The Cheapest Insurance Policy the Government Refuses to Buy. It is time to make public transport free, or at the very least half price. The fuel crisis probably resolves. Probably. But we need to plan for the world where it doesn’t, and this is the most positive, least painful lever we have.
The New Zealand government is making a quiet bet, and most New Zealanders do not realise it is being made on their behalf. The bet is that the Iran war ends reasonably soon, that the Strait of Hormuz reopens in some form, that Asian refineries keep supplying us, and that by the spring quarter we will be through the worst of the fuel squeeze with nothing more than a pricey few months to show for it.
It is a reasonable bet. It may even be the right bet. If you forced me to lay money on a single outcome, I would probably pick that one too.
But probably is not the same as certainly, and a responsible government does not plan only for the base case when the tail risk is national fuel rationing, a broken airline, empty supermarket shelves, and an economy frozen by its own supply chains. The job of government in a crisis like this is to buy insurance against the outcomes it cannot afford to let happen, even if those outcomes are not the most likely ones.
And the cheapest insurance policy available is sitting untouched on the shelf.
What the Government is Actually Doing
To be fair to MBIE, the dashboard is working. Twice a week we get an updated snapshot of fuel stocks. As of 8 April, New Zealand had 59.7 days of petrol, 49.1 days of diesel and 50.7 days of jet fuel across the whole system, counting what is in country and what is on ships heading our way. Those numbers are healthy. They are above our minimum stockholding obligations. There are fourteen tankers in local waters or steaming toward us.
The prime minister is at pains to point this out, repeatedly, whenever a microphone is near. He describes the latest dip in stocks as very normal. He says our importers have confirmed orders through to the end of May, even some into June. He says we are well organised relative to Australia. He says there is no need for New Zealanders to change how they buy fuel.
All of this is true, as far as it goes. The problem is that it is not going very far.
What the Government is Not Saying
The fuel in our storage tanks is the fuel we already have. The fuel on the water is the fuel we already bought. Neither of those numbers tells us anything about whether we will be able to buy fuel in July, August or September. And it is what happens next that should be keeping the Beehive awake.
The places we buy our fuel from are all doing the same thing at the same time. China has halted exports of diesel, petrol and jet fuel, with shipments falling nearly 40 percent month on month in March. Thailand has banned most refined fuel exports. South Korea has capped shipments at last year’s levels and is openly discussing redirecting export bound jet fuel back into its domestic market. Singapore’s refining margins are climbing as buyers scramble for limited supply.
These are the three main sources we rely on. If Korean and Singaporean refineries cannot get enough crude to run at full capacity, or if their governments tell them to keep their output at home, our confirmed orders through May are worth less than we think. You cannot ship fuel that has not been refined, and you cannot refine crude that is not arriving.
Europe is already getting the bad news. The International Energy Agency has warned that jet fuel faces worsening shortages through April and May. European airports say a systemic jet fuel shortage will hit within three weeks if Hormuz does not reopen. Scandinavian airline SAS is cancelling a thousand flights in April. Global jet fuel prices have roughly doubled in six weeks, from about ninety nine US dollars a barrel to a hundred and ninety five. In the United States, jet fuel has gone from two dollars fifty a gallon to four dollars eighty eight in just over a month.
Closer to home, Air New Zealand has already suspended its earnings guidance. Forsyth Barr is talking about combined pre-tax losses of more than five hundred million dollars across this year and next. The airline has stopped buying sustainable aviation fuel because the pricing structure makes it punitive. Lufthansa is forming teams to model the grounding of aircraft. Ryanair is warning of summer cancellations. Philippine Airlines is openly discussing fuel rationing.
This is the world the government’s dashboard does not quite capture. The numbers it reports are real. The numbers it does not report are the ones that matter.
The Eight Week Hinge
There is a useful rule of thumb from conflict analysts that has been quietly circulating in energy circles. The first eight or nine weeks of a war are the window where quick resolution is still the most likely outcome. Past that point, conflicts tend to settle in for the long haul. Rystad Energy’s chief economist made the point to CNBC using the Russia Ukraine comparison. The longer a conflict runs past that early window, the more likely it becomes a protracted one.
