The OECD verdict is blunt
The OECD’s May 2026 Economic Survey of New Zealand delivers a line that should be pinned to the wall of every boardroom in the country: “Affordability will remain elusive without breaking the gas-electricity price link by scaling non-gas long-duration firming, expanding demand response and strengthening competition.”
This is not a Greenpeace talking point. It is the OECD telling New Zealand that its electricity market structure is broken and that gas dependence is the core problem. The survey says electricity prices are “structurally too high due to falling gas supply and underinvestment in firming capacity” and warns that dry years now trigger prolonged price spikes forcing industrial shutdowns.
The government’s proposed LNG import terminal? The OECD says treat it as a short-term transition tool only, not a structural answer. Businesses banking on cheap imported gas arriving to save them are misreading the economics.
The supply cliff arrived three years early
The data underneath the OECD’s warning is brutal. MBIE’s June 2025 update showed proven plus probable gas reserves fell 27% in a single year, from 1,300 PJ to 948 PJ. Field operators themselves revised extraction estimates down by 234 PJ. The forecast for annual production falling below 100 PJ has been pulled forward from 2029 to 2026.
In 2025, MBIE’s Energy in New Zealand report confirmed gas supply fell 20.9% in 2024 alone, a drop of 29 PJ to just 115.7 PJ. The Pohokura, Maui, Mangahewa, and Kupe fields combined lost 109 TJ per day of capacity.
New Zealand has no import infrastructure, no pipeline from Australia, no spot market to tap. When fields decline, supply simply falls. There is no backstop.
$36 billion in GDP sits in the blast zone
The exposure is not hypothetical. A March 2026 BusinessNZ report found up to 8% of GDP and roughly 264,000 jobs directly rely on gas-using businesses. Include indirect reliance and the figure reaches up to $36 billion in GDP and 400,000 jobs.
BusinessNZ chief executive Katherine Rich said the strain is already visible: “High gas prices and supply uncertainty are forcing some users to cut production, raise prices or close operations.”
BusinessNZ’s director of advocacy Catherine Beard spelled out the breadth on RNZ: “It’s dairy, meat, food and beverage, product manufacturing, wood product manufacturing, textile, leather, clothing, footwear, cropping agriculture, but it’s also small businesses, from bakeries to breweries to dry cleaners, hot houses.”
National average retail electricity already sits at 39.3 cents per kWh, with some regions paying close to 49 cents. For industrial users, these are margin destroyers.
The gentailer structure is part of the problem
The OECD’s diagnosis goes beyond gas supply. New Zealand’s vertically integrated gentailers, companies that both generate and retail electricity, have a structural advantage that suppresses competition. In December 2024, then-chief operating officer of Octopus Energy Margaret Cooney said the settings mean “gentailers are able to manage their pricing between their generation and retail arms, often selling energy to themselves for less than they sell to independent retailers.”
The May 2026 survey calls for a mandatory Firming and Flexibility Market and possible minority Crown investment in independent-led, long-duration non-gas generation. That sits awkwardly with a centre-right government’s instincts. But the OECD’s argument is precisely that the current market structure is itself the distortion, not a free market outcome.
Capital allocation, not climate policy
BusinessDesk reported in April 2026 that the Maui field’s closure is imminent and that for some businesses, getting off gas is difficult. For others, it is impossible. That creates a bifurcated risk landscape where the companies that move first gain a structural cost advantage.
Beard has called for the government to repurpose the $200 million set aside for oil and gas exploration co-investment into concessionary transition loans for businesses switching energy sources. Her point is hard to argue with: “We need to have some sort of plan. Other countries do this, it’s very common.”
The OECD forecasts NZ GDP growth of just 1.4% in 2026. Structurally elevated energy costs grinding into that feeble recovery is not an abstract risk. It is happening now. Every business that still treats its energy supply as a fixed assumption rather than a live strategic risk is running out of time to adjust.
Sources
- ‘Electricity prices are structurally too high’ – OECD says (2026-05-07)
- OECD report suggests raft of reforms to help New Zealand economy (2026-05-07)
- Gas Report Highlights Urgency Of Securing NZ’s Energy Transition (2026-03)
- Business NZ seeks government loan support for firms moving away from gas (2026-03-30)
- OECD says NZ electricity reform needed to tackle ‘feeble’ growth (2024-12-06)
- The gas trap: why NZ companies are running out of time (2026-04-30)