tag:blogger.com,1999:blog-54069578979907534802024-03-07T09:01:57.342+13:00Oil Shock Horror Probe<b>probing into global oil depletion and peak oil - with a New Zealand focus</b>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.comBlogger60125tag:blogger.com,1999:blog-5406957897990753480.post-58820498785714898742012-02-08T15:52:00.000+13:002012-02-19T16:16:48.153+13:00Only The Good Oil News<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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Radio New Zealand has <a href="http://www.radionz.co.nz/news/national/97474/major-potential-seen-for-nz-oil-industry">broadcast</a> a news item which typifies the pathological optimism of our media when reporting New Zealand's oil supply.<br />
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The story trumpeted how New Zealand could become a net oil exporter by 2030 if new oil fields are developed. The story was based on just one line in a Ministerial <a href="http://www.med.govt.nz/about-us/ministers/briefings-to-incoming-ministers-1/briefings-to-incoming-ministers/BIM-Energy-pdf/view">briefing paper</a> to new Energy and Resources Minister Phil Heatley.<br />
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Never mind that those “oilfields” have not even been discovered yet, or that the predictions are 20 years into the future, and are based on <a href="http://oilshockhorrorprobe.blogspot.co.nz/2011/09/oil-royalties-mirage.html">guesses based in turn on other guesses.</a><br />
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The real story which went unreported was in the very next paragraph of the briefing paper. -- New Zealand faces a steep <b>DECLINE in domestic oil production for the term of this government and beyond.</b><br />
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<blockquote class="tr_bq">
<i>“Note, however, that we are forecasting domestic production to decline over the next few years as existing fields such as Tui and Maari peak in their production, and before any new developments - which have a significant lead time - come on stream”</i></blockquote>
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The MED officials also massaged this to a more optimistic message by describing a many-year-long decline as "short-term"?<br />
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There is even a graph confirming the decline, so the stark implications for New Zealand, for the term of this government and beyond, was staring the media in the face. <br />
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In the same section officials tell the Minister more bad news which also goes unreported –<br />
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<blockquote class="tr_bq">
<i>“In 2010, mineral fuels (including crude oil) made up over 16 percent (by value) of total New Zealand imports. <b>Between 2002 and 2010, the value of mineral fuels imports increased by 133 percent </b>- despite the volume imported only increasing by 7 percent (this being driven by increasing global prices).” </i></blockquote>
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The implications for our terms of trade are <a href="http://oilshockhorrorprobe.blogspot.co.nz/2011/11/huge-blowout-in-nz-oil-import-cost.html">already huge</a>. It costs NZ $8 billion annually to import oil. If oil imports rose another 133% in the next eight years (a very conservative estimate) our oil import bill will be nearly $19 billion by 2018. My earlier estimates <a href="http://oilshockhorrorprobe.blogspot.co.nz/2011/08/christchurch-quake-cost-added-to-our.html">here</a> which came up with similarly big numbers.<br />
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We are quickly heading the same way as -<br />
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<b>Greece</b> which now spends over 5% of its GDP on imported oil and where <a href="http://www.zerohedge.com/news/europe-celebrates-its-latest-recession-record-high-gas-prices">petrol prices have doubled</a> in just three years, leaving that much less to pay of its voluminous debt.<br />
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Or <b>Italy</b> where <a href="http://www.indiaenvironmentportal.org.in/files/file/fossil%20fuels.pdf">oil imports have risen from $12 billion-$55 billion in 12 years</a> which is close to its current annual trade deficit, and a large contributor to Italy's parlous financial state.<br />
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It’s best that our media and politicians don't talk about such things though. We cannot have anything interrupting the good oil news.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com5tag:blogger.com,1999:blog-5406957897990753480.post-2304502844482284032012-02-01T12:46:00.000+13:002012-02-01T12:47:26.586+13:00Peak Oil’s Economic Pain Is Trumps<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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Oil’s tipping point has passed, and the economic pain of a flattening supply will trump the environment as a reason to curb the use of fossil fuels, say James Murray and David King, in <a href="http://www.indiaenvironmentportal.org.in/files/file/fossil%20fuels.pdf">an article just published in the prestigious journal Nature.</a><br />
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James Murray was founding director of the University of Washington’s Program on Climate Change. David King is director of the Smith School of Enterprise and the Environment, University of Oxford,. He served as chief scientific adviser to the UK government in 2000–07.<br />
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<br />
These two distinguished scientists have confirmed what many peak oil pundits have been saying for years. Nevertheless publication in the Nature journal will garner much attention.<br />
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the main points made in the article are…<br />
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<ul>
<li>Peak oil is a more persuasive argument for lowering emissions due to the more immediate and severe impact on the economy </li>
</ul>
<ul>
<li><span id="goog_1166172250"></span><span id="goog_1166172251"></span> 2005 was a tipping point. Crude oil production has not risen to match increasing demand leading to wild price swings</li>
</ul>
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<ul>
<li>Crude oil production has not risen to match increasing demand leading to wild price swings </li>
</ul>
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<ul>
<li>Oil price spikes caused economic crises and contributed to the one that world is “recovering” from now</li>
<li>The future economy is unlikely to bear what oil prices have in store</li>
<li>Only by moving away from fossil fuels can we ensure a more robust economic outlook and address the challenges of climate change</li>
<li>This will be a decades-long transformation that needs to start immediately</li>
<li>We are not running out of oil but we are running out of world that can be produced cheaply</li>
<li>Non-conventional oil won't make up the difference</li>
<li>It wasn't just the "credit crunch" that triggered the 2008 recession, but the rarely talked about oil price crunch as well</li>
<li>Historically there is a tight link between oil production and global economic growth.</li>
<li>If oil production can't grow, neither can the economy</li>
<li>Climate change has driven only slow policy responses, but peak oil engendered economic consequences will drive shorter term action</li>
<li>Governments that fail to plan for a decline in oil production will face severe economic consequences well before catastrophic climate change</li>
<li>The response from governments must be greater efficiency and conservation with policies such as -</li>
</ul>
<ol>
<li>higher taxes on oil</li>
<li>lower speed limits</li>
<li>encourage public transport</li>
<li>redirecting tax credits to renewable energy</li>
</ol>
<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-33957063709443669782012-01-22T10:46:00.001+13:002012-01-26T19:22:33.577+13:00Australian government tries to hide its own peak oil report<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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The Daily Telegraph <a href="http://www.dailytelegraph.com.au/news/opinion/all-evidence-of-this-treachery-went-down-the-memory-hole/story-e6frezz0-1226248729853">has revealed</a> how the Australian government has attempted to suppress its own report on peak oil. The response from the New Zealand government had been equally secretive and obfuscating.<br />
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The Report by the Australian Bureau of Infrastructure Transport and Regional Economics (BITRE) is called <i>“Transport Energy Futures; long-term oil supply trends and predictions” </i>and can be downloaded as a pdf <a href="http://www.manicore.com/fichiers/Australian_Govt_Oil_supply_trends.pdf">here</a><i><br />
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<b>The 470 page report concludes that world oil production will peak in approximately 2016 and then begin to decline for the rest of the century and beyond.</b><br />
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</i><br />
<blockquote>
<i>"Given the growth in deep and non-conventional oil balancing the shallow decline in conventional production, it is predicted that we have entered about 2006 onto a slightly upward slanting plateau in potential oil production that will last only to about 2016-eight years from now (2008).</i><br />
<i><br />
</i><br />
<i>After that, the modelling is forecasting what can be termed ‘the 2017 drop-off’. The outlook under a base case scenario is for a long decline in oil production to begin in 2017, which will stretch to the end of the century and beyond. Projected increases in deep water and non-conventional oil, which are ‘rate-constrained’ in ways that conventional oil is not, will not change this pattern."</i></blockquote>
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The report has never been published on an Australian Government website (unlike all other BITRE reports), but has now mysteriously appeared on a French website (leaked?) and from there has now gone mainstream. <br />
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The New Zealand government approach to peak oil has been equally secretive but much more cunning.<br />
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Although the National government received very strong advice from officials in 2009 confirming <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealand-at-greater-risk-from-oil.html">New Zealand's high vulnerability to oil shocks</a>, it has decided that the peak oil issue is altogether too sensitive to risk obtaining further advice on. NZ Report <a href="http://dl.dropbox.com/u/31214727/MinisterialbriefingOilpricesandtransportsectorresilience_Sept_2009.pdf">here</a> <br />
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Better not to ask any questions when you don't have any answers.<br />
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This ostrich approach was confirmed from my official information request in late 2011. The response I received was that no specific advice on the risks and impacts to New Zealand of a potential decline in world oil production had been requested or received since 2008.<br />
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What I would now like to know now is, given the high degree of co-operation between officials trans-Tasman, whether New Zealand officials or Ministers received copies of the BITRE report, and if so what was their response to it?<br />
<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com6tag:blogger.com,1999:blog-5406957897990753480.post-80615539969088652222012-01-17T10:21:00.000+13:002012-01-22T10:49:04.233+13:00Will the onset of energy descent force NZ into a steady state economy?<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
I wish to share this excellent article by Jack Santa Barbara of Nelson. He explores NZ's unique postion in a world facing an impending energy descent, and asks whether NZ could be the first nation to have a steady state economy. Full article <a href="http://fleeingvesuvius.org/2012/01/11/will-new-zealand-be-the-first-developed-country-to-evolve-a-steady-state-economy/">here</a><br />
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Here are a few extracts ..<br />
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"New Zealand will inevitably make a transition to a steady-state economy. The onset of energy descent — having less and less energy to use with each passing decade — will push it to do so sooner rather than later. The critical question is whether the transition to a steady-state economy will be by design or disaster.<br />
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As a “developed” country, New Zealand is highly dependent on fossil fuels for its economy: international tourism, the production and export of food and timber, domestic transportation, agriculture and housing. New Zealand’s economy will change dramatically as it loses access, whether through geologic depletion or market exclusion, to relatively cheap hydrocarbon energy.<br />
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New Zealand’s geographic isolation will be a major factor in its experience of energy descent. A relatively small market at the far end of the energy supply chain, New Zealand is particularly vulnerable to both reduced supplies and high energy prices — one of the easiest customers to drop in favour of larger, closer and more lucrative markets. A market-driven energy decline could be both unexpected and abrupt.<br />
