This is an update we provided to all Fern customers on Wednesday 18 March
Hi there,
We understand how important fuel is to your business, so we want to keep you up to date about how the conflict in the Middle East is affecting our fuel deliveries here in New Zealand.
As we explained in the first update, here at Fern we have supply agreements with multiple fuel importers to try to provide you with the most resilient fuel supply at times like this.
Those importers are continuing to assure us that they have adequate stocks of diesel and petrol for the foreseeable future, but they are now dealing with an increase in ‘artificial demand’ (currently there isn’t an increase in fuel use, but rather people are buying more in case of future supply issues).
New Zealand fuel importers have responded by providing all fuel distributors like Fern with shorter notice about fuel allocations and with fluctuating volumes at different ports.
Normally, the amount of fuel we can uplift from our suppliers from each port is confirmed about one month ahead, giving us ample time to schedule our deliveries. Now these importers are giving us week-by-week allocations meaning that in some cases we can only plan our delivery runs one or two days ahead.
We’re sure you’ll appreciate that if you call us asking if next week’s scheduled delivery is still on track, we simply may not be able to tell you with any degree of certainty. But we want to assure you that we’re aware of your fuel needs, and we have a single-minded focus on planning our delivery runs effectively to short timeframes.
We’re doing everything practicable to keep your tanks wet. We are taking advantage of our multi-supplier arrangements to balance the fuel volumes at each of the 11 fuel importation ports, and we’ve got trucks travelling between regions through the night to get fuel where it’s needed.
We realise this lack of certainty about deliveries can be unsettling when fuel is critical to your operations, but we have chosen to be upfront and honest with you about these challenges we are facing.
If you have a scheduled fuel delivery that you don’t need, please contact us on 0800 99 99 89.
You may choose to ‘dip’ your tank to check the level. Simply dry the dipstick and check the tank like you check the oil in your vehicle.
Upsurge in fuel thefts
Sadly, with the value of fuel in tanks increasing, we have seen a small increase in the theft of fuel from some customers’ premises. Please talk to your local Fern fuel specialist if you’d like advice on improving the security of your tank.
We partner with the good folk at FMG, so your Fern fuel specialist can also put you in touch with a knowledgeable FMG adviser if you’d like to review your insurance to protect against fuel theft.
Thank you again for your understanding about the current fuel delivery challenges. I hope this update has been useful. I want to assure you we’re doing everything possible to ensure you have the fuel you need to get on with your work.
Regards,
The Fern team
Answers to some frequently asked questions
What is the current situation with the availability of fuel? There has been an increase in ‘artificial demand’ – that is, fuel is continuing to be used at the usual rate but some people are buying more than normal at the current high prices in case there are future supply issues. Fuel importers are trying to minimise the supply chain impacts of this by providing all fuel distributors, like us, with shorter notice about our fuel allocations and at fluctuating volumes at each of the 11 fuel importation ports.
How does this affect Fern and us, your customers? With the shorter notice about fuel allocations, we are scheduling our fuel runs to tight timeframes. We are able to access fuel at close to the usual volumes at many ports and we are moving fuel between regions when necessary. (Normally we just deliver fuel directly from a port to our local customers.) We are doing everything practicable to keep your tanks in fuel.
Will my upcoming scheduled fuel delivery happen on that day? Now that we are receiving weekly allocations from our fuel importers, we are planning many of our delivery runs just 1-2 days ahead. So unfortunately, we may not know your delivery date with any certainty until a day or two out.
What assurances can you provide me that you’ll continue to be able to provide the fuel I need for my operations? We have resilient fuel supply agreements with most New Zealand fuel importers. They continue to provide us with assurances about the availability of fuel but the upswing in ‘artificial demand’ is putting pressure on the system.
Can I get a delivery next week at today’s fuel price? Unfortunately, we purchase our fuel at the price that it is on the day we deliver it, so I’m sorry that we can’t provide your fuel at an earlier rate.
Why is the price of diesel increasing? Globally, supply is down because the Strait of Hormuz is shut and some Middle East production sites have been affected. Most New Zealand fuel is refined in Singapore and South Korea but about 60% of our suppliers’ crude oil comes from the Middle East.
Why has the price of fuel gone up so quickly when this fuel I’m buying must have come out of a refinery and been shipped here well before this conflict broke out? Fuel is priced based on the cost of replacing that fuel at the time you purchase it. So it works both ways. Once the conflict ends and prices drop, you’ll be paying a lower price for fuel that might have been refined at the peak of the conflict.
Why is fuel priced at the replacement cost? Fuel is a liquid. When you fill your car up at the pump, some of that fuel might have been delivered to that fuel outlet a month ago, some a fortnight ago, maybe some yesterday. So what price should you pay? It makes sense to price fuel at the replacement cost.
How expensive could diesel get? That’s difficult to predict because it really depends on the duration and impacts of the Iran conflict. We are just focusing on the short-medium term which we are better able to predict with some certainty.
Why has diesel gone up more than other fuels? Diesel is a workhorse fuel. It’s used in military logistics and ships are now taking longer routes around Cape of Good Hope, for example. Countries’ economic dependency on diesel does make it a priority for production.
What about long-term supply predictions? That’s really hard to anticipate because we don’t know how long the conflict will last, and how supply could continue to be impacted.
Can I get an unscheduled top-up of my tank because I’m concerned about price and supply issues going forward? Because the fuel importers are tightly managing the allocation of fuel to distributors like us, we are focused on meeting the short-term needs of our customers. For example, we are partially filing some customers’ tanks, which is less efficient for us, but it helps keep customers fuelled up.
What if the global supply issues escalate and Asian-produced fuel is more significantly impacted? Unfortunately, we really don’t know where things will go in the long term. We have resilient supply, through multiple companies, and we have their assurances that they will continue to treat us as a priority customer, as our fuel is critical for businesses, and meet our needs for the foreseeable future.
How are prices likely to change when the conflict ends? We have seen in the past with events like the Gulf War that prices drop quickly once conflicts in oil producing areas are resolved.
Is it ok if I take my 2000 litre trailer tank down to your Fern bulk diesel tank to fill up? If you need that fuel for your short-term farm/business needs then yes, but please be mindful that demand is high at the moment and while there is enough fuel in the country, all suppliers currently have challenges distributing the fuel where it needs to be, so please only purchase what is necessary.
Can I get my Fern Fuel Card credit limits increased so I can purchase more fuel from the pump? Please talk to your Fern account manager.
