Making Sense of Troubling Times: Fuel, Food, Climate and the Fragility of Our System

Written By Arna Craig

By Monique Kelly

This piece may feel a little overwhelming, but to find solutions we first need to understand the problem. It will run through the challenges we’re facing, but most importantly some of the solutions we can start to put into practice. There are lots of links for those who want to find out more. Some of it is technical so please jump that section if you feel the need. It is a long read so before you start, put the kettle on and make yourself a cuppa, take a big breath, exhale and know that we will be ok. 

THE CHALLENGE

In some ways, the last couple of weeks have felt like January 2020. Troubling news from outside of our communities is flooding our media feeds and we’re starting to feel unsettled. Not because of a virus this time but due to decisions made by a small number of actors with significant global economic and humanitarian consequences.

Understanding the Importance of Diesel in the Current Economy

Diesel is the backbone of our current global economy. It powers the machines that extract critical minerals from the ground, make things, transport bulk goods and build infrastructure and homes.  These things include the materials and products and infrastructure needed for our energy transition to renewables.

The oil needed to produce diesel and jet fuel (middle distillates) makes up about 35-45% of a barrel of crude oil. Over time, the extraction of “easy oil” suitable for diesel and jet fuel has largely been depleted. The cost of  extraction and refining of suitable crude oil is now more energy intensive and expensive. This impacts the economic rationale for the opening of new fields.

Crude oil suitable for producing diesel is found globally, but much of it comes from medium and heavy crude fields concentrated in a small number of regions, particularly the Middle East, Russia, and parts of the Americas (Canada, Venezuela, Mexico,  Brazil and the U.S. Gulf of Mexico). Many of these regions are affected by conflict or geopolitical tension, making global diesel supply highly exposed to disruption. The United States produces lighter shale oil and relies on these heavier crude streams for refining, reinforcing the strategic importance of securing access to these resources and further concentrating risk in an already fragile system.

In New Zealand, most of the diesel we source relies on the fields in the Middle East, which provide the perfect feedstock for refineries to make into these products. That oil travels to Asia to be refined before being sent via ship to New Zealand. Around 80% of our refined fuel comes from South Korea and Singapore. South Korea has already implemented domestic restrictions for fuel use and is considering export caps.

Due to the decline in supply of crude oil from the Gulf, refineries in South Korea and Singapore are operating at reduced capacity reducing the total volume of fuel available for export. Our fuel security is linked essentially to the agreements we hold with a few Asian countries and the trade agreements we have in place. With countries increasingly feeling the domestic pressure to have enough fuel for their own needs, where does that leave New Zealand?

First Wave: Cost at the Pump with a Rush to Renewables

The first ripple has already hit our shores. This has come in the form of more expensive fuel at the pumps with scarcity now also becoming a looming issue. The government has come out with a fuel plan and we are all hoping this will be a temporary blip in the system. 

The initial national reaction is encouraging. Electrification has become cool. There is a sudden run to get an EV, the prioritisation of electrification has amped up with the need to increase our share of solar on roofs. The situation has exposed the risk of building a new LNG terminal that would have opened the New Zealand energy sector to the risk of it being linked to global energy prices.  The government has now distanced itself from this proposal. The pendulum swing we need to counter is the temptation to revert back to an energy at-all-costs mindset and decide to double down on investing in national fossil fuel extraction in order to secure national supply of fossil fuels. This ignores climate action and our ability to stay within the safe limits of the planet by further bolstering fossil fuel dependence.

Second Wave: Food System Vulnerabilities

Our food system is heavily reliant on diesel at every part of the value chain. Unlike cars and homes, where alternatives are scaling, there is no scalable alternative to diesel that powers the tractors, generators, and heavy transport vehicles (trucks, ships and planes) that the current food system depends on.

The good news is that we will not run out of food.New Zealand produces far more food than it consumes. However, our food system is deeply export-oriented, with a large share of dairy, meat and horticultural production tied to international markets and prices. The food system also depends heavily on imported inputs (fuel and fertiliser) as well as global transport (fuel) to get our goods out. The cost of producing and getting our food to market will inevitably increase in line with increased costs. This means that domestic prices are set to increase. 

Understanding the Relationship between Fossil Fuel and Fertilisers

Modern agriculture is effectively fossil fuel transformed into food. Natural gas is used to make hydrogen, which is combined with nitrogen from the air to produce ammonia, and that ammonia is then processed into urea, one of the most common nitrogen fertilisers. New Zealand is highly dependent on Gulf-sourced nitrogen fertiliser. We import over 290,000 tonnes of urea from Saudi Arabia alone. 

