28 April 2026
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Following the escalation of the conflict in the Middle East in late March, the Government released an updated National Fuel Plan setting out a four-stage framework for managing fuel supply disruptions and prioritising fuel use if shortages intensify.
Since then, there have been signs of short-term de-escalation. The Strait has reopened and global fuel markets have eased from their recent peaks. MBIE has confirmed that New Zealand remains at Escalation Level 1, with fuel supply continuing to operate within normal parameters. That was the position last week; however, the situation remains highly fluid.
That position remains under active review. The National Fuel Plan is expressly designed to respond to rapidly changing geopolitical conditions, and recent events have underlined how quickly supply chains and pricing can be disrupted if circumstances deteriorate again.
Construction remains one of New Zealand’s most diesel intensive sectors. Even where physical supply is uninterrupted, recent volatility has highlighted the sector’s exposure to sudden and significant fuel price movements.
For contractors operating under fixed-price contracts, particularly those without fluctuation or rise-and-fall provisions, sharp fuel price increases can have an immediate and material impact on project margins, cash flow and risk allocation. Recent media reporting has also highlighted material price increases of 15% or more across the construction sector. Diesel is not the only pressure point.
If escalation levels were to increase in the future, the risk would extend beyond pricing. Fuel restrictions at Levels 3 and 4 could directly affect plant availability, transport, and site logistics, with inevitable flow on impacts to productivity and programme delivery.
From a contractual perspective, recent developments bring renewed focus to a number of familiar but often under-tested issues:
Fuel price and material price increases are only recoverable where the contract expressly provides for cost fluctuations. Under many standard form contracts, where cost escalation has not been selected as payable in the schedules, contractors will bear the risk of fuel and material price increases, even where those increases are extreme or driven by global events. Recent volatility is a reminder that this is a genuine, not theoretical, commercial risk.
If fuel rationing were mandated by the Government, it would likely occur through an Order in Council under legislation such as the Petroleum Demand Restrain Act 1981 or the Civil Defence Emergency Management Act 2002.
Where contracts include change-in-law provisions that extend to secondary legislation (as many were amended to do post-COVID), such measures may give rise to a variation entitlement, potentially triggering both an extension of time and time-related costs. Any relief is likely to relate to the consequences of fuel restrictions (for example inability to operate plant or transport materials), rather than increases in fuel and material prices.
Fuel and material price increases would not normally qualify as a force majeure or relief event and many construction contracts do not contain force majeure clauses. Entitlement will always turn on the precise drafting of the contract and strict compliance with notice and mitigation obligations.
While the reopening of key trade routes and the current de-escalation are welcome, they do not remove the underlying fragility of global fuel supply chains. From a risk management perspective, this is a timely opportunity for Principals and Contractors to revisit contractual risk settings, understand where fuel/material price increase risk truly sits, and ensure project teams are prepared should the National Fuel Plan move beyond Level 1.
Geopolitical volatility has a way of re-emerging quickly, and construction contracts tend to allocate risk long before that happens.
Paula Nicolaou, Partner – Wynn Williams Construction team
Rebecca Saunders, Partner – Wynn Williams Construction team
Keriana Snodgrass, Law Clerk – Wynn Williams Construction team
WWW.WYNNWILLIAMS.CO.NZ
