Amid a worsening global energy crisis, New Zealand and Singapore’s freshly struck deal to keep fuel and other essential goods flowing is being touted as a boost to supply chain resilience.

The agreement commits both countries not to impose export restrictions on each other during economic upheaval. But it also highlights an uncomfortable reality facing New Zealand’s energy security, which depends heavily on fuel stored and refined overseas.

Nearly 60% of the country’s petroleum reserves are held offshore in countries such as the United States, Japan and the United Kingdom, and around a third of its fuel is refined in Singapore. As global tensions disrupt oil markets and put pressure on key shipping routes, that model is being tested.

While New Zealand meets international requirements to hold 90 days of net petroleum imports as a member of the International Energy Agency (IEA), much of this is stored thousands of kilometres away.

In emergencies, the IEA can coordinate collective stock releases to stabilise global markets, as occurred in the agency’s release of 400 million barrels of oil in March.

However, a closer look at the data shows New Zealand is a clear outlier in how it meets these obligations.

How NZ’s fuel security has shifted offshore

To remain compliant, the New Zealand government buys “ticket” contracts – or contractual claims on oil stored in other countries.

While these count toward the country’s 90-day requirement, they are effectively rights to purchase fuel that may never reach its shores during a major disruption, such as the closure of the Strait of Hormuz.

In January, New Zealand’s total petroleum reserves stood at exactly 90 days’ supply. This meets the IEA’s minimum requirement, but is the second-lowest reserve among members, ahead of only Australia’s 49-day capacity.

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New Zealand is also the only IEA member whose public oil reserves are fully overseas.

By contrast, countries such as Japan and South Korea hold around 200 days of reserves domestically, leaving them far better prepared for global supply shocks.

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It comes after New Zealand’s heavy reliance on offshore reserves has grown sharply over the past 15 years.

IEA data shows the country’s domestically-held industry stocks made up more than 90% of reserves in 2010–11, while public offshore holdings accounted for less than 10%.

By 2026, that balance had flipped. Industry stocks had fallen to 42%, while government-owned reserves held abroad had risen to 58%.

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As companies cut physical inventories to reduce costs, the government filled the gap with ticket contracts to maintain compliance with the IEA’s 90-day requirement.

This shift effectively means New Zealand’s domestic resilience has been hollowed out. In January, for instance, the country held just 38 days of onshore petroleum stocks – far below the average of IEA members and of other Asia-Pacific nations.

The New Zealand government’s recent move to procure 90 million litres of diesel at Marsden Point will add roughly nine days of supply.

While a positive step, it remains small compared to the much larger domestic buffers maintained elsewhere.

The economic cost of fuel uncertainty

Because oil is a major driver of inflation, this all matters greatly to the average New Zealand household.

Last month, local diesel prices surged to over $3.80 a litre, almost double what they were before the Iran conflict. Because diesel powers farming and transport – both cornerstones of the New Zealand economy – these costs ripple through the entire supply chain.

When geopolitical risks rise, businesses increase “precautionary demand”, hoarding fuel inventory to avoid shortfalls. This reduces available supply and pushes prices even higher.

Research suggests the most effective way to reduce exposure to energy price volatility is through financial hedging or by holding physical fuel reserves. Holding reserves helps buffer against sudden supply shocks and reduce the risk of stockouts.

New Zealand, however, has only a thin physical fuel buffer. So what might be done?

Increasing onshore petroleum stocks can strengthen short-term energy resilience. But bigger oil tanks are not a lasting solution: true energy independence requires reducing New Zealand’s underlying oil consumption.

In this sense, there is much room for improvement. IMF data shows New Zealand has a relatively low level of trade in low-carbon technologies, at just 1.3% of GDP in 2024 – well below the IEA average of 4.76%.

To bolster its energy security in the meantime, New Zealand could look at increasing strategic onshore reserves, while shifting away from ticket contracts toward physical stockpiles to support critical sectors such as farming and freight.

At the same time, it could make a greater push toward electrification and the uptake of alternative energy sources, particularly by powering transport with renewable electricity.

Ultimately, this requires an orderly transition away from oil altogether, with a clear national focus on reducing dependence over time.

