The closure of the Strait of Hormuz in 2026 during the US-Israel/Iran War highlighted the fragility of New Zealand’s supply of essential fuels. New Zealand relies heavily on imported fuel to operate its transport network, agricultural sector, and the broader economy. At the time of writing, while fuel remains on hand, prices have risen sharply and continuity of supply cannot be taken for granted.
This explainer explores the legal and policy frameworks for New Zealand’s preparation for and response to significant fuel supply disruptions
New Zealand’s fuel market
Since the Marsden Point Oil Refinery closed in 2022, New Zealand relies entirely on private sector imports of refined petroleum, mostly from Asia with shipping times of at least 17 days. Fuel arrives at one of nine ports nationwide, where it transfers into bulk storage terminals before being piped to distribution hubs like Auckland's Wiri terminal or trucked to retailers. It reaches the public through service stations and truck stops, or is delivered directly to sectors such as farming, health, and construction.
International obligations
New Zealand is a party to the Agreement on an International Energy Programme (“Energy Agreement”). The Energy Agreement requires member states to hold 90 days’ worth of net import demand, to be released to the global market in a fuel emergency. New Zealand meets this obligation primarily through purchasing offshore options contracts rather than holding stocks domestically. The International Energy Agency (“IEA”), which administers the Energy Agreement, can also direct that member states implement domestic measures, including regulation to restrain consumption and demand, once certain fuel emergency thresholds in the Energy Agreement are triggered.
As an international treaty, the Energy Agreement is only legally binding in New Zealand to the extent it is incorporated in legislation. The International Energy Agreement Act 1976 (“IEAA”) provides a mechanism for New Zealand to fulfill its obligations under the Energy Agreement, but it does not make that agreement legally binding on New Zealand. However, breaches are likely to damage New Zealand’s international standing, meaning there are strong reputational incentives to comply with IEA directions.
In the 2026 crisis, New Zealand and other member states voted in March 2026 to release 400 million barrels of oil to the global market. While the IEA recommended that member states implement demand restraint regulations, this is not direction binding on member states as a matter of international law.
Domestic readiness framework
National fuel plan
In 2024, MBIE published the National Fuel Plan (“NFP”) as a readiness and response framework for fuel disruptions. The NFP sets out the responsibilities of fuel companies and various government agencies to prepare for and respond to a fuel crisis. Primary responsibility for readiness rests with the fuel industry, which have responsibilities as ‘life line utilities’ under the Civil Defence Emergency Management Act 2002 (“CDEMA”) to ensure continued supply to critical functions
The NFP also sets out the different levels of a response to a significant fuel supply disruption, with the state having a correspondingly greater role the more severe the disruption (see below).
Minimum stockholding obligations
Separately, the Fuel Industry Regulations 2021 impose minimum stockholding obligations on importers of ‘obligation fuels’, calculated in thousands of litres. The minimum stockholding obligation is calculated by multiplying the required number of days of obligation fuels (28 for petrol, 24 for aviation fuel, and 21 for diesel) multiplied by the average daily demand from the previous reporting year.
The minimum stockholding obligations are separate from New Zealand’s obligations under the Energy Agreement. They are explicitly focused on security of domestic supply.
Government response to fuel supply disruptions
Response levels
The NFP sets out four levels for a response to a supply disruption. The first two levels (which apply in minor to moderate supply disruptions) involve activation of civil defence governance frameworks but with limited direct state intervention. Levels 3 and 4 (which cover major to severe disruptions) contemplate full activation of civil defence powers (including declaration of states of emergency), as well as imposition of governmen regulations to restrain fuel demand. The same framework applies to local/regional supply disruptions caused by natural disasters as to national disruptions caused by global supply shocks.
In March 2026, the government tweaked NFP response levels (now re-labelled ‘phases’). The phases are in substance similar to the response levels under the NFP, but with a much greater emphasis that any government intervention will be exceptional, limited, and temporary. The government is currently consulting with fuel suppliers and consumer groups about the detail of phases 3 and 4.
Non-coercive measures to address fuel disruptions
While industry has the primary responsibility at phases 1 and 2, there are several mechanisms the government can use to both reduce demand and increase supply. To achieve the former, the government can activate messaging advising consumers how to reduce fuel, issuing non-binding directions for certain fuel conservation practices (such as working from home), and adjusting work practices in the public sector. To achieve the latter, it can relax land transport regulations to provide for transport bottlenecks (only effective in local emergencies) and lower engine fuel specifications to allow a wider range of fuels to enter the New Zealand market.
Civil defence powers
The NFP also contemplates that certain fuel supply disruptions are likely to be managed under states of emergency declared under the CDEMA. Doing so activates a statutory coordination framework between central and local government and lifeline utilities, as well as providing for emergency powers (although less extensive than the powers available under demand restraint regulations).
Demand restraint regulations
The government is empowered to make mandatory demand restraints via regulations made under the Petroleum Demand Restraint Act 1981 ("PDRA"). While the government has signalled that these powers will only be exercised in phases 3 and 4, this promise does not act as a direct legal constraint on their use.
Similar demand restraint powers are available under the IEAA, but the powers are narrower and subject to relatively greater constraints. In a supply disruption, the government is therefore more likely to rely on the PDRA.
Content
The PDRA grants the Cabinet unusually broad regulation-making powers. These include controlling or prohibiting the sale and supply of fuel, imposing rationing schemes, restricting motor vehicle use, and exempting persons acting under the regulations from both legislative and contractual obligations. Regulatory powers can be sub-delegated directly to the Minister of Energy by direction, including directing supply to specified persons.
Constraints
The legal constraints on these powers are minimal. The only express condition is that regulations must be directed at restraining demand for petroleum products, or ensuring their equitable distribution when supply is, or is likely to be, short. Notably, an actual supply disruption is not required to trigger the powers. There are none of the procedural safeguards common to modern legislation, such as mandatory considerations, consultation requirements, or other procedural/oversight mechanisms, though the Minister must undertake "appropriate consultations" before issuing directions under any regulations made.
Controversial features
This latitude for unchecked executive action reflects the legislation's origins in the interventionist ‘Think Big’ era before the liberalizing reforms of Lange government after 1984. Several features are particularly controversial by contemporary legislative standards.
The breadth of available interventions is striking. Rationing, price controls, and sweeping restrictions on vehicle use (reminiscent of Muldoon-era "carless days") are all legally available to the current government, even as it has signaled a cautious approach to the 2026 crisis. The ability to sub-delegate wide interventionist powers directly to the Minister further bypasses the limited scrutiny that accompanies Cabinet regulations of general application.
The duration of any regulations is also a concern. PDRA regulations are confirmable instruments, expiring after five years unless confirmed by Parliament through primary legislation. This contrasts sharply with states of emergency under the CDEMA, which expire after 7 days without formal extension.
Perhaps most controversial is the power under s 7(2)(a)to exempt persons acting under the regulations from liability for breaching other legislation or contracts. Provisions of this kind, known as Henry VIII clauses, allow the executive to override Parliament and come with a high risk of abuse unless the power is narrow and constrained (which is not the case withs 7(2)(a)). Modern courts apply strict and narrow interpretations to such clauses.
The PDRA is, in short, a product of a different era, out of step with modern legislative norms and judicial expectations. Whether it will prove adequate if the 2026 fuel crisis deepens, or whether the government will need to follow its predecessor's Covid-19 example and enact purpose-built legislation, remains an open question.
For further information on this or similar issues please contact Director, Brigitte Morten
