War on Iran, NZ oil supply and the failure of the free market

How the War on Iran Threatens New Zealand's Fuel Supply and Security

Israel's bombardment of Iran, backed by the United States in violation of international law, has forced a question most New Zealand governments have preferred to avoid: what happens to our fuel supply when the Middle East burns?

The answer runs through a narrow strip of water most New Zealanders couldn't find on a map — but which determines whether petrol reaches our pumps, diesel reaches our trucks, and jet fuel reaches our planes.

Why the Strait of Hormuz Matters

The Strait of Hormuz sits between Iran and Oman, connecting the Persian Gulf to the open ocean. At its narrowest point it is just 33 kilometres wide, with each shipping lane — one in, one out — only 3 kilometres across. Through that corridor flows roughly 20 to 30 percent of all globally traded oil: around 20 million barrels every single day. 

Global Oil Production by Region

Approximate share of world oil production (recent data):

                    Region                                                                % of worlds oil

• North America (USA, Canada, Mexico)   30%
• Middle East                                                       29%
• Russia & Eurasia                                              13%
• Asia-Pacific                                                        9%
• Central & South America                              8%
• Africa                                                                   7%
• Europe                                                                 4%
•  Total = 100%.

Oil production does not equal oil supply chains. Much of the crude oil produced in the Middle East is exported to large refining hubs in Asia where it is converted into petrol, diesel and jet fuel.

Major exporters using this route include: Saudi Arabia , Iraq, Kuwait, United Arab Emirates, Qatar, Iran

Because of this concentration of supply, the strait is widely considered the most critical oil shipping chokepoint in the world.

Where That Oil Actually Goes

Oil destination through the Strait of Hormuz

• Asia (collective): ≈83–89% of crude oil and condensate transiting the strait goes to Asian markets (China, India, Japan, South Korea, and other Asian countries) — with China, India, South Korea and Japan as the top destinations.

• China alone: ~37–38% of total flows.

• India: ~14–15%.

• South Korea: ~12%.

• Japan: ~10–11%.

• Other Asian: ~14%.

• Europe: ~3.8%.

• United States & other: ~2–4%.

Asia’s share therefore totals about ~83–89% of oil flowing through the strait. 

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Why That Matters for New Zealand

New Zealand does not import most of its crude oil directly from the Middle East.

Since the closure of the Marsden Point refinery in 2022, and conversion into an importing terminal, New Zealand imports most of its refined fuels — petrol, diesel, and jet fuel — from overseas refineries. Most of those refineries are located in major Asian refining hubs such as Singapore and South Korea.

The Knock-On Effect

This creates a chain reaction:

1. Middle Eastern oil flows through the Strait of Hormuz

2. That oil is shipped to Asian refineries

3. Asian refineries turn it into petrol, diesel, and jet fuel

4. Refined fuels are exported to countries like New Zealand and Australia

If the Strait of Hormuz were disrupted or closed, the first countries hit hardest would be the big Asian importers — China, India, Japan, and South Korea.

But that shock would not stop there.

Asian refineries would suddenly receive less crude oil, which means they would produce less refined fuel. With supply tightening, those refineries would prioritise their largest domestic and regional markets.

States like Australia and New Zealand heavily reliant on Asian fuel supply, would then face higher prices, tighter supply, and stronger competition for available fuel shipments.

Why Smaller Markets Feel It More

In a global shortage, large economies can often secure supplies more easily because they buy far larger volumes of fuel.

China, Japan, and India together consume enormous amounts of oil and have long-term supply contracts with producers and refiners.

By comparison, New Zealand is a relatively small fuel market. That doesn’t mean supply would disappear overnight, but it does mean the country is more exposed to price shocks and global supply competition.

China's position is somewhat insulated — it maintains direct oil trade agreements with Iran and would likely continue receiving supply regardless of Western sanctions or conflict escalation as its a friend of Iran. For New Zealand, no such arrangement exists.

The Bottom Line

Even though New Zealand and Australia sit far from the Persian Gulf, their fuel systems are connected to it through Asian refining networks. Disruptions there inevitably ripple outward through the entire regional energy system.

For New Zealand and Australia, the impact would not come directly from the shipping route itself. It would come through the Asian fuel supply chain that both countries depend on.

In an interconnected global energy market, distance does not provide much protection.

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How much fuel does NZ have in storage ?

