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Sunday, December 5, 2010

Staring down the barrel of oil shortages - but seeing nothing

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Business writer Rod Oram and Transport Minister Steven Joyce have been debating the government's current and potential roading and rail projects ( Sunday Star Times) The essence of their spat seems to be "my cost benefit analysis is bigger and better than yours - nah nah na nah na".

Meanwhile there is a very large elephant in the room that both protagonists refuse to, or fail to see. This is something blindingly obvious to the even the super - optimistic International Energy Agency, namely that NZ, along with all other OECD nations is going to have to start living with less oil, starting now. Oil -- you know --- that black stuff that fuels 95% of our road transport.

The cost benefit analyses that Oram and Joyce are bickering over do not take into account the impact of higher oil prices or shortages. A 2008 Land Transport Authority report did start to make the connection between higher oil prices and future roading plans, but the incoming government has ignored its recommendations.

So the Oram/Joyce debate is taking place in this vacuum, without consideration of the likelihood that fewer, not ever increasing numbers of vehicles, are going to be using our roads within 2 - 5 years.

Neither of them mentions this possibility, although to be fair to Oram, at least he sees the benefit of an Auckland rail loop.

Why less oil and fewer vehicles? China, India and all oil producing nations are growing rapidly as is their demand for an ever-increasing share of global oil production. For every new car hitting the streets of Shanghai or Mumbai - that's one OECD car taking the exit lane.

Because it's not just higher fuel prices which will drive this change to a smaller transport fleet. A supply shortfall of almost 5 million barrels is forecast for this year, widening to 9.2 million by 2015, according to the latest in a string of similar reports published this year. Independent oil analyst/economist Mamdouh G. Salameh projects this gap between supply and demand will be too big to reconcile even with prices soaring beyond the record $US147 per barrel ($2.20 per liter for petrol) we saw in 2008.

In other words the theory of mainstream economists that higher prices will always draw new oil production from the ground is simply not working. We are staring down the barrel of oil shortages.

So the question has to be asked -- how is it that Oram and Joyce along with their economist and political peers inhabit this fantasy land in which the NZ they foresee is somehow magically immune from the looming oil supply shock? They stare down the barrel of higher oil prices and shortages and see nothing.


Anonymous said...

Joyce is a joke. The granny herald keeps asking "questions" about where his direction's pretty obvious already he doesn't care not only what auckland cares about but actually votes for. BTW..I'm sure you've heard of Peter Newman from Perth planning..he has some great things to say about comin oil shocks too...great blog btw.

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