Last Friday (27 March 2026) the Government released its updated National Fuel Plan, introducing a four-level fuel alert framework and six criteria that will guide New Zealand’s response to the ongoing fuel supply disruption. MBIE confirmed that fuel supply remains within normal levels for now, with fuel companies having secured imports through to the end of May.
The crisis has its origins in the escalation of the Middle East conflict in late February, which has disrupted key shipping routes – most critically, the Strait of Hormuz. National fuel prices have risen approximately 55 cents per litre for petrol and 90 cents per litre for diesel since the conflict began, while in-country reserves have dropped to around 21 days of cover.
The Four-Level Alert Framework and Assessment Criteria
The Fuel Security Ministerial Oversight Group will decide whether a shift between levels is warranted, based on six assessment criteria:
- export restrictions at source refineries;
- changes to fuel stock levels of plus or minus three days;
- a fuel company’s inability to fill future orders;
- a breach of minimum storage obligations;
- significant policy changes in Australia or from the International Energy Agency; and
- a significant disruption to regional distribution.
New Zealand is currently at Escalation Level 1 – monitoring, easing fuel import specifications, and encouraging voluntary conservation.
Phase 2 would involve closer Government-industry coordination in response to signs of supply disruption. Phases 3 and 4 contemplate mandatory restrictions and prioritisation of fuel by industry.
Importantly, different fuel types may sit at different phases: diesel could move to Phase 2 while petrol remains at Phase 1.
Consultation is currently taking place on the National Fuel Plan.
Implications for the Construction Industry
Construction is one of the most diesel-intensive sectors in New Zealand. Excavators, cranes, concrete trucks, generators and haulage vehicles all depend on reliable diesel supply. With prices up 90 cents per litre, contractors are already facing materially higher operating costs. For projects on fixed-price contracts without adequate cost escalation provisions, this creates significant margin pressure.
Parties should be reviewing their contracts now, with particular attention to:
- Cost escalation clauses: Does the contract provide for price adjustment in response to fuel price movements? Many contracts exclude or cap fluctuation provisions, leaving contractors exposed.
- Force majeure: If fuel restrictions are imposed at higher phases, force majeure may become relevant – but only where the contract contains such a provision and the circumstances fall within its scope. This is not common under current New Zealand standard forms.
- Extensions of time: Fuel shortages may ground extension of time claims, depending on whether they qualify as a qualifying cause of delay under the contract (for example: not reasonably foreseeable by an experienced contractor at the time of tender and not due to the fault of the contractor).
- Change in law: Mandatory fuel restrictions at Levels 3 or 4 could constitute a change in law, potentially entitling contractors to additional time and cost.
- Insurance: Insurers may be able to withdraw cover for construction goods in transit, and we have recently started to see this in the market.
We will be publishing articles looking in more detail at each of these areas under contracts commonly used in New Zealand over the coming days.
Beyond fuel costs, the same shipping disruptions are also affecting construction material imports. Longer lead times and increased freight costs are likely to compound pressure on project budgets and delivery programmes.
Further Next Steps
Alongside reviewing contracts, industry participants may wish to engage with their supply chains to:
- understand fuel dependencies and vulnerabilities;
- consider fuel conservation measures and operational efficiencies; and
- communicate proactively with other parties on their projects about potential costs and programme impacts – if possible, the best protection against future impacts is for parties to get on the same page and formally agree an approach.
With in-country reserves at approximately 21 days and the geopolitical situation unresolved, it would be best to take steps to prepare now.
If you have questions about how the fuel crisis may affect your contractual position or project delivery, please get in touch with our Construction and Infrastructure Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
