NPR.
This is The Indicator from Planet Money.
I'm Darian Woods, joined today by producer Cooper Katz-McKim.
Darian Woods, hello.
Welcome to the studio.
Thank you.
We're now seven weeks into a war focused in the Middle East, yet no one is free from its impact.
The closure of the Strait of Hormuz has caused a seismic supply disruption.
It makes sense.
About 20% of global oil passes through the Strait of Hormuz.
And the impact?
Oil prices have skyrocketed, with another jump above 100 a barrel after news of the US blockade of Iranian ports in the Strait.
Last week, we heard stories of Americans feeling the pinch of high oil prices.
But in other parts of the world people are facing blackouts, fuel rationing, even concerns of actually running out of oil completely.
So in today's episode, how three nations are handling the global oil crisis.
We look at New Zealand, where fuel stocks are worryingly low Zimbabwe, who's facing one of the highest fuel prices in Africa, and China, who is actually handling the situation pretty well.
Our story begins in the homeland of our very own host, Darian Woods.
And not just because it's my homeland.
Now, we were curious about New Zealand because it's particularly vulnerable.
Despite being a higher-income nation, it sits at the end of a supply chain for oil.
To learn how they're doing, we actually reached out to someone from your past life, Darian.
Eric Crampton.
Darian Woods.
It's been some time.
And so full disclosure, you taught one of my courses in undergraduate economics.
What did you grade him?
You can admit it.
Oh, Darien did great.
Good to hear.
Good to hear he remembers.
Let's see the transcripts.
Yeah.
Eric is now the chief economist at the New Zealand Initiative, which is a pro-market public policy think tank.
And Eric explains why New Zealand is so vulnerable to an energy shock like this.
We're entirely reliant on refined supplies coming in from overseas.
And that's primarily South Korea, Singapore, and then rats and mice from everywhere else.
Is this a New Zealandism?
What does this mean?
Yeah, rats and mice, small, insignificant thing.
So small amounts elsewhere.
So both South Korea and Singapore get oil from... the Middle East.
And the result is that in New Zealand diesel prices have gone up roughly 70 to the US equivalent of 727 per gallon.
And diesel is critical to the New Zealand economy.
It's behind food production distribution, the movement of essential goods, and there's really no easy alternative.
And cost isn't the only concern.
New Zealand is also worried about having enough oil.
South Korea has already put a cap on how much they'll export.
Yeah, and people in New Zealand are very aware of how much is left in the reserves.
In fact, there's several websites devoted to that question.
One of them is called Fuel Clock.
Yeah, it has this ominous countdown in red and it shows at current rates of usage.
New Zealand only has, as of this recording, 27 days left of jet fuel.
It also lists diesel.
We're not used to looking at, well, here's a month and a half and then nobody can drive around.
More importantly, groceries can't get from warehouses to the grocery shelves.
That could be very bad.
All right.
So oil and gasoline prices, or petrol as we call it, there are high, supplies are uncomfortably thin.
And meanwhile the government is facing pressure to take all kinds of action, maybe rationing, cutting the fuel tax or subsidizing fuel.
And they've resisted pressures so far to intervene in gas prices or petrol prices, as you call them.
Unlike Australia, who's already cut fuel taxes.
If you do that, then the government has to say hey everybody, we know that the price is now lower, but please please, use less of it, even though the price is lower.
Letting prices rise really encourages people to cut back on demand.
That said, the New Zealand government has boosted support for low and middle income families with children.
So for now, New Zealand does have fuel.
But come June, Eric says there is a question.
I start seeing risk of things like international flights not wanting to come here because they'd be worried about whether they can refuel.
So Darian, you may want to wait a few more months to travel home.
Yeah, that's slightly worrying.
And while New Zealand is not in a good position, it is a higher income nation that can afford to bid on higher gasoline prices.
That's not the case for lower income countries like Zimbabwe, who are also reliant entirely on oil imports.
Right.
So Zimbabwe, much like New Zealand, is at the whim of external forces.
They've seen gas prices rise 40 in less than a month to one of the highest, if not the highest, in Africa.
Gerald Macheca is an economist located in the capital, Harare.
