The fuel crisis is causing a "significant" rise in Waitaki District Council contracting costs — as much as 30% in some instances.
At least one local contractor is already reporting cash flow difficulties, councillors have been told.
This week the council was briefed on the local level ramifications of the ongoing conflict in the Middle East and the ensuing global volatility.
Infrastructure manager Joshua Rendell said at the briefing he was concerned council budgets could be breached and some work would have to be stopped.
The council was seeing "significant increases in some of the costs associated with contracts".
There were vendors who had already said costs were going to go up by about 30%.
"Pipe manufacturing in particular is an issue," Mr Rendell said.
"We’ve had an instance where we have had a capital works project which was planned and we are not able to get that pipe in the country — and there is no plan for when that pipe is going to be manufactured again.
"So, we are having to look at some alternative options at the moment."
The biggest cost increases were for maintenance contracts where diesel was used, affecting day-to-day service levels, Mr Rendell said.
"We have had one of the contractors reach out to us already and say the CPI [consumer price index] and cost fluctuation movements are too far delayed and they are having difficulties with cash flow so they are wanting some kind of fuel adjustment factor early on.
"I’m not sure where conversations will go with the other two but I’m sure, as the pinch continues, that we may end up with something sooner rather than later."
Mr Rendell said his "biggest concern" was around breaching budgets due to expected increases in the rate of inflation in the coming months.
"There is some scope for us to remove certain sets of works from the contracts to be able to keep within budget.
"That will have an immediate effect in terms of service levels."
There was the significant cost of mowing lawns, Mr Rendell said, which would become more problematic if fuel prices stayed high into the summer.
The council was in a bind, he warned.
Reducing service levels would result in contractors "seeking some liability from us in terms of lost profit and overheads".
"We can’t just vary a contract and reduce the work we give a contractor," he said.
"The only option we have is to reduce the amount of work we do but the contractor is still entitled to their fair share of profit and overhead associated with the contract, so we’d be paying the same amount of money to have significantly less work done."
Council director of natural and built environment Roger Cook said the issue illustrated the "financial ecosystem we are part of".
"If we cut work to our contractors that has a flow-on effect on the people they employ who live in our district, who support our community in other ways, they go to the food shop, they pay our rates."
A working group was set up by the council following the United States conflict with Iran to identify risks posed at a local level.
A report prepared for the fuel crisis briefing said rising fuel prices and flow-on contractor and supply chain cost increases "are already affecting council’s cost base and increasing pressure on budgets, service priorities, capital delivery and affordability for both council and the community".
This risk was identified as high.
The second rated as high was the "exposure of the wider Waitaki economy to fuel supply disruption and price escalation", the report said.
Given the district’s "reliance on fuel-intensive industries, sustained fuel pressure could reduce economic activity, increase business costs, affect employment and create additional demand on council services", it said.