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There is an exciting and inspiring alternative to this negative scenario: New Zealand appreciates that it will be the first developed country to seriously suffer from energy descent and prepares accordingly. New Zealand has a unique opportunity to provide global leadership in the transition to a steady-state economy unfolding by design rather than disaster. <br />
If New Zealand is to make the transition to a culture and economy that is ecologically sustainable, socially just, healthy and invigorating, it will need to dramatically change the structure of its economy. Instead of exporting natural resources, it will need to export practical sustainability knowledge and expertise for all facets of an energy-descent economy — an expertise likely to be in high demand as the world wakes up to the impending crises ahead.<br />
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New Zealand has many advantages over other nations in terms of becoming a leader in practical sustainability:<br />
• The capacity to feed itself (although it currently imports about half its food)<br />
• Geographical isolation from most population centres, making mass migration difficult<br />
• A small population relative to the biocapacity of its land <br />
• A climate likely to be less affected by climate change than that of many highly populated areas<br />
• A minimal number of large cities obliged to undergo radical adaptations in the face of global change <br />
• Many small rural communities that could be expanded and redesigned to be sustainable<br />
• Traditional frugality and practicality, still flourishing in much of the population<br />
• A residual core of knowledge and skills required to restart essential local industries <br />
• A literate and well-educated population with access to technical training facilities <br />
• A tradition of parliamentary democracy helping to facilitate the increased levels of cooperation required for various groups to contribute to the transition.<br />
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A strategy also requires an honest assessment of liabilities. Some of the obstacles to such a new vision for New Zealand include:<br />
• A widespread commitment to economic growth which has been responsible for the crises New Zealanders now face (New Zealanders have all benefited from this economic model and a new paradigm will challenge some basic beliefs about what constitutes the good life — for example, the role of material goods for wellbeing; the efficiency and innovativeness of corporations; the possibility of a highly industrialized economy.)<br />
• Some vested interests intensely committed to maintaining the growth paradigm as it gives them considerable power (for example, some politicians and the elites that have undue influence over them)<br />
• International pressures to provide for needs abroad, such as food, coal and immigration <br />
• The nation’s current foreign debt and any additional debt it takes on<br />
• Uncertainty about the magnitude and timing of the impending crises on New Zealand (This makes planning difficult as planning at leisure is different from planning on the brink of disaster and New Zealand has little way of knowing how close it is to the latter.) <br />
• The possibility that the rate and magnitude of changes coming will overwhelm people and push the country to a disaster steady state faster than it can manage a transition that allows it to optimise its physical and social resources<br />
• Inertia and despair as a result of coming to understand the profound harm humans have collectively done to Mother Earth and the extent of change required for a healthy, sustainable future.<br />
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It is prudent, given the uncertainty about the timing and magnitude of impending changes, to adopt a risk management approach — to assume that significant change can be rapid and to be as prepared as possible as soon as possible. The majority of New Zealanders is in denial about the nature and scale of the problems the country faces. When crises hit the majority, people will need massive support. Preparing stores of essential resources such as food and water, along with a capacity to teach the basic skills people will need to survive and thrive, would be both prudent and helpful."<br />
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<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com2tag:blogger.com,1999:blog-5406957897990753480.post-43589455523940362962011-12-07T11:58:00.001+13:002011-12-07T12:24:53.256+13:00This does not compute<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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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.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWjsBtO-3IOzySKZPkcqfTbnIZxsh2A8F8tnzMeyUq6ZcDBiowQrAWp94fPG-ijimIlj3nkPriIpCwklAbJiqd6abg7hVgaFIdh05RcMval89tSSjUGjG6ak29IxnQSmLN1XtgyEFHwoI/s1600/recovery.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="271" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhWjsBtO-3IOzySKZPkcqfTbnIZxsh2A8F8tnzMeyUq6ZcDBiowQrAWp94fPG-ijimIlj3nkPriIpCwklAbJiqd6abg7hVgaFIdh05RcMval89tSSjUGjG6ak29IxnQSmLN1XtgyEFHwoI/s320/recovery.gif" width="320" /></a></div><b>Oil price strangling economic “recovery”</b><br />
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The IEA's Fatih Birol said the world economy was in a more fragile state now than during the crisis of 2008-2009. <b> 2011 has been a <a href="http://www.arabianbusiness.com/don-t-bet-on-big-fall-in-oil-even-as-crisis-looms-431435.html">record year for oil with Brent crude at its highest-ever average above $110 per barrel.</a></b> This is the highest annual oil price since 1864, during the American Civil War. <br />
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Birol said Europe was especially at risk from the high oil price, but that it could also turn into a major problem for energy-hungry Asia.<br />
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"It is a major risk for the slowdown of the economic growth in Asian countries which were the countries which brought us out of the financial crisis in 2008," said Birol.<br />
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With New Zealand so reliant on China, and the rest of Asia, the implications for us are huge.<br />
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<b>Lack of Investment or lack of oil?</b><br />
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The immediate future of oil production is seen by as one of adequate investment. The IEA says that the Middle East and North Africa will need at least $100 billion a year in new investment for the foreseeable future even in a place where oil is still cheap to exploit. The problem, however, is that the rising expectations of Arab Spring is rapidly shifting oil revenues from investment in more oil production to the kinds of social spending that will keep people happy and out of the streets.<br />
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In <a href="http://www.energybulletin.net/stories/2011-11-29/peak-oil-crisis-iea%E2%80%99s-road-show">the closest the IEA comes to predicting peak oil</a>, Birol says that without major increases in investment (an increasingly unlikely occurrence), Middle Eastern oil production will fall sharply leading to oil prices in excess of $150 a barrel - until of course demand slumps from the high prices.<br />
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Meanwhile in the same week as the IEA was stating 90% of future oil production must come from the Mid-East, S<a href="http://www.reuters.com/article/2011/11/21/us-oil-new-aramco-idUSTRE7AK1T520111121">audi Arabia announced that it is halting its $100bn oil expansion programme</a>, claiming that the requirement for the kingdom to increase production has "substantially reduced" in the face of emerging new oil and gas supplies. <br />
"Has the Kingdom already reached peak production capacity as it struggles to replace depleting supplies? Is this a case of budgetary priorities shifting as Saudi moves spending to social programmes to avoid contagion of unrest from neighbouring countries? "<br />
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<b>This does not compute</b><br />
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Who is wrong? My pick is that Saudi Arabia is the emperor with no clothes, or in this case with no extra oil to pump. It cannot yet admit that it is close to its maximum production capacity, and is using the much hyped development of unconventional oil in the US and Canada as a convenient excuse .<br />
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But if the Saudi production stalls out at present levels, while the IEA warns we rely on them and other Mid East producers for 90% of future production then obviously something does not compute. <br />
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The only realistic conclusion is that oil prices will stay high and move even higher until the global economy falls back into recession or even depression and chokes off demand. And a recession/depression could be coming to an economy near you, sooner than you imagine.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com2tag:blogger.com,1999:blog-5406957897990753480.post-25758913368057426682011-11-30T16:02:00.001+13:002011-12-01T08:37:39.880+13:00NZ Election 2011 - Praying to the Growth Fairy<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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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.<br />
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Before I could get around to it I read this <a href="http://thestandard.org.nz/paradigm-shift/">excellent post from James Henderson at "The Standard",</a> and so I am re-posting it here. <br />
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<b>Paradigm Shift</b><br />
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"In
the Budget, we were told to expect 4.2% growth in 2012, which would make
getting back into surplus and creating jobs possible. The Pre-election
Update reduced it to 3%. Now, the OECD says ’2.5%, providing Europe
doesn’t go to crap .. oh, and Europe’s going to crap’. We’ve got to
accept that economic growth won’t fall on us like manna from heaven
anymore and work out how to build an actual brighter future.<br />
<br />
At the anemic rate of ‘recovery’ we’ve had since the economy reached
its lowest ebb two years ago, it will take until 2018 to recover the
level of GDP per capita we enjoyed in 2007. But even that is unlikely to
happen – the outlook is getting worse, not better.<br />
<br />
We keep on being told that a return to ‘normal service’, rapid growth
with rising wages and more jobs, is just around the corner but that’s
all reliant on external factors – higher commodity prices, low oil
prices, reinsurers coming to the party in Christchurch, even foreigners
wanting to buy our power companies for high prices but generously not
gouging us once they have them.<br />
<br />
The fact is, growth isn’t coming back. That’s the reason why European
countries are having debt crises. They borrowed in the expectation that
growth would mean a larger economy in the future to pay back the money
and the interest. When growth ceased, the debt pile just grew and grew
as a portion of the economy until it reached danger point.<br />
<br />
When you think about it, lending is essentially a bet by the borrower
that they will have the capacity to pay back the principal plus
interest in the future (ideally, because the borrowed money has been
used to create more productive capacity) and a bet by the lender that
the borrower’s wealth will grow sufficiently for them to pay back the
loan. In other words, the credit system is all predicated on the economy
growing.<br />
<br />
Now, it’s OK to borrow for a while in recessionary times to keep
everything ticking over and stop an even deeper recession caused by
lending and borrowing freezing up and people paying down debt rather
than investing or consuming. But, if growth isn’t coming back, all
you’ve done is dig yourself a deeper hole.<br />
<br />
Labour, I think, got about this far in their economic thinking: if
growth isn’t happening, debt is a major problem. When it became evident
earlier this year that no rebound is coming, if anything another
recession is coming, Labour turned its focus on to getting debt down
while maintaining control of strategic, income-producing infrastructure.<br />
<br />
But only the Greens have started to think beyond that to why growth
isn’t coming back and what to do about it. Unfortunately, their policy
in the area isn’t all that detailed. The Greens know that the economy is
an energy system – it will grow when there is more net energy being
used effectively (ie efficiently) after accounting for the energy needed
to generate the energy in the first place. Peak oil means that the
‘surplus’ energy that powers the economy is starting to decrease. For a
while, the fall can be countered by increased efficiency. And that’s
essentially where we have been for the last five years – the net energy
available, at least in terms of oil (which is by far our most important
energy source because it powers transport) has been steady or falling,
and only efficiency gains are allowing the weak growth we’ve seen.<br />
<br />
As a crude measure of this, you can look at how oil imports have
grown as a share of our national income, squeezing out other things.