He says things are changing fast.
Fuel in February was, for petrol, it was $1.50.
That may not sound like a lot, but it is the equivalent of $8 a gallon.
And Zimbabweans make less than $2,500 per person on average each year.
Diesel prices, too, have gone up nearly 20%.
And that's a problem when Zimbabwe's economy depends on oil and gas.
Its main industries are mining and agriculture, which need fuel to power their machines and transport their goods.
And people are feeling the impact.
The price of consumer goods is already higher, even the price of public transportation.
So imagine using public transportation, but now it doubles or triples, but your income is not doubling or tripling.
Zimbabwe is in a delicate position.
The country has been loaded with debt and has little room for external shocks.
The government is walking the tightrope between trying to fund itself through things like fuel taxes, while also not putting too much pressure on citizens.
Unfortunately, consumers are already feeling the pain.
Zimbabwe's fuel prices are outpacing their neighbors.
Across the northern border, Zambia's citizens are paying 40% less on fuel.
That's frustrating for Gerald.
The government was quick to respond and reduce the taxes to cushion their citizens.
Whilst in Zimbabwe's case, nothing like that happened.
There are significant taxes on fuel that the government hasn't changed since the oil crisis began.
Zimbabwe has cut taxes on diesel, which is big for protecting industry, keeping consumer prices down.
They're also considering adding more ethanol to oil in hopes of reducing prices at the pump.
New Zealand and Zimbabwe are both at the whim of oil prices and supply chains that extend far beyond them.
China, on the other hand, is feeling a little bit more in control right now.
We spoke to Shahzad Qazi, the chief operating officer at the China Beige Book, to understand what's going on there.
He says the East Asian country is one of the biggest oil consumers in the world and is very dependent on imports.
Plus, China buys up around 80, maybe even 90% of Iranian oil.
That is wildly high.
All that said, you might think China is in a precarious position.
Well, Shahzad disagrees.
When you compare China to any other country in the world and certainly any other Asian economy, they are by far the best situated to deal with the current crisis.
And this is no accident.
China has prepared itself deliberately against an energy shock like this, in part because they're the factory of the world.
You don't want your whole economy to be thrown off because oil prices change.
So they built up their oil reserves, buying the resource when it's cheap and building a stockpile estimated to last between three and six months.
Shehzad says China has also protected itself through energy diversity.
Much of China's power runs on coal.
As we've covered on the show, China has also invested heavily in solar power, electric vehicles and electrification.
China also has the benefit of a unique arrangement in importing oil.
Unique because it buys up cheaper oil from sanctioned countries, Russia, Venezuela, Iran.
Even though there's a war, China continues to get oil from Iran.
The upside of Americans' policy to sanction these countries and trying to crush their economies has had this unintended but yet immensely positive impact for the Chinese economy, because it's given them access to this very critical natural resource at prices that are certainly well below what other market players have to pay for it.
Overall, China looks very shrewd right now in the face of a massive global energy shock.
If anybody's winning right now, it's most certainly them.
And I think it has helped them understand that they were very smart to keep this heavy focus on this economic self-sufficiency.
Okay.
So Darian, we have New Zealand, a country pushing back against price intervention as it weathers a supply shortage.
We have Zimbabwe, where leadership is figuring out how to ease the burden on its citizens while protecting the economy.
And we have China, who is very well prepared for a moment just like this.
Yeah, so just three stories that show that, whether or not your country is involved at all with the Middle East, the effects are being felt everywhere.
Now, Cooper, this is a particularly exciting week for you.
It really is.
Because you've been working behind the scenes to create a newsletter for The Indicator, our very own newsletter.
Yeah, so it'll basically be a version of The Indicator, but in your inbox.
We answer listener questions, put out call-outs and reveal what we talk about when we're not on mic.
It's a fun, bite-sized email. and the first one comes out this Friday.
So listeners can be among the first, and they can sign up right now.
The sign-up link is in the show notes.
This episode was produced by Corey Bridges and engineered by Kweisi Lee.
It was fact-checked by Sierra Juarez.
This episode was edited by Julia Ritchie.
Kagan Cannon is the show's editor.
The Indicator is a production of NPR.
