This does not compute

The International Energy Agency has again warned that the high oil price could strangle hopes for a global economic recovery. It also says that 90% of future growth in oil production has to come from the Mid-East, mostly from Saudi Arabia. Without a $100 billion annual investment in that region, oil prices will exceed $150 a barrel. But Saudi Arabia has just announced it is halting its $100 billion oil expansion program? This does not compute.

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NZ Election 2011 - Praying to the Growth Fairy

I had thought that my next post would be on the surreal lack of policy from any of the political parties in the Election addressing resource depletion and their collective failure to face the reality that "economic growth" is not returning.

Before I could get around to it I read this excellent post from James Henderson at "The Standard", and so I am re-posting it here. 

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Election 2011 Two-facedness - Saving money good - saving fuel bad

All of the political parties agree New Zealand needs a long-term savings and investment plan . These elections there have been major policy announcements on Kiwisaver, reducing debt and the age of eligibility for National Superannuation. Saving money good.

But when confronted with arguably a more serious and immediate threat to New Zealand's economy, national well-being and security -- namely our dangerous exposure to oil price shocks, and oil supply disruptions and shortages, - all the main parties fail to articulate a coherent long-term plan to lower our dependence on ever more expensive imported oil. Saving fuel bad.

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Huge blowout in NZ oil import cost

In the year to September oil imports rose 22% to $7.7 billion. Oil is costing us $1.4 billion more than a year ago.

If this price trend continues then by 2015 our annual oil import bill will soar to $17 billion and will be $11 billion more than it was in 2010. That annual extra cost will be greater than the government's contribution to the Christchurch earthquake.

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New Foundation to highlight peak oil and end of growth

When I started writing this blog over a year ago, I stated my motivation was “to probe, raise awareness, encourage informed debate, and look at community responses.” But it’s often felt like I was a lonely voice in the wilderness. How come almost no one else in New Zealand – even in the blogosphere - was commenting on peak oil and its huge economic implications for our nation? How come there was not even a nascent entity or group taking up the challenge of informing the public, and generating debate that would hopefully seep into the mainstream media?

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Peak oil, recessions and the end of growth

On Tuesday I gave a presentation to Auckland University students on "Peak oil, recessions and the end of growth"

The event was organised by AIESEC , the world's largest youth run non profit organisation.

The powerpoint version is available here

to view the video on slide 24 see here

The .pdf version is here

When might New Zealand's oil imports dry up?

A Guest Post by Nigel Williams

There is a set of questions that we can never know the answer to except in hindsight. Questions like:- “How long do I have before I cannot afford to buy fuel?” “How long do I have before there is no oil in the tank of my car?” “How long do I have before there are no diesel-powered trucks running on roads bringing food to my supermarket’s shelves?”

The answers to these will be different for each one of us, possibly by many years.

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(Un) Economic Peak Oil is what really matters

In several of my recent posts, such as here, here, and here, I have argued that concentrating on the geological peak of oil production is a distraction. What really counts are the severe economic implications for New Zealand and the world economy as oil prices trend upwards and become more volatile. And I have highlighted the substantial impacts on our economy even without global oil production actually peaking, or declining. Production being on a plateau since 2005 has been sufficient.

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Officials Muzzled on Peak Oil?

The government has finally released its Energy Strategy. There are cosmetic changes from the Draft version but it's no surprise that the final Strategy continues to completely ignore the threat of peak oil. 

There were many submissions, including my own, which detailed the raft of recent reports from oil and energy experts, think tanks and government institutions which are all pointing to an imminent supply and oil price crunch. And in 2009 government officials themselves gave strong warnings to Ministers. So since 2009, have the officials been muzzled?

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Oil Royalties a Mirage?

Beside the release of the government's final Energy Strategy was a report from Woodward Partners purporting to estimate the potential royalty income from existing, and yet to be discovered oilfields.

Business cheerleaders such as the National Business Review typically took the most extreme best case guesstimate and trumpeted the report with headlines of a $13 billion bonanza. But if they had bothered to actually read the report they would find that quite different story emerges.

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Christchurch quake cost added to our yearly oil import bill?