The Government talks about 90 days of fuel cover…

• New Zealand is a member of the International Energy Agency (IEA), which requires members to hold the equivalent of at least 90 days of net oil imports as a contingency reserve.

• However, that 90‑day stock isn’t all physically sitting here in NZ tanks.

  • A significant portion comes from “oil tickets” — contracts that give NZ the right to purchase fuel stocks held overseas in emergencies.

  • Onshore fuel importers are required to hold minimum stocks of fuel physical in NZ, but these requirements (e.g., 21 days diesel, 24 days jet fuel, 28 days petrol) are far short of 90 days by themselves.

So NZ meets the 90‑day IEA obligation through a combination of physical stocks and contractual offshore reserves, not because of 90 days physically stored on NZ soil.

Actual fuel physically in New Zealand is closer to 3–4 weeks.

• The Minimum Stockholding Obligation (MSO) that came into force on 1 January 2025 requires onshore storage roughly equivalent to about:

  • 28 days petrol

  • 24 days jet fuel

  • 21 days diesel
    (all calculated on normal daily consumption).

• Even with ships in NZ’s Exclusive Economic Zone counted as physical supply, this is far less than 90 days physically here — closer to about a month for each fuel type.

That means the common public understanding of 90 days of fuel stored here is not literally correct; the 90‑day obligation partly relies on fuel held overseas under contracts.

Who gets fuel first in a shortage?

The public isn’t the first priority — fuel goes to critical services first.

There are government fuel planning frameworks that consider prioritisation during severe supply disruptions (e.g., keeping fuel for emergency services, healthcare, critical logistics).

• The National Fuel Plan recognises different sectors and stores like defence and hospitals hold some of their own emergency fuel, although these tend to be a few days’ worth.

• Civil Defence and MBIE planning documents discuss mechanisms for managing fuel shortages, but the extent of those powers (rationing, police enforcement, priority supply) depends on the severity of the situation and would be set out in an escalation plan as part of emergency response frameworks — not automatic for all disruptions. 

To understand why New Zealand is this exposed, you need to go back to 2021 — and to a decision made not by government, but by three multinational oil companies that no New Zealander elected.

New Zealand had its own refinery at Marsden Point until it was closed in 2022 while under Labours watch. Shane Jones from the current government partner , NZ First, blames the last Labour government for Marsden points closure, ignoring Megan woods was open to supporting its continued existence.
the standard lies damned lies and shane jones oil refinery take

The Marsden Point Heist: How Three Multinationals Closed New Zealand's Only Refinery 

 NZ Refining company (NZRC) was set up and  owned by the five major oil companies of the time (Shell, BP, Caltex/Europa, Mobil), they built  Marsden Point oil refinery in 1964 . When it needed expansion in 1981  the NZ government to underwrote NZRC loans to tune of $1.8 billion under PM Robert Muldoon, as part of the "Think Big Projects" 

The NZ Super Fund owned 50%  when it co-founded Z Energy with Infratil in 2010 by buying Shell's NZ downstream assets. By the 2013 IPO it was down to 20%. By 2015 it had sold down to just over 10%. By 2016 it held a mere 1.5% — a residual equity position managed by external fund managers. By the time Ampol completed its $2 billion takeover of Z Energy in May 2022, the Super Fund was barely a rounding error on the share register, walking away with a tidy $1.09 billion on an initial $209.8 million investment — a 48% per annum gross return. Not a bad result for a fund designed to pay your grandparents' superannuation.

The decision to close was made by private shareholders — but to understand how that was possible, you need to understand who actually held the power.

The Ownership Structure

Marsden Point was operated by a private publicly listed company called Refining NZ, later rebranded Channel Infrastructure. 

• ExxonMobil (Mobil): 14.4%
• Z Energy: 12.9%
• BP: 8.5%
• Institutional fund managers: ~31%
• General public retail investors: ~33%

Three multinational oil corporations held 36% of the shares between them — and that number alone tells you almost nothing about their actual power. Because Refining NZ had a structural peculiarity that made conventional shareholder analysis almost irrelevant.

It was a toll refinery. It had no independent customers. It processed crude oil on behalf of three companies — Z Energy, BP, and Mobil — and charged them a fee to do so. Those same three companies were also its major shareholders and held seats on its board. In practice, the three shareholder fuel companies used every barrel of its capacity. There were no other customers. None. The refinery's entire commercial existence depended on those three companies choosing to use it.

This is not incidental. This is the entire story.

