{"id":484748,"date":"2026-06-19T03:14:18","date_gmt":"2026-06-19T03:14:18","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/484748\/"},"modified":"2026-06-19T03:14:18","modified_gmt":"2026-06-19T03:14:18","slug":"oil-crisis-over-z-energy-chief-lindis-jones-on-what-happens-to-petrol-prices-now-and-who-we-should-be-thanking","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/484748\/","title":{"rendered":"Oil crisis over? \u2013 Z Energy chief Lindis Jones on what happens to petrol prices now … and who we should be thanking"},"content":{"rendered":"
\u201cThe single biggest factor driving that supply demand balance in the world, offsetting the loss of production from the Strait of Hormuz, is China\u2019s reduction in imports,\u201d he says.<\/p>\n
\u201cThey\u2019ve halved the amount of imports, and that\u2019s offsetting about 40% of that shortfall.\u201d<\/p>\n
They may not do that forever, and when they start rebuilding their reserves, it could have a big impact on what happens to prices in the coming weeks and months, Jones says.<\/p>\n
Even though oil prices have fallen sharply since the peace deal was announced, it will likely be \u201csome time next year\u201d before we can say the industry is really back to some kind of pre-war normal, he says.<\/p>\n
\u201cThere\u2019s still a global industry that\u2019s extremely tight. We\u2019ve got very, very low inventories. We\u2019re going into a period where demand\u2019s going up, and there\u2019s uncertainty about whether it will remain open and actually how much will come out in the medium term.\u201d<\/p>\n
That said, there is now \u201ccautious, conditional optimism\u201d in the market, he says.<\/p>\n
\u201cWe\u2019ve seen the global oil system replumb itself in terms of where oil is going from and to and where that product\u2019s coming from.<\/p>\n
\u201cAlmost entirely it\u2019s coming from existing stocks or inventory. And that\u2019s not a forever game.\u201d<\/p>\n
Real concern<\/p>\n
Although the worst didn\u2019t happen, Jones says the crisis was very real.<\/p>\n
There were times when the threat of fuel shortage loomed large.<\/p>\n
\u201cI was concerned,\u201d he says. \u201cIn particular, when you look at the importance of diesel for the New Zealand economy.\u201d<\/p>\n
What we actually saw during March, when prices increased dramatically, illustrated that, he says.<\/p>\n
\u201cPrices increased very rapidly during those first three to four weeks \u2013 twice as quickly as they\u2019ve come off.”<\/p>\n
The oil price increased by about 70%, but diesel increased by 200%.<\/p>\n
\u201cIt was more of a diesel crisis than a fuel crisis,\u201d he says.<\/p>\n
Most of us can make some choices about how much petrol we use.<\/p>\n
We can cycle, take public transport or just work from home more.<\/p>\n
Demand for petrol did fall, he says.<\/p>\n
But if you want to keep the economy moving, it is much harder to reduce demand for diesel.<\/p>\n
\u201cWe actually saw year-on-year demand [for diesel] was higher in March this year than it was last year,\u201d he says.<\/p>\n
\u201cWhen I say demand, actual consumption \u2013 vehicle kilometres travelled by trucks. So it just shows how critical that diesel fuel is to the New Zealand economy. Any interruption in the supply of diesel has a disproportionate impact.\u201c<\/p>\n
Price crunch<\/p>\n
The events of the past few months haven\u2019t been good for Z, despite what the cynics among us might think.<\/p>\n
\u201cNo one wants high prices,\u201d Jones says.<\/p>\n
\u201cWe certainly don\u2019t want it \u2013 it costs us more to buy and more to sell, it uses more of our balance sheet.<\/p>\n
There is often too much focus on the correlation between the crude oil price and the pump price, Z Energy chief executive Lindis Jones says. Photo \/ Dean Purcell<\/p>\n
Okay, but let\u2019s deal with the elephant in the room.<\/p>\n
Why does it feel like fuel companies are quicker to put up prices than they are to bring them down?<\/p>\n
One answer is that the price equations for fuel companies are more complex than people realise, Jones says.<\/p>\n
He argues that there is often too much focus on the correlation between the crude oil price and the pump price.<\/p>\n
\u201cThe price that matters is not the price of oil,\u201d he says. \u201cSimply put, we don\u2019t put oil into our cars, vans, tractors or aircraft. We actually put product in. So it\u2019s the underlying product price that matters \u2013 and that moved very differently to the price of oil.”<\/p>\n
Broadly speaking, the prices for refined product increased at more than twice the rate at which they have declined, he says.<\/p>\n
\u201cBecause the news events that drove it caused concerns around scarcity and hoarding and energy security.\u201d<\/p>\n
As the situation has gradually resolved itself, the international price has come off a bit, but that rapid surge in price is still reflected in the pricing in today\u2019s market in terms of what consumers pay.<\/p>\n
\u201cThe way that we price product into markets is what we call replacement cost pricing,\u201d Jone says.<\/p>\n
\u201cThe cost of the product that we take into account when we price today is as if we bought the product today.\u201d<\/p>\n
\u201cYou might ask \u2013 why do you do that? You bought this product ages ago, so it should be cheaper.\u201c<\/p>\n
But this is the way the industry manages itself globally, it\u2019s the best indicator of margins and performance, he says.<\/p>\n