The war with Iran started on 28 February. We are now well past the eight week mark. The two week ceasefire that briefly held has collapsed. The United States has imposed a formal blockade on the Strait of Hormuz. Iran has threatened retaliation. None of this is the shape of a conflict resolving. It is the shape of one digging in for a longer stay than anyone initially expected.
And even when it does end, the taps do not just turn back on. Refineries that have throttled down take weeks to come back to full capacity. Contracts that have been broken take months to re-establish. Ships that have been rerouted around southern Africa are still weeks from the ports they would otherwise be heading for. The lag works in both directions. The shock took weeks to reach us, and the recovery will take weeks to reach us too.
The government’s own figures show what that means. We do not have strategic reserves of the kind Japan holds (254 days) or South Korea (208 days) or even China (120 days). We run lean. The minimum stockholding obligations that came into force in January last year require 28 days of petrol, 21 days of diesel, and 24 days of jet fuel, and we are only modestly above those thresholds when you strip out the on water stock. If imports tighten meaningfully for two or three months, we do not have the buffer to absorb it.
The Asymmetry Nobody is Pricing
This is where the argument for precautionary action gets its force. The cost of preparing for a bad outcome is low. The cost of not preparing, if that outcome arrives, is catastrophic. And the two costs are not remotely comparable.
Consider what precautionary demand management actually costs. You reduce fuel tax temporarily, like Australia did. You move to Phase 2 of the Fuel Response Plan. You reduce minimum stockholding obligations modestly to give importers flexibility to bring in what they can. You quietly negotiate priority access arrangements with Asian suppliers while we still have leverage. You make half price or free public transport available, like we did in 2022. None of these things cost very much. Most of them save households money. All of them are easily reversed if the base case plays out.
Now consider what the tail risk actually costs. If fuel allocation kicks in, freight slows and supermarket supply chains come under real pressure. Air New Zealand, already haemorrhaging cash, may need emergency government support to keep domestic routes flying. Regional connectivity collapses for anywhere served only by air. Tourism, already fragile, takes a second concussion on top of the first. Diesel rationing hits every courier, every contractor, every rural community. Petrol rationing hits every household that cannot reach work or school without a car. And all of this happens in a country where, as MBIE itself says, we rely on regular shipments to keep supply steady because we do not have large storage capacity beyond the minimum.
You do not need to think the tail is likely to think it is worth insuring against. You just need to think it is not vanishingly small. And it is clearly not vanishingly small. It may be ten percent. It may be twenty. It may be thirty. Nobody in a position to know is showing their working.
The Cheapest Lever in the Toolbox
Which brings us to public transport.
New Zealand has done this before, and recently. In 2022, in response to the cost of living squeeze and the Russia driven fuel price spike, the Labour government made public transport half price nationally. Patronage rose. Household fuel costs fell. Lower income households, who spend a far higher share of their income on fuel, benefited the most. The fiscal cost was somewhere in the order of twenty five to forty million dollars a month depending on uptake. The operational mechanics were already in place. We know how to do this because we have done it.
Overseas the evidence is even stronger. Germany ran a nine euro monthly ticket in 2022 and recorded something in the order of a billion extra trips. Spain went further and made certain commuter and medium distance rail services free. Ridership surged in both cases. The policy worked as a demand management tool in exactly the way you would want it to.
The logic is straightforward. We do not control fuel supply. We do control fuel demand, at least at the margins, and demand has more elasticity than most people assume. Every person who takes the bus instead of driving is a person not buying petrol. A five percent reduction in petrol demand is, in supply chain terms, the same as five percent more supply. The difference is that we cannot magic up extra tankers, but we can absolutely magic up a fare subsidy.
Even better, free or half price public transport does useful work whether or not the tail risk materialises. If the war ends next month and fuel prices normalise by spring, the subsidy has been a cost of living measure at a moment when households genuinely needed one. If the war drags on and supply tightens further, the subsidy becomes a crucial piece of demand management that buys us weeks of additional runway before anything more painful has to be contemplated. There is no scenario in which this policy does not earn its keep.
It is progressive, because lower income households use public transport more and spend more of their income on fuel. It is counter cyclical, because it puts money back in pockets exactly when pump prices are taking it out. It is fast, because the fare systems already exist and we have run this playbook before. It is reversible, because you just let it expire when conditions allow. And it is politically defensible across the spectrum, because the frame is fuel security and cost of living rather than transport ideology.
