Diesel users to pay for new standards at the pump

Energy Resources Aotearoa warns that consumers will ultimately face higher costs at the pump because of new Minimum Stockholding Obligations (MSO) announced today.

Energy Resources Aotearoa Chief Executive John Carnegie says with diesel consumption expected to decline in the coming years, investment in diesel assets is challenged and may become obsolete.

"The Government’s decision to add 7 days of diesel stockholding obligation on importers, rather than fund and manage themselves, will require industry to either lease additional tanks or convert/build tanks to support current demand. Both options require significant long-term investment which will be passed through to the consumer at the pump."

"Add the low likelihood of experiencing a sustained and severe fuel disruption to that picture, and we will have a high-cost solution imposed on New Zealanders for a rare and unprecedented event."

Carnegie says that while the government’s reasoning for increasing fuel stocks is New Zealand’s vulnerability to international fuel supply disruptions, the costs to consumers far outweigh the benefits beyond the current 21 days of mandated cover.

"New Zealand operates in a nimble, complex and highly integrated supply chain system that supplies liquid fuels in Asia Pacific, which has only improved since the closure of the Marsden Point refinery.

Now, more than ever, more ships are on the water delivering fuel across New Zealand. Since the refinery closure, fuel companies have been providing fuel to New Zealand through more frequent shipments from a wider range of sources."

Carnegie says if the government wants to enhance resilience, it should fund an extra seven days of coverage instead of imposing this requirement on fuel importers.

"The beneficiaries are all New Zealanders rather than diesel users who will have to carry these costs. Government funding is the fairest approach to sharing the costs because resilience is a form of public insurance for the highly unlikely event of a sustained and severe fuel disruption.

Costs associated with MSO include monitoring systems and IT, labour, storage for fuel and data, legal and contractual fees, engineering, and design. All of these costs will ultimately be passed on to the consumer.

We are not convinced that increasing onshore stocks will improve diesel resilience or is the right approach to future-proofing New Zealand’s emergency management system."