According to brokers, the fuel crisis is now slamming some transport operators and primary producers who are parking fleets of trucks and agricultural machinery because the economics no longer stack up. That pressure on costs and supply comes as hundreds of petrol stations run dry and the federal government moves to shore up fuel availability. Those measures include relaxing diesel standards and petrol quality requirements, while some reports suggest authorities are also considering increasing the proportion of ethanol in petrol.
“We’ve had a number of members of our network who can describe clients parking up truck fleets, or farmers parking up contracting machinery, because there’s just not sufficient margin to use them because of fuel cost," said Richard Crawford (pictured left), CEO of Community Broker Network (CBN), the Steadfast-owned AR network with brokers in Australia and New Zealand.
The immediate problem is getting fuel through strained distribution networks rather than a sudden collapse in national inventories. Two weeks ago, New Zealand’s Ministry of Business, Innovation and Employment (MBIE) said it was actively assessing fuel security and remained in close contact with fuel companies, while reporting that most oil companies were not yet seeing supply-chain issues. Public government statements in the following days suggest that assessment has not materially changed.
But for brokers in Australia and New Zealand, the deeper concern could be what fuel inflation does after this first wave of rushes at the pump.
“There’s a lot of talk about cost and supply, and probably a lot of the dialogue I’m hearing is around claims cost and the cost of fulfilment of claims, and whether there is going to be a rapid and further inflation in costs of reinstatement in claims events," said Crawford.
That is the risk chain many brokers will recognise: higher diesel feeds higher freight costs; higher freight costs feed repair, replacement and reinstatement costs; and those costs then work their way into underwriting conversations, indemnity adequacy and client cash flow. The road sector is especially exposed. ABC reported that rising oil prices were putting fresh pressure on an already struggling Australian trucking industry. According to a CBRE Australia survey published in August, 71% of Australian logistics occupiers identified transportation and labour as their top cost concerns. While in New Zealand the trucking sector recently warned that fuel had overtaken labour as its single biggest cost and noted that more than 90% of freight in Aotearoa moves by road.
There are signs the disruption is biting consumers and regional business alike. In line with reports earlier this month, the NRMA told IB that callouts during March for NSW motorists running out of fuel are still up by 15%. ABC and regional reporting have also documented rationing, outages and emergency prioritisation in parts of regional Australia as panic buying intensified.
For marine brokers and underwriters in Australia, the immediate shock came not from client voyages in the firing line in the Strait of Hormuz but from the shock to clients caused by insurers moving quickly to cancel war cover and reprice it voyage by voyage.
“You have to notify all of your clients," said Belinda Caunt (pictured right), CEO of Trident Insurance based in Perth. "So, of course, there is a panic from the clients.”
She made clear that Trident’s own book was not directly hit by shipments in the affected zone.
“We haven't had any clients that had shipments in that direct area," said Caunt. "They just had the cover and the cover was cancelled, but it didn't actually affect them because they were outside that specific geographical area.”
When global marine insurers and P&I clubs moved quickly in early March to cancel standard war-risk cover in the Gulf and adjacent waters it forced insureds to seek fresh cover at sharply higher prices for voyages through the area. Marsh has estimated that near-term marine hull rate rises in the Gulf could run from 25% to 50%. Even where Australian and New Zealand clients are not directly transiting Hormuz, the broader shipping system remains vulnerable: UN Trade and Development (UNCTAD) said more than 80% of world merchandise trade moves by sea, and its latest review warned that geopolitical rerouting is increasing ton-miles, volatility and costs across global shipping.
For Caunt, that broader spillover is now the more important conversation.
“That's probably having a bigger impact," she said. "Any businesses that are involved with transporting things around - it's hitting their bottom line."
The immediate panic over empty pumps or cancelled war cover can make the crisis look temporary. But the more durable issue is that fuel, freight and insurance cost inflation are now feeding each other across transport, logistics and marine supply chains. If the Middle East disruption drags on, brokers will not just be helping clients find cover. They will be helping them decide what they can still afford to move at all.