The Wider Toolkit
Public transport is the single biggest lever available, but it is not the only one, and a serious government would be using the full set.
Reducing the motorway speed limit temporarily from a hundred to ninety, or even eighty, improves fuel efficiency noticeably. Other countries have done this during fuel crises. Germany considered this during the Russia shock for exactly that reason. A coordinated push on school bus capacity reduces the number of parents doing the school run in single occupant cars. A public information campaign on fuel efficient driving sounds naff but has measurable effects at scale.
None of these measures individually solves the problem. Taken together they could meaningfully reduce national fuel demand, which extends the runway, which delays any need to move to harder measures like rationing, which preserves optionality if the base case does not play out.
The common thread is that all of these are voluntary, painless, and cheap. They are the kind of measures a government deploys when it is taking the tail risk seriously without panicking the public. They are the exact middle ground between doing nothing and rationing, and they are the space the government is currently declining to occupy.
Why the Silence
It is worth asking why none of this is in the public conversation. The answer, I suspect, is a combination of political caution and ideological reflex.
The government is genuinely worried about panic buying and hoarding, and rightly so. The run on Wellington petrol stations in March showed how quickly confidence can tip. Every announcement that sounds alarmed risks triggering exactly the behaviour the government is trying to avoid. So the messaging is tilted heavily toward calm.
That is a legitimate instinct, but it has been taken too far. There is a large and important difference between telling people not to panic and telling people not to worry. The first is honest. The second is not. A mature communication strategy would sound more like this. We think the most likely outcome is that supply normalises by spring. We are preparing in case it does not. Here are the precautionary measures we are taking. Here are the triggers that would move us to the next phase. Nothing you are doing needs to change today.
Instead we are getting reassurance on loop, while behind the scenes any competent officials must be running scenarios that look rather different. The public is being told the gauge is fine. The public is not being told that the pump behind the gauge is being throttled upstream.
The ideological piece is less polite to say out loud but probably also true. The current coalition has not historically been keen on public transport subsidies. National and Act in particular have been sceptical, and NZ First somewhat less so. Half price public transport is associated with the previous government, which makes it harder for this one to embrace even on its merits. That is a political problem, not a policy one, and the fuel crisis is exactly the kind of circuit breaker that ought to allow a climb down. We are doing this as a fuel security measure. We are not suddenly transit converts. That frame is available and entirely defensible. It is simply not being used.
Pull the Trigger
The government is probably right that this all resolves more or less tolerably. The base case probably plays out. The tankers probably keep coming. By the end of the year we are probably looking back on a rough winter, some painful pump prices, a wounded airline, and a lesson learned about strategic reserves that we will probably not meaningfully act on.
Probably.
But the word is doing a lot of work in that paragraph, and the honest question is whether probably is a good enough answer when the downside is national fuel rationing. It is not. It is very obviously not.
Making public transport free, or at the very least half price, is the single most positive and least painful insurance policy available to us. It helps households now regardless of what happens next. It reduces fuel demand at the margin, buying precious runway if things tighten further. It costs very little by comparison to the alternatives. We have done it before, so there is no execution risk. Other countries have done versions of it and recorded large, measurable demand responses.
The only reason not to pull the trigger is that the government thinks it is not needed yet. But the entire point of an insurance policy is that you buy it before you need it. By the time you need it, it is too late to put it in place. The decision to act precautionarily is always made with incomplete information, and that is fine, because the cost of acting and being wrong is so much lower than the cost of not acting and being wrong.
This is the moment. The government is betting on the base case. Let them keep doing that. But in parallel, give New Zealanders a way to ride through the worst of this without it costing them every spare dollar at the pump, and give the country a modest but real buffer against the version of this story that does not resolve neatly. Free or half price public transport does both of those things.
It is not a heroic measure. It is a sensible one. It is not even a new measure. It is one we have deployed before and know how to deploy again. The case against it amounts to nervousness about looking worried, and nervousness about a policy associated with the other lot. Those are not good reasons when the downside scenario is what it is.
Pull the trigger. Do it now. And if the base case plays out and we look back in October and say we did not really need it, so be it. That is what insurance feels like when you are lucky. It is a cost you are glad you paid, and one you would have paid a thousand times over if the luck had run the other way.
What do you think? Should the government make public transport free during the fuel crisis? Share your thoughts in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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