by Peter MacDonald

Based on my analysis of the current geopolitics, it is reasonable to assume the Middle East conflict will continue indefinitely. Hypothetically, if the war remains ongoing, the implications for global crude supply are severe. With the Strait of Hormuz effectively blocked to commercial traffic and Iranian missile and drone attacks threatening regional energy infrastructure, several Gulf producers have sharply reduced output and exports. Some facilities have been temporarily halted for safety, while logistical bottlenecks and shipping risks have forced further precautionary production cuts, removing a substantial portion of the world’s oil supply from the market. This crude normally feeds Asian refineries in Singapore, South Korea, and Malaysia the very refineries New Zealand relies on for refined fuel. Alternative crude flows from West Africa, the US, Brazil, and the North Sea exist, but they are limited, expensive, and prioritised for larger, strategic customers, leaving New Zealand low in the queue. Importantly, the Iranians are deliberately holding off on destroying fuel harbours and refinery infrastructure, recognising that excessive damage would constrain their own post conflict output, as a result, the Gulf continues to operate under limited but intact conditions, creating ongoing constraints rather than permanent destruction.

New Zealand’s position at the back of the line is structural. Singapore and South Korean refineries prioritise their largest, long term, and “too big to fail” customers, including Japan, South Korea, Australia, and major Southeast Asian economies. These countries represent much larger volumes of fuel demand, have strategic importance, and are considered geopolitically critical, so they receive first allocation when supply is constrained. By contrast, New Zealand is a small market, not seen as “too big to fail,” and politically less critical, meaning shipments can be delayed, reduced, or rationed, even if alternative crude is technically available.

The root cause of New Zealand’s vulnerability is the decommissioning of the Marsden Point Oil Refinery, the country’s only domestic refinery. Had Marsden Point remained operational, New Zealand could have refined crude domestically, including alternative sources outside the Gulf, maintaining supply even in the face of global disruptions. Domestic refining would have also allowed NZ to blend and store strategic reserves, providing a buffer against international shipping delays and mitigating price spikes. Without it, the country is entirely dependent on overseas refineries, whose supply is now constrained by war, infrastructure shutdowns, and customer prioritization.

If the war drags on indefinitely, New Zealand’s fuel supply will wind down in a predictable sequence. Existing shipments already en route from Singapore will arrive in March and April, temporarily masking the crisis. By late April and into May, Asian refineries will begin rationing output due to depleted Gulf crude, and shipments to NZ will be smaller and inconsistent. Rural areas and smaller towns will be the first to experience shortages, while urban centers may continue to receive some supply, albeit reduced. By May 30, 2026, buffers will be mostly exhausted, alternative crude flows will be insufficient to maintain normal supply, and rationing in cities becomes unavoidable. Pump prices are expected to reach $3.60 per litre in urban areas, with rural areas potentially even higher.

The Marsden Point refinery was more than just an industrial asset it was a national security instrument. Its closure has left New Zealand exposed to global conflicts, shipping chokepoints, and foreign refinery priorities, a vulnerability that could have been mitigated with domestic refining capability. The current scenario demonstrates the folly of the Labour government’s decision to decommission it. Without Marsden Point, New Zealand now faces a fuel crisis that is directly tied to international instability, one that will impact every city and town, disrupt transport and industry, and impose rationing on ordinary citizens. Post Note..

The Marsden Point Oil Refinery was a government commissioned, strategically vital project constructed between 1962 and 1964, with Bechtel as the engineering and construction contractor. While the bulk of the initial capital came from international oil companies, the New Zealand government directed the project to supply petrol, diesel, aviation fuel, and other refined products to the nation, making it critical national infrastructure. In the 1980s, the refinery underwent a major expansion, including a hydrocracker and a pipeline to Auckland under the Muldoon era Think Big policies. This expansion was supported by government backed financing, with levies on petrol and diesel collected at the pump effectively ensuring that taxpayers directly contributed to the upgrade.

In 1988, the Fourth Labour Government passed the Petroleum Sector Reform Act, deregulating the petroleum industry and allowing the transfer of the refinery’s assets to the newly formed New Zealand Refining Company (NZRC), a consortium of oil companies including Shell, BP, Mobil, and Caltex. As part of this transition, the government provided approximately NZ$85 million in funding over three years to help the refinery adapt to a competitive, deregulated market. This support ensured that the refinery could continue operating reliably under private ownership while maintaining New Zealand’s fuel security.

While some argue the refinery “shut down, not the government,” Marsden Point is a strategic national security asset, and the government was fully aware and involved in approving the transfer and ongoing operations. Private shareholders could not simply decommission the refinery without government consent. The refinery continued as New Zealand’s only large scale refinery until its commercial closure in 2022, leaving the country dependent on imported fuels and more vulnerable to international supply disruptions.

In short, the construction, expansion, deregulation, transfer, and eventual closure of Marsden Point all occurred with government oversight and taxpayer involvement, reflecting its role as a cornerstone of national energy security.