How You Close a Company You Don't Majority-Own

The official narrative focused on the shareholder vote. A 75% supermajority was required to convert the refinery to an import-only terminal. The three oil companies held only 36% — mathematically insufficient to pass such a resolution alone. And yet the final vote came in at 99% in favour. How?

Because the vote was almost irrelevant. It was a formality to rubber-stamp a decision that had already been made through contract, not democracy.

Here is the sequence of actual power:

Z Energy told Refining NZ it would not be renewing its tolling contract for crude processing. BP did the same. Without those two customers, the refinery was commercially dead — regardless of what any shareholder voted. The remaining retail and institutional shareholders — passive financial investors chasing dividends — had no reason to vote against a board recommendation to close a business that its only customers had just abandoned. The 99% vote was not consensus. It was inevitability dressed up as process.

Mobil initially held out. It was the one customer-shareholder that had not yet signed the commercial terms for the new import terminal. But once Z and BP had withdrawn their custom, Mobil's leverage evaporated. It could hold out and watch the refinery die anyway, or negotiate good terms for itself in the new arrangement and come aboard. It came aboard. The final closure decision followed agreements with all three.

Why Would BP Want This?

This is the question that exposes the whole structure. BP is not an Antipodean company with any particular stake in New Zealand's fuel security. It is a global multinational executing a global strategy.

In November 2020, BP closed and converted its Kwinana refinery in Western Australia into a fuel import terminal. Shortly after, ExxonMobil shut its Altona refinery in Melbourne. Two closures in rapid succession left Australia with just two operating refineries — both of which the Australian government moved immediately to subsidise on national security grounds.

Then Marsden Point followed, completing the same pattern in New Zealand.

This was not coincidence. This was a coordinated global strategic shift by the major oil multinationals: close small, ageing, relatively expensive regional refineries in Australia and New Zealand, and supply those markets instead from giant, integrated, hyper-efficient mega-refineries in Singapore, South Korea, and the Middle East — refineries in which BP, ExxonMobil, and their peers already held interests or long-term supply contracts. The margin difference between running a small 1960s-era tolling refinery in Northland and buying refined product wholesale from a Chinese mega-complex is substantial. That margin went straight into corporate profits.

The IEA had forecast that 3.6 million barrels per day of refining capacity would close globally between 2020 and 2026, with exactly this category of smaller, isolated refineries — in Australasia, the Atlantic basin, and parts of Asia — being systematically eliminated by the economics of scale concentration. Marsden Point was not a story about New Zealand. It was a line item in a global corporate restructuring plan. 

Where Ampol Fits

Ampol bought Z Energy and made its $2 billion takeover bid for Z Energy conditional on the Marsden Point refinery closing. But this was not the NZ government's doing — it was Ampol's demand, made to Z Energy's private shareholders and board.

Why would Ampol insist on this? Because Ampol owns the Lytton refinery in Brisbane — a facility kept alive only by Australian government subsidies worth up to $108 million per year on national security grounds. If Marsden Point remained operating, it would continue competing with product from Lytton and other Australian-linked supply chains. A New Zealand market dependent entirely on imported refined product is a New Zealand market that needs more ships, more volume, more infrastructure — all of which Ampol's trading and shipping operation in Singapore was perfectly positioned to supply.

Z Energy, its board, and its institutional shareholders accepted those terms. The closure was confirmed. Ampol took ownership. New Zealand became 100% dependent on imported refined fuel. 

What the Government Actually Did

Nothing. That is the honest answer.

Energy Minister Megan Woods received cabinet papers outlining what was happening. Officials canvassed whether a government loan or subsidy could keep the refinery operating — the same tool Australia had already deployed successfully. The cabinet paper concluded there was "no strong case" on fuel security grounds. No intervention was made.

The Labour government of the day had a choice. It could treat an asset that produced 70% of New Zealand's refined fuel needs as a matter of strategic national interest — as Australia did — and intervene. Or it could treat the closure as a private commercial decision by private companies that was none of its business.

It chose the latter. The refinery closed on 31 March 2022. Within months, the equipment was being gas-axed and sent for scrap — not mothballed, not preserved, but permanently and irreversibly destroyed, ten years ahead of what the company had indicated in its annual report. There is now no prospect of reopening. The CEO of Channel Infrastructure was unambiguous: "There is no big green lever."

The current National-led government commissioned a feasibility study — then quietly concluded recommissioning was too expensive and moved on. Two governments, one refinery, zero action.