We’re paying more (ie devoting more of our productive capacity/energy)
for basically the same amount of oil, and that leaves less for
everything else.<br />
So, where does that leave us? It means the growth paradigm,
particularly the export-led growth paradigm is dead. Even if we had
enough water and fertile land to produce a whole lot more milk powder
(and we don’t), our trade partners won’t be able to pay enough for it
and the costs of transport or low-value, high-bulk goods will become
prohibitive.<br />
<br />
If we’re not growing our exports, we can’t increase our imports
without going into debt, which we can’t do. We need, then, to become
more self-sufficient and decrease our needs for imports. The biggest
import is oil, so investing in replacing oil and lessening our need for
it should be a priority. This is old-fashioned import substitution for
the peak oil age – public transport instead of highways to nowhere, more
energy efficient housing (which also means lower health burdens from
poverty and a more productive workforce in the long-run), encouraging
domestic IT and manufacturing. <br />
If this looks a lot like the Greens and Labour’s economic policies,
it is. The difference is that both of them are still assuming that
‘normal service’ will resume. They both base their forecasts on
Treasury’s (fair enough), which assumes that growth is just around the
corner.<br />
<br />
They need to go the step further and plan for a steady-state economy,
and how to maintain a steady-state economy in a world of shrinking oil
supplies. We can’t assume any more that growth will magically show up
and solve our problems. A steady-state outlook needs to be at the heart
of our tax system, our economic policy, and our ideas about how income
is distributed within the economy.<br />
We can no longer rely on getting paid more for the few things we
export so that we can import everything else- we need to become more
self-sufficient. We need to build a resilient and fair economy and
society that ensures we are getting the most out of everyone (which
means not consigning 20% of kids to the scrap-heap from birth by
allowing them to live in poverty) and every resource.<br />
<br />
We can actually build a better future within these constraints. We
have incredible wealth as a country and nearly $45,000 of economic
output for every man, woman, and child every year. We can build a New
Zealand that works (and provides work) for everyone, if we choose to.
But it means really planning for the future, not pulling a few economic
levers and leaving it up to the ‘genius’ of the private sector to
decide. It also means not allowing our wealth to be so concentrated in
the hands of the few, and paying everyone else off with promises of
growth to come.<br />
<br />
Unfortunately, we’re going to waste 3 more years before we even get
started because we have a government whose plan is: cross fingers, sell
assets, and pray to the growth fairy."</div>
<br />
<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com3tag:blogger.com,1999:blog-5406957897990753480.post-25403073840401814802011-11-07T23:17:00.000+13:002011-11-07T23:31:37.510+13:00Election 2011 Two-facedness - Saving money good - saving fuel bad<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
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. <b>Saving money good.</b><br />
<br />
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. <b> Saving fuel bad.</b><br />
<a name='more'></a><br />
<br />
If you thought the need to save fuel was a minor issue compared to debt reduction, and a long-term savings and investment strategy -- think again.<br />
<br />
<b>A just released report from a US military think tank the Military Advisory Board (MAB) says oil importing nations like the US (and by comparison also New Zealand) need to reduce oil consumption by 30% in the next 10 years.</b><br />
<br />
The report, entitled <a href="http://www.cna.org/EnsuringFreedomofMovement"></a><a href="http://www.cna.org/EnsuringFreedomofMovement">Ensuring America's Freedom of Movement: a National Security Imperative to Reduce America's Oil Dependence</a> <http: default="" files="" mab4.pdf="" sites="" www.cna.org="">, describes America's reliance on imported oil as the "Achilles heel of our national security". Members include some of the US’s highest-ranking retired military leaders with 400 years of collective military experience. The report calls for immediate, swift and aggressive action over the next decade to achieve the 30 percent reduction in U.S. oil consumption. (Guardian article<a href="http://www.guardian.co.uk/environment/2011/nov/02/military-thinktank-us-oil?intcmp=122"> here</a> )<br />
<br />
<i>“We have seen oil shocks before. And they have been immediate and far-reaching. But at today’s level of US consumption, a sustained disruption would be devastating - crippling our very freedom of movement,”</i> said General Paul Kern, USA (Ret.) who chairs the MAB. <i>“This isn't just about the volatility of gas prices at the pump. This is a national security problem, manifesting itself economically, diplomatically and militarily, and it is not just going to go away."</i><br />
<br />
The Report highlights how the US (just like New Zealand) has transportation systems which rely almost exclusively on petrol, diesel, and jet aviation fuel. These three products are refined from a single basic ingredient: oil. How we get to work, how we ship materials, how we farm or produce our food, and how we transport raw products to manufacturers or finished products to or from markets depends, in nearly all cases, on this single source of materials: oil. <br />
<br />
<i> “We have seen oil shocks before. And they have been immediate and far-reaching. But at today’s level of US consumption, a sustained disruption would be devastating - crippling our very freedom of movement,”</i> said General Paul Kern, USA (Ret.) who chairs the MAB.<br />
<br />
The report calls on national leaders to take the following steps (all of which apply equally to New Zealand as a nation almost totally reliant on imported oil ) to reduce U.S. oil demand by 30 percent in ten years:<br />
• <b>Increase efficiency: </b>The first, fastest and most effective strategy to reduce oil consumption is to increase efficiency. The report identifies fuel economy standards for cars and trucks as a proven and effective way to reduce the use of oil, and calls for strengthening those standards, <br />
• <b>Diversify supply</b>: “Our current overreliance on a single fuel is a weakness; relying on diverse fuels and vehicle types can be a strength,” the report notes. Government must take action to promote the use of a more diverse mix of transportation fuels and to drive wider public acceptance of these alternatives.<br />
• <b>Develop a national, cogent, dedicated and sustained energy roadmap that rises above partisan politics</b>. The military leaders warn “security must trump ideology,” adding “the scale of impact associated with our energy use is massive.” They write that “the right energy choices can bring down our trade imbalance, lead to new jobs at home, launch new American-made technologies.” <br />
<br />
If the US‘s military top brass are calling for a massive fuel savings plan, then I say it’s well past the time for our New Zealand politicians to grasp this nettle also. The US military can see clearly that slavish reliance on the ideology of “the market will solve it” or the occasional advert on TV urging us to keep our car tyres pumped to save fuel up is not going to cut it. <br />
<br />
If a long term savings and investment is good, then a comprehensive fuel savings plan is very very good. <br />
<br />
Poster from World War 11 - Oil is Ammunition<br />
<br />
</http:><br />
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<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com2tag:blogger.com,1999:blog-5406957897990753480.post-19563574604832867432011-11-02T14:07:00.001+13:002011-11-02T14:26:37.752+13:00Huge blowout in NZ oil import cost<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
<br />
In the year to September <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10762020">oil imports rose 22% to $7.7 billion</a>. Oil is costing us $1.4 billion more than a year ago.<br />
<br />
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 <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/christchurch-quake-cost-added-to-our.html">government's contribution to the Christchurch earthquake.</a><br />
<a name='more'></a><br />
<br />
It gets worse. <br />
<br />
<b>Next decade an oil supply chasm</b><br />
<br />
The current contribution to our balance of trade of $3 billion from domestic oil production is on a steep decline and will be almost zero by 2020. Assuming new oil is found (a big if) -- little new oil will flow until 2020 and most after 2030.<br />
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<br />
<br />
<b>We are vulnerable to supply shocks</b><br />
<br />
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<br />
<br />
<b>Our economy is more exposed to oil shocks</b><br />
<br />
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<br />
<br />
<b>Our current low or no growth and high inflation is due to the 2007 -- 2008 and present oil price shocks</b><br />
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<br />
<br />
<br />
I have scoured the 2011 election media coverage for discussion of these issues by any of the leaders or candidates -- results -- zilch. Oh well never mind, we won the Rugby World Cup so no worries!<br />
<br />
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<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com5tag:blogger.com,1999:blog-5406957897990753480.post-36958897614948197702011-10-29T16:18:00.000+13:002011-10-31T14:30:58.730+13:00New Foundation to highlight peak oil and end of growth<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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When I started writing this blog over a year ago, I stated my motivation was <i>“to probe, raise awareness, encourage informed debate, and look at community responses.”</i> 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?<br />
<a name='more'></a><br />
<br />
You can imagine my delight to discover that a new initiative is taking up this challenge. It’s called <a href="http://www.energyforthefuture.net.nz/">Energy for the Future</a> with a mission to <i>“seek contributions, energy and ideas to help generate a wave of consciousness that questions the validity of growth capitalism and positively advocates shared prosperity without growth.”</i><br />
<br />
The <a href="http://www.energyforthefuture.net.nz/">website</a> is seeking expressions of interest and ideas. Please check out the site. You will find a brief precis of the problems, the mission, goals and objectives, and how to get involved.<br />