Urea prices have surged by around 30 percent in a matter of weeks, with additional pressure coming from higher transport and freight costs. With over a third of global seaborne urea exports flowing from the Middle East, even minor disruptions can send shockwaves through global nitrogen markets.

Phosphate fertilisers are another critical input into our current food system. Morocco dominates global reserves and is New Zealand’s key supplier of phosphate rock. Most phosphate imported into New Zealand comes as raw rock, which is then processed domestically. 

The supply of this rock is indirectly at risk from the conflict. A key ingredient in the process to transform phosphate into a usable fertiliser is sulphuric acid. Sulphuric acid is produced from elemental sulphur, a byproduct of oil and gas processing. The Middle East is a major supplier to global markets and accounts for a significant share of seaborne sulphur trade. This directly links the cost of fertiliser production to global energy markets. This creates a potential bottleneck, as disruptions to oil and gas supply chains can affect both the availability and cost of sulphur and therefore fertiliser production.

Farmers have been assured that there is sufficient stock of fertiliser in the country for the 2026 autumn growing season, however there is potential disruption on the horizon in spring. The application of fertilisers at specific times and quantities in plant growth is critical to have a healthy crop.  We have low to moderate stockpiles of fertiliser in New Zealand as we rely instead on continuous, stable supply of these inputs or “just in time” delivery.  We are highly vulnerable to shipping costs and supply chain disruption and rising costs are already hitting farmers in the pocket.

Risks of an Export-centric Food System

Our strength as a major food exporter is also a point of fragility.  We are highly efficient, but tightly coupled to a global system that is becoming increasingly unstable. According to MPI, New Zealand’s forecast export revenue to June 2026 was roughly $62 billion. Food accounted for 82.9% of all goods exported from New Zealand in the year to June 2025. This accounts for around 12.4% of employment and 15.4% of GDP.

Our export dollar relies heavily on the steady flow of ships bringing goods to our shores, and, critically, to carry our primary exports to global markets. This steady flow is at risk with increased fuel costs as well as the slowdown in ship movements. The Iran conflict has significantly disrupted global shipping, with vessel traffic through the Strait of Hormuz dropping sharply and many ships avoiding the region altogether, leading to delays, higher costs, and reduced global trade capacity. 

As bottlenecks emerge in moving goods out of the country, this will directly impact farmers getting stock to processing and growers getting products like apples to market. There is a growing risk of delays in vessel availability, which could stretch cold storage capacity and force difficult decisions if products cannot be shipped in time. The economic impact of this, both for farmers and the wider New Zealand economy, is significant. 

WHAT DOES THIS MEAN FOR KIWIS?

This can be summed up in two words: cost and scarcity. Increased energy prices will raise costs for those who grow food, build, move, and manufacture goods. These costs are then passed through to consumers, leading to higher prices for the goods and services we rely on. The flow-on effect is a potential economic slowdown, as businesses struggle with rising costs and households reduce spending.

Second, if the conflict continues, we may see increasing constraints on the supply of goods linked to energy markets. This includes fuel for tractors, harvesters, trucks, ships, and planes, as well as key inputs such as fertilisers. It also affects many products that depend heavily on energy and transport. Bottlenecks in key materials and supply chains could lead to shortages in some areas and rising costs across many others, including inputs critical to the energy transition.

While some individuals and businesses may have a financial buffer in place and capacity to weather the storm, many do not. This situation will impact those that can afford it the least, the most and some economists are warning of a risk of economic recession. The Reserve Bank has come out with household and business balance sheets that are currently more fragile, with less scope to absorb significant price increases. Flow on effects to watch out for include inflation, wages and employment pressure with the Reserve Bank monitoring these signs carefully.

The burden will fall most heavily on those who can least afford it, exacerbating existing inequalities. Some economists are already warning of an increased risk of recession, as rising costs ripple through the economy. The Reserve Bank of New Zealand has noted that household and business balance sheets are becoming more fragile, with less capacity to absorb further price increases. The flow-on effects to watch include persistent inflation, pressure on wages, and potential impacts on employment, all of which are being closely monitored.

SO WHEN WILL THIS STABILISE?