\u201cIt takes out the ups and downs in profitability from the value of inventory going up and down. It also makes it possible for entities like the Commerce Commission to actually track what the underlying profitability is.<\/p>\n
\u201cUltimately, we do need to recover those higher costs because we need to fund the next cargo,\u201d he says.<\/p>\n
Okay, but doesn\u2019t that mean prices should come down at the same speed as fuel companies use on the replacement price based on today\u2019s market?<\/p>\n
\u201cThey\u2019ll come down at a speed that reflects the speed at which international prices are coming down,\u201d Jones says.<\/p>\n
\u201cAnd what we\u2019ve seen is the speed at which those prices have come down \u2013 because of the ongoing uncertainty \u2013 is much slower than the rate at which they went up.\u201d<\/p>\n
Through the crisis, we have heard economists talk about a correlation between oil prices and petrol prices of around 1c a litre for every US dollar on the barrel price.<\/p>\n
\u201cIn normal times, that\u2019s an okay rule of thumb,\u201d Jones says. \u201cBut this was a huge stress test for the world energy system. That ratio of $1 of Brent to 1 Kiwi cent per litre completely broke down.\u201d<\/p>\n
Z Energy\u2019s average net profitability is about 3c a litre,\u201d Jones says.<\/p>\n
\u201cEnergy is a very high-volume, low-unit-margin, low-unit-profitability game. So when you\u2019re seeing increases for over a month that are in excess of 5 cents a litre, you just can\u2019t pass that on in a timely way.<\/p>\n
\u201cThat impacted our profitability very materially during the month of March.<\/p>\n
\u201cSo as prices come off, we will look to recover that, but it will not be extended, and it will not last longer than the decline in international prices. It\u2019ll just be slightly offset.\u201d<\/p>\n
Okay, so prices for consumers didn\u2019t go up as much as they should have (under normal circumstances) in March, and so won\u2019t necessarily fall as quickly as they could now?<\/p>\n
\u201cThey didn\u2019t go up as quickly as they could have,\u201c Jones says.<\/p>\n
\u201cIf you\u2019re running a dairy and you\u2019re selling milk at $2 a litre and you make 3 cents, if the price of the milk you buy to sell the next day goes up to $3, you just can\u2019t put your price up quick enough to recover that margin.<\/p>\n
\u201cThat\u2019s something we\u2019re used to. But that means that the speed at which it goes up is slightly lagged, and the speed at which it comes down is slightly lagged.<\/p>\n
\u201cBut does it go up as quickly as it should and down as quickly as it should? Yes!\u201d<\/p>\n
Lessons learned <\/p>\n
New Zealand, with the rest of the world, does need to learn some lessons from this crisis, Jones says.<\/p>\n
\u201cI think there\u2019s a lot that\u2019ll come out of this. If we look back to what happened in the Middle East in the 1970s and 80s, that was a catalyst for a lot of change for energy security broadly, not just oil, in terms of how different countries responded in the use of natural gas or nuclear.\u201d<\/p>\n
At a national level, countries will make different choices, he says.<\/p>\n
\u201cThere\u2019ll absolutely be a premium for security. And so I can only imagine we will see more storage throughout the world.\u201d<\/p>\n
Ultimately, New Zealand has fared well, Jones says.<\/p>\n
\u201cWe were relatively well placed because of the supply chains we relied on. So if I look at the big supply chains that supply New Zealand, we\u2019ve got ExxonMobil and BP, two large multinational companies that are very well connected.<\/p>\n
\u201cAnd Z as part of the Ampol Group, is one of the largest, if not the largest, buyer of fuel in this part of the region, so very well connected.\u201d<\/p>\n
That means we\u2019re serviced by reliable supply chains that have invested in New Zealand.<\/p>\n
\u201cWe weren\u2019t supplied by companies that just trade into another party. Everyone who supplies fuel to New Zealand\u2019s got a vested position in supply continuity.\u201d<\/p>\n
Have consumers been served well by fuel companies?<\/p>\n
\u201cWhen I look at other markets internationally, I can absolutely assure the New Zealand public that this is a very competitive fuel market,\u201d Jones says.<\/p>\n
\u201cI don\u2019t set the prices for the fuel in New Zealand \u2013 my company sets the price for about 15% of the locations where you can buy fuel in New Zealand.<\/p>\n
\u201cThe breadth and range of competitors is significant, such that the spread in prices is larger than we see in most markets.\u201d<\/p>\n
Jones says he welcomes the public scrutiny and the focus from the Commerce Commission.<\/p>\n
\u201cIf it bothered me, I wouldn\u2019t be in this game,\u201d he says.<\/p>\n
\u201cTo a great extent, we don\u2019t have the choice about when we purchase energy or how much. So that deserves scrutiny on behalf of the Government, with the Commerce Commission and MBIE. We\u2019re scrutinised by several different entities.\u201d<\/p>\n
But despite that competitive market and the fact that our supply chains held together well, the crisis has provided a timely reminder of how vulnerable we can be to global events, Jones says.<\/p>\n
\u201cShould we hold more stock for energy security? Absolutely.\u201d<\/p>\n
Liam Dann is business editor-at-large for the New Zealand Herald. He is a senior writer and columnist, and also presents and produces videos and podcasts. He joined the Herald in 2003.<\/p>\n