By 2015 New Zealand could face an extra $10 billion cost each year to import oil, compared to 2011 prices. That's more than the cost to government of the Christchurch earthquake each and every year! By 2020 the oil import cost each year could soar to $19 billion more than the present cost. That's the bill for two Christchurch earthquakes every year.

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New Zealand at greater risk from oil shocks -- official advice ignored

In November 2009 senior officials warned the government --

• the risks of oil price shocks and a physical shortfall in the world supply are issues of "strategic importance"
• New Zealand is more vulnerable and may suffer more than other OECD economies
• new technologies and fuels will only "marginally" reduce New Zealand's vulnerability to these oil supply/price risks
• without "sufficient incentives" New Zealand's resilience will decrease even further
• a substantial increases in domestic oil production will not insulate New Zealand from higher oil prices because oil is traded internationally and we would still pay the international price.

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Public Receptive to Peak Oil Debate and Policy Ideas - Survey

It's a common misconception that only "greenies" and "doomsters" are concerned about peak oil. This view perhaps explains why politicians and the mainstream media have marginalised or ignored the issue. However a recent US survey of public opinion reveals that, in fact, those Americans who identify themselves as "very conservative" politically or who are "strongly dismissive" of climate change are among those most concerned that rising fuel prices are harmful to the economy and public health.

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New Zealand’s Tui Oil Field. - Peak Oil With Bells On

One of the least understood elements of peak oil is the rapid decline rate of production from the peak for any given oil field. For an example of just how severe and steep the decline rate can be, look no further than the recent announcement that the Tui oil field in the Taranaki Basin has had its remaining oil reserves slashed by 1/5, and that production will fall off a cliff. For a New Zealand oilfield, this is peak oil in action with bells on.

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New Zealand Government’s Response to Peak Oil – In time we hope something will turn up

On July 8 I attended a forum on peak oil organised by the Sustainability Society. Dr Richard Hawke from the Ministry of Economic Development gave a presentation  on behalf of the New Zealand government entitled "Peak Oil - New Zealand's Response". I came away with emotions ranging from frustration to anger and embarrassment.

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Even more pain at the pump this year

I am usually loathe to predict what oil prices will do, certainly in the long term. As Yogi Berra famously said "it's hard to make predictions, especially about the future". But some pretty compelling evidence suggests another substantial upward tick in the oil price is coming in the second half of this year - on top of the already damaging current oil price shock.

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Infrastructure Plan wilfully oblivious of peak oil

The government's Infrastructure Plan is meant to map out a strategic direction for New Zealand infrastructure for the next 20 years. It fails miserably because it wilfully ignores peak oil.

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Oil Shock Horror blog -- the story thus far

9 months after a tentative start last September, and with 45 posts clocked up here at Oil Shock Horror Probe, I thought it was time to re-cap. What are the trends and themes that have emerged so far?

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High oil prices cause "large" effect on inflation - NZ Report

A 2005 study by New Zealand Reserve Bank economist Felix Delbruck ("Oil prices and the New Zealand economy" - Reserve Bank of New Zealand: Bulletin, Vol. 68, No. 4) has found that the inflationary effects of higher oil prices were "quite large". Specifically that :-

• the direct impact of a $.10c a litre increase in petrol price lead to an immediate increase in the average household's living cost of about 0.3%
• the indirect effect (of higher bus, taxi, train and air travel, and firms passing on higher transport costs which raised the cost of food etc) added another 0.3% onto the direct effect -- a total 0.6% increase in the CPI for every $.10c a litre increase in fuel. 

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2007-08 oil shock caused "substantial" decline in New Zealand's GDP say Reserve Bank economists

In a recent report, two New Zealand Reserve Bank economists have estimated the real effects of oil price shocks on New Zealand’s GDP. The economists conclude --

1. a 5% permanent increase in retail fuel prices implies a decline in NZ's GDP of 0.3%
2. a succession of oil price shocks such as those in 2007-08 had "a substantial effect on real GDP in New Zealand"
3. New Zealand's oil use is different, leaving us more vulnerable to oil shocks. Faced with oil shocks New Zealand households and firms have only one third of the ability to lower the amount of oil they consume, compared with the United States.
4. real wages decline in response to an oil shock, as they are eroded by inflation.