This is the question everyone is asking, and the honest answer is that we don’t know. Even if the conflict were to stop tomorrow, the impacts would not unwind overnight. Energy markets would take months to stabilise, shipping routes would remain disrupted, and fertiliser supply chains, already strained, could take an entire growing season or more to rebalance. Some economists are now pushing recovery timelines from our current situation further out, with risks extending into 2027 if disruption persists.

In food production, farmers need to make decisions months in advance. For example, arable farmers are often locked into contracts before seeds go in the ground, meaning they have limited ability to respond to rising input costs. Missed planting windows or reduced fertiliser application at the right time translates directly into lower yields later in the year and into the next. This will impact their bottom line.

We are likely looking at a 6 to 18 month lag before many of these impacts are fully felt, particularly in food production and prices. It is unlikely that conditions will begin to resemble those prior to February 28th in the near term, and even then, a full return to the old system is unlikely. Prices may ease, but volatility will remain, and some of the structural shifts now underway, toward energy security, domestic prioritisation, and tighter global supply, are likely to persist. The system does not simply reset; it adjusts, often in ways that leave it more fragmented and less predictable than before.

COMPOUNDING IMPACT OF CLIMATE CHANGE

Alongside these pressures, climate is an increasingly important and compounding risk to the food system. We are likely moving into another El Niño phase, which typically brings drier conditions to parts of New Zealand, alongside more extreme weather patterns globally. This will put pressure on our farmers and growers with increased likelihood of atmospheric rivers, large storms, droughts, heat stress on crops and livestock, and more variable growing conditions. The result is not just lower yields in some regions, but greater unpredictability across the entire system. What makes this particularly challenging is the interaction with the other pressures already building.

When climate impacts coincide with higher fuel and fertiliser costs, farmers have fewer options to respond. Recovery becomes slower. Over time, this shifts the system from one that is relatively stable to one that is more volatile, where supply shocks become more frequent and harder to manage.

The New Reality

Aotearoa New Zealand is unlikely to return to the exact economy it had before February 28. Not simply because of the war, but because the war has collided with deeper structural changes already underway. These include the decline of cheap fossil fuel dependence, the growing physical impacts of climate change, and the fragility of long global supply chains. The challenge now is not how to avoid transformation, but how to manage it in a way that protects people. We need to focus now on building a system that is more resilient, more local, and less exposed to shocks.

WHY FOOD RESILIENCE MATTERS

One thing is certain - food resilience has to be at the top of our minds. Higher priced fuel and inputs are going to eventually be passed on to consumers. Inflation, which was slowing, will now ramp up. While the world scrambles to source alternatives,  the people most affected will be those who can least afford it. 

Farmers can not be expected to pick up the tab and absorb the costs. While prices for beef, lamb and dairy have improved recently and given a bit of breathing space for our farmers, they’re riding on pretty tight margins with input costs increasing across the board in the last few years. In the arable farming sector, last week saw the announcements of two of our major processing plants, Watties and McCains both pulling out of New Zealand and no white horse on the horizon to come and save them as costs increase. 

The Watties/McCain situation has also exposed a huge logic gap in our current system. A farmer selling 1kg of peas to McCain gets about 60 cents per kilo. The manufacturer sells it to the distribution hub for about $1.70. Yet the price for that same kilo is about $6 in a supermarket, many times what the cost of the actual food is (when they have not put it on special, probably due to the Stuff article, which they have done this week).  

This will not be the exception. Across the OECD, under our current system, the farmgate share of the price we pay for food is about 10-30%. Everything else, transport, logistics, retail, financial markets etc., takes up 70-90% of our money. Fuel and energy is embedded at every layer of that delivery system. This means we don’t pay for food, we pay for the system that delivers it. And that system is extremely vulnerable to fuel scarcity and price hikes.

The real risk is not that we suddenly run out of food. The risk for New Zealand is that access to food becomes uneven, expensive, and unstable. This will exacerbate an already existing problem where it’s estimated that one in three households have experienced food insecurity in the past year.

WHAT YOU CAN DO

This is a moment to pause and take another breath. Rather than trying to patch a system that is showing its limits, we have an opportunity to start designing what comes next. What do we want our food system to look like in 50 years? Who does it serve? And how does it operate within an ecological future where we live within Earth’s limits?

