Fuel Prices Projected to Rise as US-Iran Conflict Disrupts Oil Supply

The Impact of Middle East Instability

The current market volatility follows the collapse of an interim ceasefire and the resumption of military strikes between the U.S. and Iran. Following these developments, the U.S. reimposed a naval blockade on Iranian ports, and Iran retaliated by targeting commercial tankers in the Strait of Hormuz. This waterway is critical to global energy stability, as approximately one-fifth of the world’s traded oil and gas normally passes through the route. The renewed hostilities have caused Brent crude prices to climb back above US$85 a barrel, reaching their highest levels since early June. According to Collins, the primary issue is not a lack of oil production, but rather the difficulty of transporting it. Insurance costs for shipping companies have surged due to the perilous nature of the Strait, leading many owners to avoid the region. While tankers can reach destinations like New Zealand via longer routes, the increased sailing distance results in higher shipping costs, which are ultimately passed on to consumers.

Diesel and Aviation Fuel Face Greater Pressure

While petrol prices are expected to rise, industry analysts suggest that diesel and aviation fuel may experience more significant increases. This is compounded by a Russian ban on diesel exports, implemented following Ukrainian strikes on Russian energy infrastructure.

Economic Context and Consumer Advice

In New Zealand, the average price of 91 octane petrol is approximately $2.93 a litre, according to the tracking app Gaspy. While this is lower than the $3.48 peak seen in mid-April, experts warn that the window for lower prices is closing. “The longer you wait, the more you’re probably going to have to pay,” Collins said, noting that some fuel companies have already ceased their usual weekly price specials. Because fuel importers must account for the rising cost of replacing their stock, prices at the pump are expected to adjust quickly to reflect global market shifts. The economic ripple effects are also being monitored by financial institutions. Economists note that the persistence of these energy shocks introduces volatility to the New Zealand dollar and complicates inflation forecasts. There is concern that sustained high energy costs could make it more difficult for the Reserve Bank to bring inflation below 3%.

Resilience in the Face of Volatility

Despite the price pressure, officials emphasize that New Zealand does not face a physical fuel shortage. “We don’t have a supply problem. We just have a price problem, and that’s a global thing,” Collins said. For many households and businesses, the uncertainty has necessitated changes in behavior. Recent research indicates that 44% of New Zealanders have responded to the high-cost environment by driving less often, while more than a third have reduced non-essential spending. Businesses, particularly in the transport and agricultural sectors, are reportedly operating with caution, focusing on managing cash flow and inventory as they navigate the volatile global market. Ultimately, experts suggest that the duration of elevated fuel prices will depend on how long the conflict persists and the subsequent impact on insurance premiums and shipping routes. Until a sustained ceasefire is achieved, the environment is expected to remain uncertain for both consumers and businesses.

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