<br />
I am very excited about the initiative. It could well be the much-needed catalyst to generate the wave of consciousness that takes these issues into the mainstream. <br />
<br />Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-78028040839494974682011-10-13T15:00:00.000+13:002011-10-13T15:37:15.685+13:00Peak oil, recessions and the end of growth<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
On Tuesday I gave a presentation to Auckland University students on <i>"Peak oil, recessions and the end of growth"</i><br />
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<br />
The event was organised by <a href="http://www.aiesec.org.nz/">AIESEC </a>, the world's largest youth run non profit organisation.<br />
<br />
The powerpoint version is available <a href="http://dl.dropbox.com/u/31214727/Peak%20Oiloct2011.pptx">here</a><br />
<br />
to view the video on slide 24 see <a href="http://www.youtube.com/watch?v=EQqDS9wGsxQ">here</a><br />
<br />
The .pdf version is <a href="http://dl.dropbox.com/u/31214727/Peak%20Oiloct2011.pdf">here</a>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-47146754167565647892011-10-03T14:30:00.000+13:002011-10-03T14:39:13.445+13:00When might New Zealand's oil imports dry up?<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
A Guest Post by Nigel Williams<br />
<br />
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?” <br />
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The answers to these will be different for each one of us, possibly by many years.<br />
<a name='more'></a><br />
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But since I have a strong desire to make sure that when ‘it’ happens to me I am as prepared for the ‘transition’ as I can be, I have prepared this analysis based on the best contemporary information I can find.<br />
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<b>Data</b><br />
Raw data on country-by country production and consumption is usefully <a href="https://www.cia.gov/library/publications/the-world-factbook/rankorder/2173rank.html">complied by the CIA</a>. Subtracting one from the other gives the country’s import/export status. The available CIA data is generally of about 2009 vintage – good enough for overall views. The following Table 1 shows by country the Top Ten world ranking for oil production and consumption and hence (by subtraction) exporter and importer ranking too.<br />
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Outside the club containing all the net oil exporters and the top ten importers is a group of comparatively impotent countries with little or no indigenous oil production who all rely on imports to satisfy their demands. <br />
<br />
For example New Zealand produces about 61,000 barrels per day and consumes about 151,000 barrels per day (CIA 2009 data). Virtually all New Zealand’s production goes to refineries offshore, so we import most of our domestic needs in spite of our fluctuating oil production approaching 40% of our volumetric demand. The estimates of the scale of our currently producing oil reserves have been <a href="https://www.cia.gov/library/publications/the-world-factbook/rankorder/2173rank.html">downgraded recently</a>, and production is now confirmed to be falling sharply. <br />
<br />
The P50 estimates of actual oil production for the significant oil-producing fields around New Zealand each fall to the near-useless volume of 1 million barrels per year (about 2750 barrels per day) between 2020 and 2025. So even if we were to divert local production to our refinery (and then pay the going global price for it) it will only be a drop in our present daily demand bucket of 160,000 barrels. Barely enough to sustain <a href="http://www.energybulletin.net/node/19919">essential emergency and security services</a>, but maybe worth having all the same.<br />
<br />
<b>Increased production?</b><br />
So what is the likelihood of increasing growth in production from the biggest producers?<br />
<br />
Saudi Arabia is <a href="http://www.econbrowser.com/archives/2011/03/what_will_saudi.html">unlikely to increase production</a> much beyond present levels.<br />
<br />
After several years of <a href="http://omrpublic.iea.org/nonoecdsupplyresults.asp?nonoecdcountries=Russia&nonoecdformat=%25&Submit=Submit">steady increases</a>, it appears that Russia’s oil companies are <a href="http://ecoggins.hubpages.com/hub/Russia-Political-and-Economic-Outlook-2011-and-Beyond">struggling to increase production</a> due in part to the ongoing depletion of existing oil fields. <br />
<br />
<a href="http://omrpublic.iea.org/OECDresults.asp?OECDcountries=United+States&oecdformat=%25&Submit=Submit">IEA data</a> confirms that production from the United States is <a href="http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Oil/6448894">at best steady</a>, bolstered only by shale oil and imports from Canada and further abroad. <br />
<br />
Iran, in spite of hopes to the contrary, appears to be <a href="http://omrpublic.iea.org/opecsupplyresults.asp?opeccountry=Iran&opecformat=%25&Submit=Submit">in decline too</a>, and unless its political woes are resolved that is unlikely to change. <br />
<br />
And so we go on down the list, with scant encouraging news to be found on the increasing production front.<br />
<br />
<b>Increased internal consumption of oil exporters</b><br />
Now our dragon is eating its tail - all oil exporters are also oil consumers. It is inevitable that the local oil production of these countries will eventually be crossed by the internal oil demands of the country – if only because the country sells its oil very cheaply to its population to maintain social order and its political power base.<br />
<br />
As Luis de Sousa noted in his presentation to ASPO in Portugal in 2008, Jeffry Brown’s <a href="http://scitizen.com/future-energies/jeffrey-brown-and-the-net-oil-exports-crisis_a-14-2559.html">Export Land Model</a> for any country sees <a href="http://www.aspo-spain.org/aspo7/presentations/deSousa-Exports-ASPO7.pdf">production and consumption run relentlessly towards each other.</a> There are a number of well-documented <a href="http://en.wikipedia.org/wiki/Export_Land_Model">recent cases</a> of this effect, notably Indonesia, Egypt, Malaysia and recently Vietnam. The risk of Mexico crossing the zero export line<a href="http://www.smarterearth.org/content/mexico-and-usa-will-follow-egypt-collapse"> is as acute</a> as it is unavoidable due not only to the effects on the people of Mexico but on the USA’s supply situation too.<br />
<br />
Saudi Arabia’s <a href="http://www.zerohedge.com/article/electric-company-saudi-arabia-warns-country-may-run-out-oil-2030">internal oil consumption is increasing at about 6% per year and will equal its oil production</a> around 2030. Even <a href="http://www.graphoilogy.com/2008/01/quantitative-assessment-of-future-net.html">Russia is expected to be consuming all its production by around 2025. </a>Analysis of the top exporters show a<a href="http://www.aspousa.org/2010presentationfiles/10-7-2010_aspousa_TrackBNetExports_Brown_J.pdf"> persistent trend down to zero exports</a>. Not a good look.<br />
<br />
<b>Making deals…</b><br />
The USA obviously suffers intensely with its <a href="http://www.google.co.nz/search?gcx=w&sourceid=chrome&ie=UTF-8&q=USA+oil+deals">history of oil deals</a> with increasingly shaky and unsympathetic regimes, with its final solution to any particularly difficult provider being to give other nations the idea that the use or threat of military force is a legitimate way to secure oil supplies. The <a href="http://www.bloomberg.com/news/2011-09-14/oil-holds-losses-after-energy-department-report-on-inventories.html">USA’s demand is stalled for now.</a> <br />
<br />
The remainder of the top ten importers tend to adopt rather more conventional and successful approaches.<br />
<br />
<a href="http://www.payvand.com/news/07/feb/1213.html">Japan’s oil deal with Iran</a> may no longer be current, and it appears to be a<a href="http://venezuelanalysis.com/news/5355"> bit behind the others</a> in nailing secure supplies. Its state of mind right now with the demise of public favour of nuclear and the resulting economic impacts leaves it unlikely that Japan’s demand will increase markedly, although its economic clout means its basic fuel supply needs will still need to be met. <br />
<br />
China: Deals with all and sundry, including <a href="http://www.google.com/hostednews/afp/article/ALeqM5hqtRn6suHy3ucseDgyPglRoUlMbg?docId=CNG.a807bd69f3debaa7a6b4ca2383f9500b.1481">recent</a> and<a href="http://news.bbc.co.uk/2/hi/7634871.stm"> past deals</a> with <a href="http://www.csmonitor.com/World/terrorism-security/2011/0525/Venezuela-threatens-to-interrupt-US-oil-supply">USA’s supply saviour Venezuela</a>. Some expect <a href="http://www.thisismoney.co.uk/money/news/article-1658364/Oil-price-predictions-What-oil.html">China’s oil demand to increase by 9.2% next year</a> (2012)<br />
<br />
And the deal-making is never simple, with <a href="http://www.spiegel.de/international/germany/0,1518,754571,00.html">Germany</a> recently providing bank assistance to India to help that country with an oil deal with Iran, over protests from US of A. The deal ostensibly led to the release of two German reporters held by Iran, but nevertheless the use of oil agreements as a bargaining chip is an interesting development. <br />
<br />
South Korea is rubbing shoulders with suppliers in <a href="http://allafrica.com/stories/201107050832.html">South Africa</a>, <a href="http://gulfnews.com/business/oil-gas/s-korea-secures-abu-dhabi-oil-deal-1.776166">United Arab Emirates</a> (for a 100 years!) as well as agreements with the big corporates<a href="http://www.yorkshirepost.co.uk/business/business-news/south_korea_agrees_51bn_lng_deals_with_oil_giants_shell_and_total_1_3689924"> Shell and Total.</a> <br />
<br />
India is striking up useful relations with the <a href="http://www.tradearabia.com/news/ogn_202550.html">House of Saud </a>and <a href="http://www.financialexpress.com/news/india-signs-landmark-kazakh-oil-deal/777067/">Kazakhstan</a>, and no doubt as many others as it can, and who can blame them. It’s a great example of what a state with awareness of the coming crisis should be doing. A Lamb for Litres deal between New Zealand and any anybody who eats meat and produces oil would not be a bad scheme. The odd refrigerated container as a back load on the deck of a tanker would not be a bad idea. <a href="http://www.thisismoney.co.uk/money/news/article-1658364/Oil-price-predictions-What-oil.html"> India’s demand is expected to grow by up to 8% next year.</a><br />
<br />