This is a story of both lack of political will and structural capture. When the market has already decided, when the infrastructure is demolished, when the workforce is gone, and when no private company has any incentive to participate — governments of both centre and right arrive at the same conclusion by different routes.

 Labour deferred to the market because it believed the market's judgment. National commissioned a study because NZ First demanded it, then used the cost figure to justify the same inaction. The outcome was identical. That is not coincidence. That is what it looks like when the political system has no framework — and no appetite — for challenging the logic of capital on questions the market has already settled in its own favour.

The Capitalist Logic, Laid Bare

What Marsden Point illustrates is not corruption in the crude sense — no brown envelopes, no proven conspiracy. It is something more systemic and therefore more dangerous: the ordinary, rational operation of multinational capital in the absence of any countervailing public interest.

Three global companies, each following their own rational corporate logic, converged on a decision that served their shareholders and devastated a nation's energy sovereignty. BP closed Kwinana because that served BP. ExxonMobil closed Altona because that served ExxonMobil. Z Energy-Ampol closed Marsden Point because that served Ampol. None of them were elected. None of them were accountable to New Zealanders. None of them bear any consequence for the outcome.

The New Zealand public — which originally paid for the Marsden Point refinery through public investment under the Nash Labour government in the 1960s, which expanded it under Muldoon's Think Big through public debt, and which relied on it for 60 years — was not consulted. No referendum. No parliamentary debate with teeth. No ministerial veto. The asset, transferred to private hands in the deregulation of 1988, was simply gone.

And now, as the Middle East burns and shipping routes through the Strait of Hormuz face disruption, and New Zealand sits with 90days of refined fuel supply either in-country or at sea, and Shane Jones and Winston Peters rage impotently about what the previous government should have done — the irony is complete. The politicians who most loudly champion the free market are the ones now loudest in grief about what the free market did.

We Have Our Own Oil — And We Export It

This is perhaps the most maddening footnote to the entire story.

New Zealand is not an oil-free nation. The Taranaki fields — Maui, Pohokura, Maari and others — produce between 10 and 20 million barrels of crude oil every year. It is high quality oil: light, low in sulphur, what the industry calls "light-sweet" crude. It commands premium prices on international markets.

And we export every single barrel of it.

Meanwhile, we import 100% of our refined petrol, diesel and jet fuel from Singapore, South Korea and Malaysia.

The official explanation for this absurdity is that Marsden Point was designed to process heavy Middle Eastern crude, not New Zealand's lighter domestic oil — so exporting our premium crude and importing cheaper heavy crude to refine was commercially rational. That much is true. But it is not the whole truth.

The 1980s Think Big expansion of Marsden Point — the $1.84 billion project financed through public debt — was specifically designed and built to enable the refinery to process Taranaki crude. The hydrocracker, the pipeline from Taranaki to Marsden Point, the entire expansion — it was done so New Zealand could refine its own oil. And for decades it did, albeit as a small fraction of total throughput, because the private oil companies that controlled the tolling agreements preferred the cheaper imported heavy crude that padded their margins.

A publicly owned refinery, directed toward national energy sovereignty rather than shareholder return, could have progressively shifted that balance. It could have refined a greater share of domestic crude, reduced our exposure to Middle Eastern supply routes, and built genuine self-sufficiency over time.

Instead, we have a demolished refinery, a tank farm for imported product, Taranaki crude sailing off to Australian refineries, and politicians arguing on television about a decision that was made years ago in private boardrooms by people who owe this country nothing.

The market made its rational choice. The question we should be asking is why we allowed that choice to be made for us — and why no government since 1988 thought that New Zealand's energy sovereignty was worth defending.

The Lesson

The Marsden Point closure is not an aberration. It is the system working exactly as designed. Capital flows to its highest return, indifferent to geography, indifferent to community, indifferent to sovereignty. When Marsden Point became less profitable than Singapore, the capital left. It was always going to.

The only force capable of countervailing that market profit logic is a government willing to define some things as outside the market and to intervene by investing where private capital wont— to say that the infrastructure on which a nation's economy depends is not simply a tradeable asset to be optimised for shareholder return. Australia said that, imperfectly and belatedly, but it said it. New Zealand did not.

That is capitalism functioning precisely as it is designed to, the search for profit regardless of societys needs, in the absence of a government willing to represent the public interest against it.

The question is not whether the market made a rational decision. It did. The question is whose rationality we allow to govern public life — and who we elect, and what we demand of them, when we discover the answer.