The good news is that this is not an unsolvable problem, but it does require us to think differently about how our food system is structured. The instinct in a crisis is to look for a single, large solution. In reality, change happens through many small, practical shifts that, over time, build a more resilient and localised system. In 2025, Wao, with the support of the Southern Lakes Kai Collective, published a Roadmap to Food Resilience. The ideas in that report are more relevant today than ever.

The actions we take now are not just about responding to the current disruption, but about laying the foundations for the system we want to create. These shifts sit across three levels: what we do individually, what we build locally, and what we enable at a policy level.

Action You Can Take Now

  • Support local: Buy directly from farmers where possible. Support local processors and growers markets. Keep money circulating within regional economies. The closer food is produced to where it is consumed, the less exposed it is to fuel, shipping, and global shocks. Think of the local butcher, bakers, grower, farmer etc. and get to know them.

  • Increase your energy resilience: While fossil fuels will remain part of our lives for some time, scarcity and price will make them less accessible to the average Jo(e). Start thinking about energy like gold. Reduce your energy use where you can. Insulate your home; electrify where practical; bike, walk or take public transport where you can to save fuel costs; if you don’t already, think about getting an EV; carshare; become more energy aware in how you live day to day. Connect with the Electrify Aotearoa movement or closer to home, the Queenstown Electrification Accelerator. 

  • Get your hands in the dirt: There is nothing more grounding and rewarding than harvesting your own food. Learn more about where your food comes from. Grow what you can, even if it’s small. Getting your hands in the dirt and growing some staples, harvesting and then cooking them up for your family is an instant antidote to stress and one of the things you can immediately control in an uncertain world. If you are a grower, teach someone else. Check out Your Garden Coach for expert tips from Ali.

  • Nourish your community: If you have extra, connect with local food pantries, families, friends to share your food. Check in with your community, see if anyone is in difficulty. Connect them with the services in your community that can help if they’re struggling with the cost of living or you can see their wellbeing or mental health is being impacted. If your school has a garden or runs a programme like Garden to Table, offer to help. 

Get Involved in Supporting Local Food Resilience

These networks don’t replace the system, but they strengthen it when it comes under pressure and provide a buffer and thriving food network when there is a shock to the system.

  • Shorten the supply chain: Support ideas that shorten the distance between growers, farmers and families. See what role you can play in helping rebuild local processing (e.g. abattoirs, canning, freezing), regional distribution networks, direct-to-consumer channels.

  • Explore alternative ways of farming and growing: If you’re a grower or farmer, start thinking about what and how to grow in a low input, low fossil fuel system? What shall we plant? How do we ensure that the food gets the right nutrients at the right times? How do we reduce reliance on imported inputs over time? How do I make sure my animals have what they need to grow without large fertiliser bills? Even small experiments can build knowledge and resilience.


System-Level Changes: Policy and Strategy

  • Advocate for a national food strategy: Eat New Zealand is doing a great job of getting this on the political agenda as is the Mana Kai Initiative. Engage with your local MP and advocate for a national food strategy that prioritises feeding New Zealanders alongside export earnings. A two-tiered system could use policy and other levers to buffer the food system similar to food policies in other countries in Asia and Europe. This would reduce exposure of our communities to global volatility while maintaining export strength. 

  • Build redundancy, not just efficiency: For decades, we have optimised for efficiency with “just-in-time” supply, minimal stockpiles, and global sourcing. Advocate for, invest in, and work towards a more resilient system to ensure we have strategic reserves available (fuel, fertiliser, food) and that multiple supply pathways have been established. We need to accept some redundancy as a form of security - i.e. prioritise national and local investment in critical infrastructure so that the knowledge, capabilities and capacity to grow and process food remain in the country.

  • Rethink the value of food: If only 10–30% of what we pay is the food itself, the system is broken. Value needs to be more evenly distributed and less dependent on energy-intensive processes. Think of a system where farmers and growers receive a fairer share of value and all kiwis are able to access and afford healthy, locally grown food. Support a fairer distribution system that reduces the layers between food and people. A regulatory framework that encourages local markets, cooperatives and keeps processing and storing infrastructure in place is key.


YOU MADE IT - I HOPE YOUR CUPPA IS NOT COLD!

The challenges are real, but so is our power to act. Every choice, from supporting local food, using energy wisely, or speaking up for fairer policies, helps build a stronger, more resilient system. Small steps today add up to a future where everyone has access to healthy, reliable food. Together, we can turn uncertainty into opportunity and shape a food system that works for people and the planet.

Arna Craig
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