And even France has not been backward at coming forward – rapidly establishing working relations with the new regime in <a href="http://timesofindia.indiatimes.com/world/middle-east/France-strikes-oil-deal-with-new-Libyan-regime-Report/articleshow/9821572.cms">Libya</a>. <br />
<br />
<b>New Zealand’s Supply Position</b><br />
With the present oil supply structure the New Zealand government has no intrinsic structure or mandate with which to commence such negotiations. Thus compared to the Top Ten Importers, New Zealand is singularly timid in any effort to establish working relationships with other sovereign-state providers, preferring instead to rely entirely on multi-national corporate providers to satisfy its domestic needs. <br />
<br />
New Zealand Refining Company’s <a href="http://www.nzrc.co.nz/investor-centre.aspx">major shareholders</a> are BP, Exxon Mobil, Aotea Energy Limited (‘Z’ to the man on the street), Garlow Management Incorporated and Chevron. Garlow seems to be withdrawing from a number of NZ investments, including putting its stake in Rainbow’s End up for sale, but I suspect its interest in Marsden Point may be more in that facility’s ability to process the heavier sour Arabian crudes and on-ship them to more lucrative destinations in the continental United States and to its home ports in Canada than to provide any benefit here. <br />
<br />
Only the independent brand <a href="http://www.gull.co.nz/fuel-terminals/">Gull</a> (wholly owned by Gull Group from Australia) imports its refined product directly to its terminal in Tauranga. <br />
<br />
So in total New Zealand’s fuel supply arrangements of around 160,000 barrels a day are directly ‘owned’ by private interests, and the New Zealand government does not have any effective international agreement for supply of fuel at all; with anybody. We certainly do not have anything like the astonishing 100-year agreements secured by the likes of South Korea – that is foresight with a capital ‘F’.<br />
<br />
We do not even have any first-call on our local oil production that hovers between 60,000 and 40,000 barrels a day, depending on the state of our tiny oil fields. Instead we take the royalty money to assist with our balance of payments, and as noted above even that meagre cash injection is <a href="http://dl.dropbox.com/u/31214727/Woodwardreport.pdf">set to decline sharply. </a><br />
<br />
<b>The Players</b><br />
We have the net oil exporters who are enjoying the economic and social benefits of their happy positions, with the inevitable outcome (as highlighted by the Export Land Model) that their ability to export is rapidly eroding; next we have the Top Ten importers who are employing every possible shade of negotiation skill, guile and if necessary force to secure robust and remarkably long term supply agreements with those oil exporters, and we have the likes of New Zealand with no effective direct hold at all on its oil supply.<br />
<br />
The exporting nations are of course in a prime spot as far as future global economic activity is concerned. If you are setting up a new production line will you do it in an increasingly energy poor country like New Zealand (about as energy-poor as it gets) or even one like Mexico which is close to oil-neutrality and the consequent collapse of its major income stream and Egypt-type social instability soon thereafter? No, you will pick a winner and look for the most politically-stable operating base you can find. Norway, for example, looks a good pick, and Russia too for a while if you can figure out the rules to operate there. The point is that thoughtful manufacturers will transfer operations to countries that have the best chance of being productive longest, while abandoning less well-endowed and hence riskier locations. This will of course exacerbate the failure of the energy-poor economies, and hasten the rise in internal energy consumption by the current net exporters. <br />
<br />
There is little comfort to be gained from the fact that we are probably not alone in this unhappy condition. If we count the oil exporters on the CIA list we find that there are some 43 countries with a production surplus ranging from as little as one thousand barrels a day up to Russia with 7,800,000 barrels a day to sell.<br />
<br />
The other group of net importers (including New Zealand) numbers 152 countries, 62 of which (again including New Zealand) have some domestic production, but not enough to cover their needs.<br />
<br />
So we have three groups of players in the game. The first are the net exporters, the second group are the net importers who have managed to secure some decent supply agreements with the exporters, and the third is The Rest (including New Zealand) who are reliant on supplies from the net exporters, but who have no significant assurance of supply from anybody.<br />
<br />
<b>What then does the future hold for us?</b><br />
World Energy Outlook 2010 and subsequent reports and refinements, gives a transparent view of the future oil supply situation for places like New Zealand. The key chart is shown below in Figure 1.<br />
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5Ae7U9nDVOHlapo1hPEU9SShRgZItATE-9W2JkAqBK4oqhGm8oDzXckmV3px8-BRCt0vrZfunyrIj8BR6Qo3BnI3R2p4E37z_zKttGFtgvVGfYk3nQcdyCBddjg5xtU5GFTfTZ1c8Pco/s1600/HLDWH+Fig+1.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="257" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi5Ae7U9nDVOHlapo1hPEU9SShRgZItATE-9W2JkAqBK4oqhGm8oDzXckmV3px8-BRCt0vrZfunyrIj8BR6Qo3BnI3R2p4E37z_zKttGFtgvVGfYk3nQcdyCBddjg5xtU5GFTfTZ1c8Pco/s400/HLDWH+Fig+1.jpg" width="400" /></a></div>
Figure 1: WEO 2010<br />
<br />
The WEO 2010’s chart for the New policies scenario gives their best estimate for World Oil Production from Currently producing fields, Fields yet to be developed, Fields yet to be found, Natural gas liquids, Unconventional oil.<br />
<br />
I will not over-analyse the meaning and energy content of these various types of oil. However when I put on my ‘prudent grandfather’ hat I find that with the combination of:<br />
<br />
• declining energy return on energy invested for production from existing wells, <br />
• my scepticism about the actual production of fields to be developed and fields to be found, <br />
• the low energy content of natural gas liquids and <br />
• the low energy return from the production of unconventional oil <br />
<br />
I end up putting a pin in the IEA chart at about 40 million barrels a day around 2030. I find any higher figure to be non-credible.<br />
<br />
So in terms of the raw production likely going forwards we have the production curve for existing fields, and a sliver of the production from the rest.<br />
<br />
<b>The Big Picture</b><br />
Figure 2 shows this decline curve through 40 million barrels a day around 2030 and the demand curve of the exporting nations incremented upwards by 2.9% per year. This modest increment rate recognises the impact of the overall declining global economic situation, and the increased internal demand arising from natural growth exacerbated by transfers of production from other countries.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuH8hX_INX5nmPtDVOR3gdc9vF-TeS19HQXlRPZ6S3493mjATYfquei1K-DXyy1P8GbAbMY4LGm__aOqrOS8UYcuGqoIBxSJhHN__sfsG3lgZuozAcVgNjjv9f01DRZ-4VXvQn8YNCPdI/s1600/HLDWH+Fig+2.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="246" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiuH8hX_INX5nmPtDVOR3gdc9vF-TeS19HQXlRPZ6S3493mjATYfquei1K-DXyy1P8GbAbMY4LGm__aOqrOS8UYcuGqoIBxSJhHN__sfsG3lgZuozAcVgNjjv9f01DRZ-4VXvQn8YNCPdI/s400/HLDWH+Fig+2.jpg" width="400" /></a></div>
Figure 2: IEA WEO 2010 and Exporter's Consumption<br />
<br />
Based on this simple chart, it appears that there will be no oil left for anybody except exporting nations by about 2031. But don’t worry yet; it gets worse.<br />
<br />
If we add the demand of those Top Ten net-importing nations which have managed to secure some solid supply agreements to the exporter’s demand then we get a better idea of what is left for The Rest (Figure 3).<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj12HaKeaxums2qmhEFAUlJ3GEBan7sW3o-DNZR-wY10eliphS7eigvZkWnJZhZr-yjBz8o1Ilpdys3gLrR2sdouEIUqWARL0rGCGhRp9ZbleP2PaEO3gA2d73Tw0IOP8GaOaHPuB0BUHE/s1600/HLDWH+Fig+3.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj12HaKeaxums2qmhEFAUlJ3GEBan7sW3o-DNZR-wY10eliphS7eigvZkWnJZhZr-yjBz8o1Ilpdys3gLrR2sdouEIUqWARL0rGCGhRp9ZbleP2PaEO3gA2d73Tw0IOP8GaOaHPuB0BUHE/s400/HLDWH+Fig+3.jpg" width="400" /></a></div>
Figure 3: WEO 2010, Exporters Top Ten and The Rest.<br />
<br />
The oil supply for The Rest is defined by the declining global production curve and the rising internal demand of exporters and the Top Ten importers. This ‘triangle of hope’ in the top left corner of the chart, terminates (and I use the word advisedly!) in about 2016, five years from today. <br />
<br />
<b>What it means</b><br />
As the overall system is working today, things seem to be hanging on in some sort of fragile balance, don’t they? The present demand of the 152 importing countries excluding the Top Ten amounts to about 12 million barrels a day, as represented on the Now axis in Figure 3. <br />
<br />
But that happy situation does not seem likely to continue does it?<br />
<br />
What can be wrong with this interpretation? <br />
<br />
• The estimate of usable crude oil production could be too low? That has the effect of giving us more time.<br />
• The estimate of the growth in internal demand of the oil exporting nations could be too high. Giving us more time.<br />
• The estimate of growth in demand of the Top Ten oil importing countries, and the persistence of their demand could be too high. Giving us more time.<br />
<br />
But I rebut those <br />
• Every indication I find confirms that there is a widening gap between discoveries and production.<br />
• Much new oil production requires sustained oil prices that the world economy cannot afford to pay, so the oil will remain in the ground.<br />
• Oil exporting nations will be the last bastion of conventional manufacturing and production. This will not go un-noticed.<br />
• The momentum of the Top Ten importers (including China and India with growth of around 8% to 10% expected) will place immense stress on their oil supply lines. They will not go quietly.<br />
• New Zealand has no political or practical infrastructure in place to take over oil supply arrangements from its present corporate providers, or to negotiate supply agreements with any producer. We are voiceless in the market.<br />
<br />
Thus there are reasons for each curve to be steeper or flatter, for the end-point to come sooner or later. <br />
<br />
But this extension of the Export Land model to include the demands of the most powerful importers as well shows the frightening vulnerability of the smaller oil importing nations. It is not just a matter of looking at the end of all oil exports on some far-distant date, but rather this analysis reveals that oil supplies may end for New Zealand and over 150 other small-importer nations very much sooner. <br />