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UK Ignores Peak Oil Warnings - NZ Pretends It's Not An Issue

It has long been suspected that Western governments have been investigating peak oil and its impacts on the economy, but keeping the information hidden from the public. In the case of the UK government we now have definitive proof that this has been happening. The Guardian has reported (15 June) that UK ministers have ignored peak oil warnings.

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New Zealand's oil security. How dependent are we on oil imports?

New Zealand imports 97% of its oil. Oil is the lifeblood of our economy. So a vital question must be -- how vulnerable is New Zealand to oil supply shocks? -- Whether from short term disruption, or due to an on-going and perhaps permanent decline in world oil exports?

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New Zealand Government's Oil Price Projections - A Bad Joke?

The Ministry of Economic Developments oil price estimates are a very bad joke. It is a joke on all of us however, as their grossly optimistic projections underpin government policy not just for energy but for the broader economy.

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UK Government to Develop Oil Shock Response Plan - When Will NZ ?

UK Energy and Climate Change Secretary Chris Huhne has agreed to develop an 'Oil Shock Response Plan', following a meeting with the UK Industry Taskforce on Peak Oil and Energy Security (ITPOES).

Specifically, Huhne agreed that the UK government and ITPOES would work together on peak oil threat assessment and contingency planning.

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NZ Budget 2011 Ignores Oil Shock Impacts

The Times [article behind a paywall] has just broken a story that the UK government has been undertaking research on the likely adverse effects on their economy of an oil price spike.
The Times reports that

"A sudden huge increase in oil prices would cut more than £102 billion from the economy over the next five years, wrecking Britain's economic recovery, increasing unemployment and provoking industrial action, according to government research."

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Must Watch Australian Report on Peak Oil

The Australian Broadcasting Corporation’s Catalyst programme has just broadcast the best peak oil documentary in recent times. In just 12 minutes it covers many of the essential points, and is a great way to get yourself up to speed on peak oil. Please take the time to watch it, and share this Youtube link and the ABC Catalyst link with your networks, and with anyone you believe is unaware of, or in denial about peak oil.

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New Zealand Joins Peak Oil Club - IEA

The International Energy Agency has published it's “New Zealand Energy Review 2010" which confirms that New Zealand's oil and gas production has peaked and will enter a period of rapid decline. This was exactly the conclusion I reached in my earlier posts in January 2011 regarding the Venture Taranaki report, and the presentation by Dr Peter Crabtree of the Ministry of Economic Development to the Petroleum Conference in November 2010

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IMF Warns of Oil Scarcity And End of "Growth"

What is going on? The International Monetary Fund -- a body that states its mission is to "foster global growth and economic stability" has produced a major report which concludes the world has entered an era of oil scarcity, and openly discusses a peak oil scenario in which global GDP doesn't grow, but declines steeply !

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Obama’s Oil Plan Picks Winners – We Can Do That

Last week President Obama released a new Oil Strategy. Like every President before him since Richard Nixon, Obama's aim is to reduce America’s dependence on imported oil. The plan openly picks winners. The strategy has been widely criticised for failing to address the scale and urgency of the end of cheap and abundant oil. But at least it’s a plan, which is 100 steps ahead of where we are here in New Zealand, -  a nation even more dependent on imported oil than the USA.  The New Zealand government has no plan other than to leave it to the market.

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Government’s Energy Strategy -- Grade F for Fail

The government has mistakenly released its Draft Energy Strategy, which is still to be signed off by Cabinet. Despite hundreds of public submissions it remains almost word for word identical with the version published in July 2010.

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Next oil induced recession -- are we there yet?

Research in the US confirms that there is a strong correlation between high oil prices and recessions. Recessions emerge when oil prices reach around $US85 a barrel (currently $US115 a barrel) or when the aggregate cost of oil for the nation equals 5.5% of GDP.