Footnote: Karl Barkley and the Share Plan That Misses an Essential Element

Credit where it is due: Karl Barkley of Operation Good Oil was among the first voices publicly connecting the Ampol takeover to the Marsden Point closure and raising the alarm about New Zealand's fuel sovereignty. His instincts were right and he deserves acknowledgement for asking questions that most of the media and political class ignored entirely.

https://operationgoodoil.co.nz/

His current proposal, however, has two problems that go deeper than his strategy.

Barkley's plan is to buy 10,000 shares in Channel Infrastructure — the company that now owns the Marsden Point site — to gain standing as a shareholder, agitate from within to prevent the site being sold to foreign buyers, and then push government to get involved in restoring some form of domestic fuel production. Karl claims the refinery infrastructure still mostly exists and could be restarted for a few hundred million. The evidence says otherwise.

Channel Infrastructure is no longer a refinery. It is a fuel import terminal. All cabling was cut at ground level. Heat exchanger bundles were stripped and sent for scrap. Catalysts removed and disposed of. Over 80% of the specialist workforce has gone. The company's own commissioned engineering report — prepared by international firm Worley in September 2024 — concluded that recommissioning would cost between $4.9 and $7.3 billion, take at least four years, and would require international labour because New Zealand's own workforce could not supply the skills. The CEO was blunt: "There is no big green lever."

But the cost is not actually the deepest flaw. The right wing constantly argue that government should operate like a business — but government does not exist for that reason. It not only exists to promote the capitalist agenda , but to also to fix the failures that capitalism cannot fix on its own, especially the social harm ones. Fuel security is exactly such a failure. If the political will existed, $5 to $7 billion is not beyond a government that can find money for motorways and tax cuts.

The real problems are structural, and there are two of them.

The first is commercial. Marsden Point closed because its only three customers — Z Energy, BP and Mobil — withdrew their business. A rebuilt refinery faces the same problem from day one. There is no private oil company with any incentive to buy its output when refined product from Asia remains cheaper. Without legislated mandatory offtake obligations — effectively forcing oil companies to purchase domestically refined fuel whether they want to or not — a rebuilt refinery has no revenue and no reason to exist. That is not minor regulatory tweaking. That is the government commandeering private commercial decisions in a fully deregulated market. No New Zealand government since 1988 has shown the faintest appetite for it.

The second is harder still. New Zealand produces only around 12% of the crude oil it consumes, and all of that domestic crude is the wrong grade for a conventional refinery — which is why Marsden Point ran on 94% imported Middle Eastern crude even at its peak. True fuel security — the kind that survives a Hormuz closure or a wartime supply disruption — requires near-complete domestic self-sufficiency from wellhead to petrol pump. A refinery still fed by Middle Eastern crude is not energy independence. It is the same foreign dependency with an extra processing step in the middle. Solving it requires either a massive expansion of domestic oil exploration — which successive governments have actively wound back — or a state-directed overhaul of the entire energy supply system.

Australia's model — paying refiners a variable subsidy when margins drop below viability — was the right response to a narrower version of this problem. New Zealand's Labour government was offered exactly that choice in 2021, costed it, and declined. That window is now closed.

In short: rebuilding Marsden Point requires the government to simultaneously find $5 to $7 billion, mandate that private companies buy then subsidise those purchase to make it competitive and dramatically expand domestic oil production — all in a political environment where the last government couldn't bring itself to offer a loan to keep the existing refinery running.

Karl Barkley is asking the right question. But Karl isn't just fighting the government — he's fighting capitalism itself. And that requires a bigger answer than 10,000 shares in a tank farm.

The omitted environment cost.

There is also a dimension Karl's campaign does not address at all. The refinery poisoned Bream Bay for 60 years. Groundwater contamination leached 400,000 litres of fuel annually into the land beneath the site. Local iwi Patuharakeke and Te Parawhau ki Tai lost access to shellfish beds — pipi tasting of petrol, a rahui imposed on the headland, kai moana gone from a coastline their tīpuna harvested for generations. Channel Infrastructure has refused to action and pay for the $300 million remediation. The land sits on what local iwi describe as confiscated whenua, with Waitangi Tribunal claims still unresolved. Any serious proposal to recommission Marsden Point cannot treat the environmental and Treaty legacy of the site as an afterthought. Karl is fighting for fuel sovereignty — but the people who lived beside that refinery were fighting for something too.