Fuel importers and wholesalers with bulk storage facilities will now be required to hold minimum levels of onshore stocks of petrol, jet fuel, and diesel.
It’s part of Government efforts to strengthen New Zealand’s fuel sector with more supply resilience and the move is being welcomed by trucking industry body National Road Carriers.
A suite of other initiatives also look to tackle sustainability and encourage more competition in the industry.
Minimum fuel stockholding levels will equate to around 28, 24 and 21 days’ worth of petrol, jet fuel and diesel respectively.
The Government will also procure additional onshore storage of reserve diesel stocks of at least 70 million litres of diesel, providing around seven days’ cover.
“The focus on diesel for additional stockholding reflects the importance of diesel for the operation of critical services, such as emergency services and deliveries of food and essential goods,” energy and resources minister Dr Megan Woods says.
“Transport fuels currently underpin the day-to-day running of our economy and it’s vital we manage our fuel resilience well.”
Meanwhile, a Sustainable Biofuels Obligation bill will be introduced to Parliament in the coming weeks and will require fuel wholesalers to deploy biofuels into their fuel supply.
Woods says the start date for this will now be pushed out a year to April 1, 2024, given the cost of living crisis and to allow the sector more time to prepare.
The obligation is expected to prevent around one million tonnes of emissions from cars, trucks, trains and ships over the first two years and up to nine million tonnes by 2035.
Fuel wholesalers will need to meet emissions intensity reduction targets of 2.4% for 2024 and 3.5% for 2025. Provisional targets will be set for 2026 and beyond, increasing up to 9% by 2035, with adjustments on the intensity targets in the intervening years to make up for the year’s delay in implementation, Woods says.
The Government is also giving the Commerce Commission the power to step in and set fair prices if needed, to encourage more competitive wholesale pricing. It is expected to come into effect in mid-2023.
A terminal gate pricing regime was one of several changes brought in under the Fuel Industry Act 2020 to improve competition at the wholesale level and increase the transparency in fuel markets.
The terminal gate pricing regime requires wholesale suppliers that sell from terminals to post a daily spot wholesale price (the terminal gate price).
If requested, wholesale suppliers must supply the retailer with the requested amount at the terminal gate price. This improves access to the wholesale market and provides for transparent wholesale prices, which makes it easier for new participants to enter the market and for existing fuel sellers to expand into other regions.
The regulatory backstop measure was recommended by the Commerce Commission in 2019 as part of its fuel markets study which prompted the Act.
“While the Act is already facilitating a more competitive wholesale fuel market, there are some outstanding risks to the success of the terminal gate pricing regime,” Woods says.
“For example, the increased price transparency helps competition, but there’s a risk that wholesalers could co-ordinate prices, due to the greater wholesale price transparency, unless there are some disincentives built into the system.
“Following consultation with the sector in 2020 we are now pushing through on development of the backstop regime, which would allow for terminal gate prices of one or more wholesale suppliers to be price regulated if excessive terminal gate prices are found to be offered.
“This suite of measures strengthens our fuel system to make it more secure, sustainable and affordable for all New Zealanders,” Woods says.
NRC supports diesel holdings
The National Road Carriers Association (NRC) says the Government’s announcement to increase onshore fuel holdings to 21 days for diesel is “a significant step forward”.
NRC chief executive Justin Tighe-Umbers says onshore fuel holdings are a critical part of our domestic supply chain resilience.
“Ninety-three per cent of our goods are delivered via diesel trucks, including the critical exports that pay our way such as dairy, logging and agriculture,” Tighe-Umbers says.
“New Zealand is almost entirely dependent on international shipping for our ground fuels, and there is no guarantee we won’t face more supply chain disruptions or shipping lane volatility in the near term as global instability rises in north Asia and Europe.
“Ideally, I’d like to see an even longer onshore fuel stock requirement given our vulnerability, 30 days or beyond. The challenge is, this requires building more storage facilities for a fuel that is being transitioned away from, so oil companies are reluctant to invest,” he says.
Woods says New Zealand has always been reliant on fuel imports – the difference now is that we no longer import crude oil, instead we import refined fuel products.
Following the closure of Marsden Point’s refinery to a fuel import-only terminal, the facility now imports refined fuel products from a range of overseas refineries.
“The additional onshore storage of diesel stocks will also boost our contingency supply,” she says.
An independent review of national fuel security was done when the refinery signalled it would transition to an import-only terminal for storing fully refined fuels.
It found the refinery’s closure improved the overall resilience of fuel supply chain in the sense that the country would no longer face the risk of a single point of failure associated with an unplanned refinery outage, and fuel companies now deliver fuels to New Zealand in more frequent shipments from more diverse sources.