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Ideology Trumps Common Sense

It's said a picture is worth a thousand words. Take a look at these graphs and see if you can make any sense of the government's response to oil prices rising and it's transport policy. Damned if I can.
(hat tip to Auckland Transport blog and frog blog)

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Oil Price Response Plan For New Zealand Ignored

Prime Minister John Key's only response to rapidly rising oil prices has been to say "the government is powerless - there is nothing we can do". Not so. A 2008 report commissioned by the New Zealand Transport Authority sets out a comprehensive blueprint as to how both central and local government can at low cost, reduce New Zealand's dependence on imported oil, with huge economic benefits to the economy and consumers. The independent report is entitled "Managing Transport Challenges When Oil Prices Rise".

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Do Saudis have spare capacity? And why your standard of living hinges on it.

The conventional response to a supply disruption like from Libya is -- no worries, the Saudis have heaps of oil and can immediately pump more to take up the slack. But do they? And what happens to oil prices if they can't?

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Earthquake $NZ5 Billion – Oil Quake More?

The Christchurch earthquake is estimated to cost the government $5 billion in tax revenue. GDP will fall by 1.5% in 2011, as a result of the quake alone.

While attention is understandably focused on Christchurch, an oil quake is beginning to shake the foundations of New Zealand's economy. The economic impact of an oil shock (or series of shocks) could well prove to be substantially greater, and more long-lasting than those arising from the Christchurch quake.

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N Z's oil policy based on flawed forecasts

Independent oil experts have been saying for many years that the New Zealand government's almost religious reliance on forecasts of the International Energy Agency (IEA) is a big mistake because they have been consistently and grossly over optimistic. The result has been a decade of lost opportunities to prepare for the looming oil shocks and shortages.

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Oil prices were rising steeply before the unrest in the Middle East

Here is the best analysis I have found about what’s been happening on the global oil scene.

It also confirms that peak oil pundits like Canadian economist Jeff Rubin, and Richard Heinberg and dozens of others, have been uncannily accurate.

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Starting to Join the Dots .... finally

Suddenly the world's media is awash with concern that the recent rise in oil prices will stall economic growth worldwide and cause another global recession. Guardian and here  BBC  Wall Street Journal

Finally, even in New Zealand, Brian Fallow economic commentator for the New Zealand Herald expresses concern about the implications for the New Zealand economy from rapidly rising oil prices.

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Ostrich-like Denial Continues

In August 2009 I wrote an opinion piece published in the New Zealand Herald - "Country Oblivious to Next Oil Shock". I opined that “the spike in oil prices to US$147 a barrel in 2008 helped trigger the global recession. And soon after a global economic recovery, the inevitable return to triple-digit oil prices will lead the world right back into recession.”
Back then the oil price was around US$70 a barrel – today Brent Crude is indeed over US $100 – in triple digit territory.

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Peak Oil for Saudi Arabia confirmed by WikiLeaks

Projections by peak oil people that Saudi Arabia oil reserves have been grossly overstated (by 40%) and that the country can no longer prevent world oil prices rising have been confirmed in confidential cables from the US Consulate, released by WikiLeaks

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Auckland airport -- where pigs fly and bring untold prosperity

An Auckland airport report estimates the airport corridor’s contribution to the economy for the next 20 years, but outrageously fails to even mention the future risks to the airline and tourism industries of higher oil prices and/or fuel shortages.

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NZ Survey - Elected Local Councillors Ill-informed on Peak Oil

Becky Wardell at the University of Canterbury has surveyed technical transport staff and elected officials in three representative local councils in New Zealand – (rural, a provincial city and Auckland) to determine what influences them and what their attitudes are to peak oil.

She found that the majority of elected officials had either minor or no concerns about peak oil and only 27% had a major level of concern about peak oil. The level of concern about peak oil amongst technical transport staff was much higher than elected officials, with 65% of them considering peak oil to be of major concern.

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NZ oil and gas in steep decline - Taranaki Report

Venture Taranaki have produced an immaculately presented report entitled "The Wealth Beneath Our Feet". The report is essentially a glossy public relations exercise of trying to talk up the contribution of the oil and gas industry to the local and New Zealand economy.

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