<br />
The transfer of the power represented by energy-wealth will, as the Export Land Model suggests, be surprisingly rapid. Smaller nations like New Zealand are virtually powerless to control their energy supplies, and in particular to claim a viable share of the declining resources. <br />
<br />
The potential pace of this change in supply conditions is not well understood by decision makers, and even less accepted by New Zealand’s political leadership. <br />
<br />
Regardless of the actual date of the end of our oil supply the risk of abrupt and sustained failure of most of New Zealand’s oil supply is acute, and immediate. <br />
<br />
______________________________<br />
<br />
<i>Nigel Williams is a transportation planner and traffic engineer working out of Auckland. He has maintained a long interest in the global oil supply situation (especially in relation to its impact on viable transportation choices), together with a watch on climate change issues and the potential challenges of sea level rise. At the risk of over-working the ‘grandfather thing’ he nevertheless strives to make all possible preparations for the coming interesting times, so that, at least, he can say to his three grandsons: “Boys, we saw it coming and did what we could.”</i>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com15tag:blogger.com,1999:blog-5406957897990753480.post-20707495648280114712011-09-20T21:24:00.000+12:002011-09-20T21:35:43.677+12:00(Un) Economic Peak Oil is what really matters<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
In several of my recent posts, such as<a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealand-at-greater-risk-from-oil.html"> here</a>, <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/high-oil-prices-cause-large-effect-on.html">here</a>, and <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html">here</a>, 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.<br />
<a name='more'></a><br />
<br />
<a href="http://www.peakoilconsulting.com/">Chris Skrebowski</a>, an expert oil analyst and trustee of the UK-based <a href="http://www.odac-info.org/welcome">Oil Depletion Analysis Centre </a>(ODAC) advances these propositions cogently and persuasively in a <a href="http://www.odac-info.org/newsletter/2011/09/16">recent article</a>. Essentially he argues that <b>there is economic peak oil. This economic peak oil is the point at which the price of oil becomes unaffordable to consume and therefore to produce. </b><br />
<br />
Here is a synopsis of Chris Skrebowski’s arguments:-<br />
<br />
First he maintains that Peak Oil is largely an economically driven phenomenon. It occurs when the cost of supply for oil producers exceeds the price economies can pay without destroying growth at a given point in time.<br />
<br />
<b>Oil production costs rising</b><br />
<br />
Saudi Arabia needs an oil price of $90-100/b for its revenues and expenditures to balance. Many, if not all of the other OPEC members have revenue/expenditure breakeven oil prices comparable to those of the Saudis. The Saudis are the world’s oil price setters.<br />
<br />
The escalation of oil development costs is being driven by the depletion of the low-cost, easily exploitable oil and its replacement by less accessible and higher-cost oil. The chances of any significant and sustained price fall, barring a major global depression, look remote.<br />
<br />
<br />
<b>Higher oil prices helped trigger ‘Great Recession’ and cause of current “slow recovery”</b><br />
<br />
$147/b oil in mid-2008 helped trigger the ‘Great Recession’. The run up in prices to around $120/b in 2011 brought growth to a near halt in a number of western economies, and notably in Europe. A study by University of California-San Diego economist James Hamilton, links oil price spikes to 10 of the last 11 recessions.<br />
<br />
<b>Developing nations better able to cope with higher prices than advanced economies</b><br />
<br />
In mature economies, such as the US, there is a significant economic impact at over $90/barrel whereas China can probably sustain oil prices in the $100-110 range. Why is China’s tolerance higher? Because the value of oil is higher there.<br />
<br />
<br />
Will this higher price tolerance mean developing economies could keep developed economies in growth-less stagnation by paying oil prices that were just above those that bring developed economies to an economic halt?<br />
<br />
<b>Current cost of production unaffordable</b><br />
<br />
In its most recent survey, Barclays Capital indicates that oil companies’ budget assumptions have risen to $87, literally the maximum carrying capacity of the US (and probably European) economies. <br />
Thus, on current trends, the oil companies will be approving projects that deliver oil at prices which are literally unaffordable for advanced economies.<br />
<br />
<br />
<b>Slow adaptive responses and fast oil price rises leads to economic peak oil</b><br />
<br />
Adaptive responses, on the basis of the reactions after the first (1973) and second (1979) oil crises, are slow (taking 10-20 years) while oil prices have been faster moving going from $25 to $100 in the eight years between 2003 and 2011.<br />
<br />
All the indications are that adaptive responses have failed in terms of both size and speed to restrain the steady rise in oil prices seen after 2003. The only break in the steady oil price increase occurred as a result of the 2008 economic crisis and the subsequent ‘Great Recession.’<br />
<br />
The adaptive response is to use oil more efficiently or to back out lower added-value uses of oil or to move to other fuels. Either way this shows up as improved efficiency in use (volume of oil per unit of GDP.<br />
<br />
The graph below plots an oil price rise of $10/year (blue line) and a productivity gain of 3%/year (adaptive response) – red line. <b style="color: red;">The graph shows the price increases, driven upwards by depletion, outrunning the adaptive responses that higher prices induce, to give a crossover in 2014. The crossover gives the timing of the economically determined Peak Oil. </b><br />
<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYBBpRAkBQa5FqY5as5Aubd0aBy62G8EpAXyEcMP-ub5R0tnPbA9Kg4tCKQP_8knC5ktyBkgAL7B4yZTSUn04wJA9LFTm_fFPj-v2cAXI95gX5fFuB4SDh5V2TtBalnH0E3kZ7uRJwQ6M/s1600/brent-oil-prices-n.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYBBpRAkBQa5FqY5as5Aubd0aBy62G8EpAXyEcMP-ub5R0tnPbA9Kg4tCKQP_8knC5ktyBkgAL7B4yZTSUn04wJA9LFTm_fFPj-v2cAXI95gX5fFuB4SDh5V2TtBalnH0E3kZ7uRJwQ6M/s400/brent-oil-prices-n.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><b>The crossover point gives the economically determined Peak Oil when sustained growth becomes impossible.</b></td></tr>
</tbody></table>
<br />
<br />
<b>Conclusion</b><br />
<b> </b> <br />
Adaptive responses are not large and fast enough to constrain the upward trend of oil prices. The primary adaptive response will therefore be periodic economic crashes of a magnitude that depresses oil consumption and oil prices. These have the effect of shifting consumption from incumbent consumers—the advanced economies—to the new consumers in the developing economies.<br />
<br />
This is exactly what happened in the last recession when between the start of the recession in January 2007 and 2011 demand rose by 4.3 million b/d in the non-OECD nations and fell by 4 million b/d in the OECD area. Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-91195797952186224862011-09-02T10:30:00.000+12:002011-09-02T10:34:48.968+12:00Officials Muzzled on Peak Oil?<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<b></b><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsjiT8IC-YoohBjrBRY4jAXmQ8bXtiY0c2qn0p2q0Pz_DFeqQfmUyoLYj4TmUb9JWoaMz1vnunVn8web6tvTtr1UGbL_h09v34R7UOz1XaVS5Di0H4XSw_W0KBRsjIXr3KA7pS1VFi1-I/s1600/Cross-eyed-businessman-muzzled-with-duct-tape.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="176" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsjiT8IC-YoohBjrBRY4jAXmQ8bXtiY0c2qn0p2q0Pz_DFeqQfmUyoLYj4TmUb9JWoaMz1vnunVn8web6tvTtr1UGbL_h09v34R7UOz1XaVS5Di0H4XSw_W0KBRsjIXr3KA7pS1VFi1-I/s200/Cross-eyed-businessman-muzzled-with-duct-tape.jpg" width="200" /></a></div>The government has finally released its <a href="http://www.med.govt.nz/upload/77402/NZ%20Energy%20Strategy%20LR.pdf">Energy Strategy.</a> There are cosmetic changes from the <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/governments-energy-strategy-grade-f-for.html">Draft version</a> but it's no surprise that the final Strategy continues to completely ignore the threat of peak oil. <br />
<br />
There were many submissions, <a href="http://dl.dropbox.com/u/31214727/des%20submission2.pdf">including my own</a>, 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 <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealand-at-greater-risk-from-oil.html">strong warnings to Ministers</a>. So since 2009, have the officials been muzzled?<br />
<a name='more'></a><br />
<b>Summary of Submissions</b><br />
The <a href="http://dl.dropbox.com/u/31214727/des%20submission2.pdf">summary of submissions</a> does acknowledge that peak oil concerns were raised by submitters:- <br />
<br />
<i>“32 submitters (including 23 individuals, the Green Party and the Māori Party) expressed concern about peak oil. They argued that peak oil was understated in the strategy and that the Government needed to act now to mitigate the future effects of oil supply constraints. They argued that this mitigation could not be left to market forces.”</i><br />
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<i>“The draft strategy’s position of leaving consumers to respond via price signals was not supported by many. Many submitters wanted the Government to be more proactive in leading a transition away from dependence on oil for transport.”</i><br />
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<b>Response - Denial and Obfuscation</b><br />
The comments from officials about the peak oil submissions are typical of the denial and obfuscation that were on show in the <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/new-zealand-governments-response-to.html">recent MED presentation on peak oil. </a><br />
<br />
All of the peak oil submissions are summarily dismissed, with no recommended action from officials. They rely on just one body - the International Energy Agency -- and its 2009 World Energy Outlook which says that global oil production is not expected to peak before 2030. <br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAVS6YwPxD3mnU4XTYCUVJT3XmGWK-ps_GXzUjepmn35P3UDb7R0zNvKsiVU5OCbLT-_itaE-M5-tLi3dfCWZiGvGu8Qvxl_GRB0KGpnDWj-pP2OMsfYzOdtgrSMomfDDU9PQPlts-39Q/s1600/cherrypicking.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="133" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAVS6YwPxD3mnU4XTYCUVJT3XmGWK-ps_GXzUjepmn35P3UDb7R0zNvKsiVU5OCbLT-_itaE-M5-tLi3dfCWZiGvGu8Qvxl_GRB0KGpnDWj-pP2OMsfYzOdtgrSMomfDDU9PQPlts-39Q/s200/cherrypicking.jpg" width="200" /></a></div><b>Cherry Picking</b><br />
