has burned for eight months. Preparing now can keep its sparks from igniting our paddocks.
Dr Nathan Peres is a Senior Fellow at The New Zealand Initiative focusing on geopolitical risk, economic security and the impact of international developments on New Zealand. This article was sourced HERE
Why do pump prices rise when not a single tanker arrives directly from Saudi Arabia? The answer lies in refining.
Marsden Point, our only refinery, closed in 2022. We now import all our petrol, diesel and jet fuel, about four litres in five from South Korea and Singapore, refined from crude bought internationally, including from Gulf producers.
Even a litre of diesel from Singapore carries the Hormuz risk. Keeping Marsden Point open would not have spared us, since crude and refined prices move together. It would matter only for physical supply, if a closed strait threatened the flow itself.
Saudi Arabia pipes some of its crude across the peninsula to Yanbu on the Red Sea. But that escape route is fragile too. The pipeline has been struck repeatedly by Iran and by drones launched from Iraq. Its outlet lies within range of the Iran-backed Ansar Allah, better known as the Houthis, who declared a naval blockade on Saudi Arabia in July and threaten the Bab el-Mandeb strait at the Red Sea's southern end.
Unless you are a farmer, you can be forgiven for never giving much thought to urea. It is the nitrogen-rich fertiliser that keeps our grass and crops growing. Its production depends on natural gas, which the Gulf has in abundance.
In 2025, New Zealand imported close to half a million tonnes of urea – more than half of it from Saudi Arabia. Saudi urea is made in plants on the Gulf coast and leaves by ship through Hormuz. Some is now trucked to Yanbu instead – straight into the Houthis' range.
By law, fuel importers must hold at least 28 days of petrol, 21 of diesel and 24 of jet fuel. Urea has no such requirement. Our only urea plant, at Kapuni in Taranaki, makes about a third of what we use, but it has run on short-term gas deals since its long-term contract expired in 2025. A shortfall of nitrogen slows grass and crop growth within weeks.
Urea may not even be our greatest exposure. Nearly half the world's seaborne sulphur, a by-product of Gulf oil and gas, normally passes through Hormuz. Sulphur is the basis of superphosphate, on which our pastures depend. Its price has roughly doubled this year; China has restricted phosphate exports and Morocco has cut output. Soils hold phosphate reserves for a year or two, so the damage comes slowly. But it comes, and it cannot easily be replaced.
New Zealand cannot influence the war, but it is not powerless against its fallout.
For fuel, the minimum-stock mandate makes sense. Petrol prices are highly visible, and when they spike, the political temptation to cap prices or commandeer supplies is strong. Few importers would pay to hold stock that might be taken from them.
Fertiliser is different. Its buyers are farm businesses, and its main importers, Ballance and Ravensdown, are co-operatives owned by those same farmers. Those who would suffer from a shortage also own the stocks. Farmers spread most of their urea in spring, and a shipment delayed by weeks may cost a season's growth. Urea can be stored for months, though not easily, as it absorbs moisture from the air. Security of supply rests largely on long-standing contracts with overseas producers.
Instead of mandating stocks, the Government should make them worth holding. It should commit now not to cap prices, ration supply or redirect stocks to "priority" users in a crisis. It should also keep trade open: our Singapore agreement bars export restrictions on essential goods. Similar commitments with fertiliser suppliers would be a sensible next step, though in an acute shortage they may not be honoured. And it should recognise that Kapuni's future, and with it a third of our urea, depends on the domestic gas market. Prudence means preparing for a protracted war, not a short shock.
We cannot affect what happens in either strait, but we can prepare for the consequences. As an old Arabic saying warns: "The greatest fires begin with the smallest sparks." The fire in the region has burned for eight months. Preparing now can keep its sparks from igniting our paddocks.
Dr Nathan Peres is a Senior Fellow at The New Zealand Initiative focusing on geopolitical risk, economic security and the impact of international developments on New Zealand. This article was sourced HERE
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