New Zealand does no refining of its own, which means going to the global market and paying the price. Supply has stabilised following earlier market disruptions, says Chris Gourley, chief executive of Fern Energy, but costs are still feeding through the supply chain.

“Petrochemicals and freight costs are going to feed into our economy, but touch wood, we have stabilised a bit,” he says.

Between February and March, crude moved from about $1.10 to $1.30 per litre. Refining costs over the same period went from 20 cents to $1.40.

“The refining cost is largely driven out of infrastructure damage, so there are less refineries in the world that can actually produce the quality diesel we require.

“There’s things called quality premiums because of the type of diesel we demand in New Zealand, they have leapt significantly and feed in there.”

Refining diesel runs at roughly twice the complexity and cost of refining petrol, Gourley says, and a supply-and-demand imbalance in refining capacity is compounding that pressure.

“There’s enough demand for diesel to take up all the supply.”

Because crude has held relatively static for two months, Gourley says volatility now sits in refining, not crude. Farmers hoping a softer oil price will return diesel to pre-crisis levels, around $1.80 a litre, should not count on it.

“We’re in New Zealand, a long way from nowhere.

“We import every drop of fuel that we use in New Zealand and don’t do any refining ourselves, so we’re price takers.

“I’m not sure what, as a country, we can do.

“The best we can do in the farming sector is actually just be realistic in our budgets over the next three or four months, we’re not going to see a softening that’s going to be significant enough.”

Some farmers have told Fern Energy they plan to bypass their rural supplier and fill at a service station, basing the comparison on month-old pricing. Gourley says those numbers no longer apply.

“Be quite careful because when we put fuel in your tank, you’re paying for the price then. Double-check what your price is before you turn your tank off and go to the gas station.”

The government’s decision to hold stock at Marsden Point adds a useful buffer, he says, and the delay in lifting minimum importer requirements from 23 to 28 days of supply is the right call, for now.

“It puts a lot of pressure on price when the importers have to hold more stock that they can’t sell.

“It immediately impacts the amount that we can release and pushes up the price because of simple supply and demand.”

CountryWide CONNECT with Andy Thompson & Sarah Perriam-Lampp is our daily rural show livestreamed from 11am-1pm. Visit country-wide.co.nz on how to watch/listen or download the CountryWide CONNECT mobile app, available on Apple iOS and Android.