Right now, New Zealand’s strategy is a gamble on global stability. To protect the economy from future global oil supply shocks, it must bring its petroleum reserves home – then work hard to make them obsolete.

The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

Depending on which side of the argument you listen to, the recently signed New Zealand-India free trade agreement represents either a huge economic opportunity for New Zealand or a risk to its economic sovereignty.

In an election year, we can expect political positioning over something as significant as this deal, given the broader context. India is a huge market of 1.4 billion people, migration is a burning issue globally and economic growth has been elusive during a period of inflation, war and fuel price hikes.

Broadly, the agreement reduces barriers to trade in goods, services, capital and skilled labour. It’s not surprising exporters are excited about the opportunities. India is projected to grow at 6.5% this year and the next – faster than New Zealand’s other existing trade partners.

The Ministry of Foreign Affairs and Trade’s national interest analysis estimates trade, output and real wages will increase due to the market access for New Zealand goods in the deal.

The economic benefits projected by 2050 may even be conservative estimates, given higher-than-modelled gains were seen once the New Zealand-China free trade agreement was in place.

But the India deal goes beyond trade in goods and encompasses services and investment liberalisation, which was where the most political opposition was faced.

First, it was feared New Zealand could be penalised for not investing enough in India. Second, according to NZ First’s Shane Jones, the agreement opens a door to “unfettered immigration”, displacing local jobs.

The hyperbole notwithstanding, then, what does the text of the agreement tell us about the likely economic impact of the deal on New Zealand?

Can NZ be penalised for not investing enough?

The major sticking point for the Labour Party – whose support for the deal was needed because government coalition partner NZ First opposed it – was concern that New Zealand businesses would be legally obligated to invest NZ$33 billion dollars in India over 15 years.

A close reading of the chapter on investment promotion and cooperation, however, reveals the figure is not legally binding or subject to formal dispute settlement. It is to be mutually achieved through a “review, reporting and three-tier government-to-government” consultative process every five years.

As Trade Minister Todd McClay put it, the $33 billion figure is “aspirational”. It is based on a longer-term projection of India’s economic growth over the next 15 years.

Investment will be facilitated by a dedicated desk within India’s Invest India agency. For example, it will include investment partnerships such as the Bioeconomy Science Institute Maiangi Taiao’s initiative to give expert support to India’s developing kiwifruit industry.

If New Zealand businesses don’t achieve their investment targets after 15 years, there will still be a three year grace period, with avenues for discussion and consultation.

Failing that, India has reserved the right to impose proportionate remedial measures by rebalancing tariff concessions. No specific details are mentioned, but they are intended to be temporary and will end once the investment objective is achieved.

These measures reflect the fact that India has given greater tariff concessions to New Zealand exporters than vice versa.

Focus on temporary labour mobility, not immigration

If anything, the bigger concern has been that the free trade agreement will establish an “open border” for Indian migrants into New Zealand, potentially undercutting local wages and putting even more pressure on an already strained housing market.

In reality, the agreement negotiates temporary cross-border movement for contractual service suppliers in both directions between New Zealand and India. It also allows for working holiday visas (with clear time limits) aimed solely at alleviating short-term skill shortages.

The agreement also allows temporary employment entry for some specific professions on New Zealand’s skill shortage list, all restricted to a non-renewable visa for three years.

Annexes to the agreement explicitly state:

This applies to a natural person of India, including a skilled worker, into the territory of New Zealand, in order to work under a fixed term employment contract concluded pursuant to the law of New Zealand, without the intent to establish permanent residence.

Furthermore, the agreement makes it clear these visas can only be granted for temporary travel for that specific employment purpose:

For greater certainty, these qualifications must be recognised by the appropriate New Zealand authority where under New Zealand law such recognition is a condition of the provision of that service in New Zealand.

This would mean qualified doctors, for example, can come to work in New Zealand for three years under temporary employment visas. But they will still be required to comply with local qualification and training requirements.

The intention is clear: such labour mobility provisions will only allow skilled professionals from India to provide specific services for a finite time, complementing local jobs, not displacing them.

The proof, of course, will be in the implementation of the agreement and its overall impact on trade, investment and economic growth. For now, perhaps, it is time to move beyond politics and give New Zealand businesses a chance to tap the long-term opportunities offered by this deal.

Rahul Sen does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.