But why do officials cherry pick the 2009 IEA report when the <b>later</b> <a href="http://dl.dropbox.com/u/31214727/Energy%20Outlook%202010.pdf">2010 IEA World Energy Outlook</a> contains a much more pessimistic view and the IEA, for the first time confirms that global crude oil production peaked in 2006 and will never be exceeded?<br />
<br />
<i>“Crude oil output reaches an undulating plateau of around 68 -- 69 million barrels a day by 2020, but never regains its all-time peak of 70 million barrels a day reached in 2006.” - </i>IEA 2010 World Energy Outlook<i><b><br />
</b></i><br />
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And why are the stark warnings from the later 2010 IEA report quoted below not referred in officials’ comments? More importantly why are they not a catalyst for the government to <b>"act more vigorously" in its Energy Strategy</b> to use oil more efficiently and develop alternatives? If the IEA is the font of all energy knowledge and it is warning the economic burden of oil and vulnerability to supply disruption will increase, how come the government still weakly abdicates its responsibility to the magic of the market to solve everything? <br />
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<i>“The message is clear: <b style="color: red;">if governments do not act more vigorously than currently planned to encourage more efficient use of oil and the development of alternatives .... we might see a fairly early peak in oil production. "</b></i><br />
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<i>“<b>If governments do nothing or little more than present, then demand will continue to increase, supply costs will rise, the economic burden of oil use will grow, vulnerability to supply disruptions will increase and the global environment will suffer serious damage.” - </b></i>IEA 2010 World Energy Outlook<i><b><br />
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<b>Another mystery. </b><br />
How come in their advice on the Energy Strategy, officials have not repeated <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealand-at-greater-risk-from-oil.html">the warnings they gave Ministers Joyce and Brownlee in 2009</a>? … when they said:-<br />
• the risks of oil price shocks <u>and a physical shortfall</u> in the world supply are issues of "strategic importance"<br />
• New Zealand is more vulnerable and may suffer more than other OECD economies<br />
• new technologies and fuels will help only "marginally" <br />
• without "sufficient incentives" New Zealand's resilience will decrease even further<br />
• even if domestic oil production increases we still pay the international price.<br />
<br />
<b>Officials Muzzled?</b><br />
It's pretty clear that officials have been muzzled by the government. In 2009 they gave some very compelling and concerning advice about the exposure of the New Zealand economy to a looming oil supply/price shock which the government simply didn't want to hear.<br />
<br />
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFv9-aY-CVUj-YdAadP-ZhUuTWY0CIGWNCAZtiuY-4mEvhOo7hoMAEriEuvclwyAXwa33PKPQiTxXqWGVuxnJjqCmg7qt5bIY3OrCvuSBbV8CRmgGC7v3Ae5eDo8d0CGWpcEd0pz_GS8o/s1600/wildlife-monkeys-hear-no-evil-see-no-evil-speak-no-evil.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFv9-aY-CVUj-YdAadP-ZhUuTWY0CIGWNCAZtiuY-4mEvhOo7hoMAEriEuvclwyAXwa33PKPQiTxXqWGVuxnJjqCmg7qt5bIY3OrCvuSBbV8CRmgGC7v3Ae5eDo8d0CGWpcEd0pz_GS8o/s320/wildlife-monkeys-hear-no-evil-see-no-evil-speak-no-evil.jpg" width="320" /></a>So the strategy ever since is obvious -<br />
• Hear no evil, see no evil and speak no evil and not ask for any further advice on the subject. I know this because I made an official information request asking for documents and emails on the risks and impact to New Zealand of peak oil since 2007. Astoundingly no such documents apparently exist since the 2009 report?<br />
• Refuse to talk about it. That's why the Acting Minister of Energy flatly <a href="http://www.interest.co.nz/news/55112/energy-minister-parata-says-nz-cannot-ignore-economic-potential-fossil-fuel-resources-due">refused to respond to questions about peak oil</a> at the launch of the Energy Strategy.<br />
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As we move into an election campaign it will be up to us voters to hold Ministers and would-be Ministers from all parties to account. And maybe, - just maybe, a few journalists will ask, and keep asking, the hard questions.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com2tag:blogger.com,1999:blog-5406957897990753480.post-45304948764983804182011-09-01T14:34:00.000+12:002011-09-01T14:34:24.110+12:00Oil Royalties a Mirage?<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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Beside the release of the government's final <a href="http://dl.dropbox.com/u/31214727/NZ%20Energy%20Strategy%20LR_final_august_2011.pdf">Energy Strategy</a> was a <a href="http://dl.dropbox.com/u/31214727/Woodwardreport.pdf">report from Woodward Partners </a>purporting to estimate the potential royalty income from existing, and yet to be discovered oilfields.<br />
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Business cheerleaders such as the National Business Review typically took the most extreme best case guesstimate and trumpeted the report with <a href="http://www.nbr.co.nz/article/oil-and-gas-could-pay-royalties-13-billion-nk-99751">headlines</a> 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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<a name='more'></a>1 The report confirms <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealands-tui-oil-field-peak-oil.html">yet again</a> that <b>domestic oil production is falling steeply</b> -<br />
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<i>"Production levels from Maari are forecast to decay quite quickly between 2010 and 2015 ......to a lesser extent Tui also will decay quite quickly over this time"</i><br />
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2 Royalty income for oil from existing fields is just over $300 million per annum and <b>most of the income will come in the next 1 -- 3 years and then plummet to almost zero by 2020</b> .<br />
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<i>“Maari is characterised by very high current production levels of oil, with a relatively rapid decay down to low production rates. This provides the Crown with attractive royalty cash flows in the next few years, but means that nearly half of Maari’s value to the Crown ($315 million of $490 million) is received in FY2011 and FY2012. So Maari’s value to the Crown will decline fairly quickly.”</i><br />
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The graph shows the "likely profile in decay of royalties from currently producing fields"<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9RJ9ZpztkQVcoDgxJCjpxTciuFJD4QH4AEtEWFuFLKMiZrdiRZS1APC4l0zmiKC65153UHauaaw9yTkKsE4MrbeNK0AmYnBtLS72qFcmcT1XyzhPW0nNgdbGcO8rfYNa4jNzccP3_JpA/s1600/woodward_profile_existing_royalty.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="245" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj9RJ9ZpztkQVcoDgxJCjpxTciuFJD4QH4AEtEWFuFLKMiZrdiRZS1APC4l0zmiKC65153UHauaaw9yTkKsE4MrbeNK0AmYnBtLS72qFcmcT1XyzhPW0nNgdbGcO8rfYNa4jNzccP3_JpA/s400/woodward_profile_existing_royalty.gif" width="400" /></a></div>
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3 the $3 billion royalty projection for existing fields is <b>the total for the next 20 years out to 2030</b>.<br />
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4 <b>The projections for frontier, as yet undiscovered oilfields are no more than guesses</b>. The Woodward report admits as much….<br />
<br />
<i>“We caution that this valuation should be seen in the context of an industry which
faces significant uncertainties, and acknowledge that this valuation could quickly be
rendered obsolete”</i><br />
<br />
Worse, the Woodward report relies in turn on a <a href="http://dl.dropbox.com/u/31214727/Potential-Undiscovered-Oil-GNS-Science-phase2.pdf">GNS Science report</a>, which also admits its "findings" are no better than pure guesswork.<br />
<br />
<i>“ the predicted (pre-drill) volumes are fraught with assumptions, and are usually, but not always,
proven to be overly optimistic……”
“The business of quantifying undiscovered petroleum resources is fraught with difficulty and
there are numerous possibilities for error”</i><br />
<br />
You be the judge as to whether this Report, full of guesses relying in turn on other guesses, is a joke.<br />
<br />
5 Even if new oil is discovered, the Woodward report confirms in its mid case scenario it will <b>not be until around 2020 at the earliest before any significant production could begin from frontier fields</b>. And it would be well into the 2030's before royalty streams would reach $1 billion. A paltry $1 billion by 2035 is hardly going to be the economic game changer that the government is making it out to be, when the extra cost of <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/christchurch-quake-cost-added-to-our.html">oil imports could be $10 billion per annum by 2015</a><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3HBX2UjtP1l0Sar3kuQLDDiFw2NxNOgbo1F1V79CE7r1XKC7qAfVVOfWT4HMkPvG8cQ8NaA5W39JwHzr15UDC8XsvNSmuhb44bF8wpqMDt3HB33OcADdu9pKJpEucCKrn_1335qM-B1I/s1600/royalty_mid_case.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="297" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj3HBX2UjtP1l0Sar3kuQLDDiFw2NxNOgbo1F1V79CE7r1XKC7qAfVVOfWT4HMkPvG8cQ8NaA5W39JwHzr15UDC8XsvNSmuhb44bF8wpqMDt3HB33OcADdu9pKJpEucCKrn_1335qM-B1I/s400/royalty_mid_case.gif" width="400" /></a></div>
Note too that the graph above has production and royalty income from as yet undiscovered fields beginning as early as 2014 ! But <a href="http://www.stuff.co.nz/taranaki-daily-news/news/5405128/Oil-drilling-delay-seen-as-victory">no new drilling will now take place until the 2012-2013 summer</a>, and it can take upwards of 10 years after discovery to get production in frontier fields under way. This graph has to be severely optimistic.<br />
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6 the mid-case scenario estimates the total royalty income for undiscovered fields from now until 2050 at just $5.5 billion. <b>Hardly a bonanza for the government's coffers as it would have us believe</b>.
Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-46394739763228293322011-08-24T10:35:00.001+12:002011-08-24T10:55:04.835+12:00Christchurch quake cost added to our yearly oil import bill?<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
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.<br />
<a name='more'></a><br />
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<b>How come?</b><br />
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<b>1. Domestic oil production is plummeting</b><br />
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New Zealand's domestic oil production will be halved by 2015, and be almost zero by 2020. This means New Zealand's net import cost for oil will rise steeply.<br />
<br />
It's taken an official information request (delayed for two months) to extract from government data for projected domestic oil production out to 2020. See below for the data as supplied, and a chart showing the steep decline. <br />
Note –<br />
1. the decline will be even sharper as the <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealands-tui-oil-field-peak-oil.html">downgrade of the Tui oilfields reserves</a> by 1/5th reported last month, has not been included. <br />
2. Even if new oil discoveries were made offshore soon, or a lignite coal to diesel plant in Southland could be commissioned quickly (a very big "if" with severe adverse climate change effects), New Zealand's domestic oil production out to 2015 would not be increased, and it is highly unlikely any significant flows of new oil could begin by 2020, if then.<br />
3. one petajoule equals approximately165,000 barrels of oil<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRwS8lsT8vZ0PyyoSfcR2EIqc2oNMSHRd1y_Fkyr9DKk-5kxTqbxayy3S5PMqa3saLbGgqjB5BaUcRkt6_Aq3k9USpH884x9SskpJ6DoLPbcqVRuEEWUG8fOT_DIlbd9zSaYd2FgJQqsw/s1600/OI_data_oil_production_july_2011.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="640" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjRwS8lsT8vZ0PyyoSfcR2EIqc2oNMSHRd1y_Fkyr9DKk-5kxTqbxayy3S5PMqa3saLbGgqjB5BaUcRkt6_Aq3k9USpH884x9SskpJ6DoLPbcqVRuEEWUG8fOT_DIlbd9zSaYd2FgJQqsw/s640/OI_data_oil_production_july_2011.gif" width="436" /></a></div><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjThw07d3OmdO88o-WLnSTzWLSiwL2LRDreGTYy4TZE_pl7AIt1oFZxCis42OakmpQDvjUj1NloQPm8hlvVdZA56QCbf7at_sAMU3MJnFqXSmqHFFJQM1q5UnfsFe7Ljx8VN1yusjxQZ8c/s1600/crude_oil_from_existing_fields2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjThw07d3OmdO88o-WLnSTzWLSiwL2LRDreGTYy4TZE_pl7AIt1oFZxCis42OakmpQDvjUj1NloQPm8hlvVdZA56QCbf7at_sAMU3MJnFqXSmqHFFJQM1q5UnfsFe7Ljx8VN1yusjxQZ8c/s400/crude_oil_from_existing_fields2.png" width="400" /></a></div><br />
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<br />
<b>2. Exchange rate forecast</b><br />
<br />
Treasury's forecast for the period 2014 -- 2020 has the exchange rate trending to 0.60US$/NZ$ (BEFU -- <a href="http://www.treasury.govt.nz/budget/forecasts/befu2010">Budget Economic and Fiscal Update</a> <br />
This exchange rate for 2015 -- 2020 would make oil imports significantly more expensive than the present exchange rate of 0.80 US$/NZ$. <br />
0.60 US$/NZ$ has been used in the calculations for 2015 and 2020.<br />
<br />
<b>3. Oil prices forecast to rise steeply</b><br />
<br />
Oil prices are forecast to be volatile but generally rise steeply in the next 5 years and beyond. Prices have risen from $US20 a barrel in 2002 to $US147 in 2008, and had been above $US100 for the last six months.<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnZe4MfZVSTgucD6N2nd6EQPjNbnlXdfZLCNYrUk-ifiDjatAzlZz3wVoBNLFsNCsd6qLuvqPTZ9g0moVqssRr_P0H5JB_Hw65_wDWBH8DsEL7xJ-qVx4cq5vECmT3Cl3WPGTSDrs9Ekc/s1600/world+oil+prices.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="214" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjnZe4MfZVSTgucD6N2nd6EQPjNbnlXdfZLCNYrUk-ifiDjatAzlZz3wVoBNLFsNCsd6qLuvqPTZ9g0moVqssRr_P0H5JB_Hw65_wDWBH8DsEL7xJ-qVx4cq5vECmT3Cl3WPGTSDrs9Ekc/s320/world+oil+prices.jpg" width="320" /></a></div><br />
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With the global economy stalling again, and the US and Europe perhaps heading back into recession, oil prices may fall again in the short term. But after the 2007-08 great recession oil prices rose quickly again, and that pattern is likely to be repeated. Many world oil experts are predicting that an oil supply crunch is looming and will rapidly push up prices in the 2012-2015 period.<br />
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The (many would say conservative) assumption used in the calculations below is that the price of oil will double to $US200 a barrel by 2015, and rise to $US250 a barrel by 2020.<br />
<br />
Even if the exchange rate and oil price in 2015 was identical to today's rate/price, New Zealand would still face an oil import bill for an extra $1 billion a year due to our steeply declining local production.<br />
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbv48WDMTWjHK53Cqa2oM_63IiASN_6BVea9mduBUQgAjzIrYwv_0m3KS_zRT04Ozii_kzt1bSNPe5I3UIOtuxllO81MKgH314HxHYoDVILie5dfPyCyBpMhJck8LU3EGquZSoLxkuO1A/s1600/2015_2020_chart.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="452" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhbv48WDMTWjHK53Cqa2oM_63IiASN_6BVea9mduBUQgAjzIrYwv_0m3KS_zRT04Ozii_kzt1bSNPe5I3UIOtuxllO81MKgH314HxHYoDVILie5dfPyCyBpMhJck8LU3EGquZSoLxkuO1A/s640/2015_2020_chart.gif" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">click to enlarge</td></tr>
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<b>Sources</b><br />
The data sources used are the official information received - see above, the New Zealand Energy Outlook 2010, New Zealand Energy Quarterly March 2011, and the International Energy Agency New Zealand Energy Review 2010.<br />
<br />
If I have made any errors in these calculations please let me know and I'll happily amend them. They are not intended to be the last word -- obviously there are many variables. But they do show that some very big numbers are involved. As officials rightly pointed out in <a href="http://oilshockhorrorprobe.blogspot.com/2011/08/new-zealand-at-greater-risk-from-oil.html">advice to government Ministers Joyce and Brownlee</a> in 2009, New Zealand's oil import vulnerability and exposure economically are matters of strategic importance.<br />
<br />
<b>Saving is good right? So why not save oil?</b><br />
<br />
All this highlights why we urgently need an adaption and conservation plan, to drastically lower our dependence on imported oil. When you see the numbers here, it just makes good common sense.<br />
<br />
We are constantly reminded that it’s simple good practice to be thrifty and save for a home or retirement. But when it comes to saving a commodity which could add costs to our economy the equivalent of the governments funding of the Christchurch earthquake every year, we have not started to even have a discussion, let alone take decisive action. Meanwhile the UK government is developing an <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/uk-government-to-develop-oil-shock.html">oil shock response plan</a>, and in the US President Obama has agreed with the auto industry on much more <a href="http://www.guardian.co.uk/environment/2011/jul/29/barack-obama-fuel-economy-standards">stringent mandatory fuel efficiency standards</a>.<br />
<br />
Sadly, none of our our corporate-owned media or political leaders, are willing to confront the huge economic and social risks inherent in our oil import dependency.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com1tag:blogger.com,1999:blog-5406957897990753480.post-19272429988785982592011-08-16T15:05:00.001+12:002011-08-16T16:20:02.405+12:00New Zealand at greater risk from oil shocks -- official advice ignored<div class="separator" style="clear: both; text-align: center;"></div><a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
In November 2009 senior officials warned the government --<br />
<ul><li>the risks of oil price shocks and a physical shortfall in the world supply are issues of "strategic importance"</li>
<li>New Zealand is more vulnerable and may suffer more than other OECD economies</li>
<li>new technologies and fuels will only "marginally" reduce New Zealand's vulnerability to these oil supply/price risks</li>
<li>without "sufficient incentives" New Zealand's resilience will decrease even further</li>
<li>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. <a name='more'></a></li>
</ul><br />
This advice from senior officials was given to Transport Minister Steven Joyce and Energy Minister Gerry Brownlee in a report entitled <a href="http://dl.dropbox.com/u/31214727/MinisterialbriefingOilpricesandtransportsectorresilience_Sept_2009.pdf">"Oil Prices and Transport Sector Resilience"</a> and obtained under the Official Information Act.<br />
<br />
Astoundingly the warnings of a clear and present danger to New Zealand's economy have been almost totally ignored by government. Instead of tackling the strategic risks identified in the report, and bringing in policies to lower New Zealand's oil dependency, the government has - <br />
<ul><li>perversely initiated policies which <b>increase</b> New Zealand's exposure to oil price and supply shocks. It has abandoned plans for mandatory fuel efficiency standards for light vehicles, and has vastly increase spending on motorways which perpetuate urban sprawl and New Zealand's car and oil dependence, while public transport funding has languished. </li>
<li>other practical policy ideas in a <a href="http://oilshockhorrorprobe.blogspot.com/2011/03/oil-price-response-plan-for-new-zealand.html">2008 New Zealand Transport Authority</a> report to lower New Zealand's oil dependence have been kicked to touch.</li>
<li> having received advice in 2009 that it clearly does not wish to hear, it has steadfastly avoided asking for any further advice from officials about New Zealand's oil vulnerability. Instead it has instructed its officials to downplay and marginalise the risks posed by peak oil, as is evidenced by a <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/new-zealand-governments-response-to.html">peak oil presentation</a> given recently by an MED official. That presentation is completely at odds with the clear and compelling warnings given in the 2009 Report.</li>
</ul><br />
<b>How do officials assess the risk?</b><br />
<br />
The report begins by documenting New Zealand's extreme reliance on imported oil. Oil accounts for 51% of New Zealand's total consumer energy, transport accounts for 80% of New Zealand's oil consumption and 14% of household expenditure is made on transport costs.<br />
<br />
The report then tackles the issue of peak oil (without using that phrase of course). It notes that in 2008 the International Energy Agency became more pessimistic and warned that current investment in oil production is insufficient and that faster than expected decline rates in larger oil fields from politically volatile countries --<br />
<blockquote><b><i>"increase the risks of a sudden oil price shocks, caused either by political tensions in major supplier countries or by <span style="color: red;">a physical shortfall in supply</span>"</i></b></blockquote><br />
The report then proceeds to pull the rug from under the government's flagship energy policy -- the Petroleum Petroleum Plan to find more oil offshore from New Zealand. The report states that increases in domestic oil production -<br />
<blockquote><i>"would not necessarily insulate the New Zealand economy from oil price volatility or long-term price rises. This is because like all internationally traded commodities domestic oil and fuel prices are largely driven by the international price"</i></blockquote><br />
<b>Effect on New Zealand economy generally</b><br />
<br />
Echoing many of the points made in previous posts <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/high-oil-prices-cause-large-effect-on.html">here</a> and <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html">here</a> on this blog, the report confirms that <i>"reflecting the importance of energy to economic activity, <b style="color: red;">high or volatile prices can have a pervasive effect on economic performance</b><span style="color: red;">"</span></i>, citing as examples the cost of asphalt and bitumen to roads and fuel costs which dominate the operating costs of the fishing and aviation sectors. <br />
<br />
<i>"<b><span style="color: red;">Our exposure to oil price changes is more acute than many of our trading partners</span> due to a distant from international markets</b>"</i> and <br />
<br />
<i>"tourist visitor numbers are at risk from significant increases in aviation fuel costs" </i>and <i><br />
</i><br />
<br />
<i>"international and domestic transportation costs largely determined by oil prices therefore play a significant role in the competitiveness of businesses right across the economy. <b><span style="color: red;">T</span><span style="color: red;">he transport sector's exposure to increasing and volatile oil prices is therefore </span><u style="color: red;">an issue of strategic importance</u></b>"</i><br />
<br />
<b>New Zealand's vulnerability relative to other countries</b><br />
<br />
<ul><li>New Zealand is a comparatively large user of oil for transport fuels. We have a low and dispersed population leading to high levels of freight between centres </li>
<li>New Zealand has a very low energy productivity at 3.6 litres of fuel per unit of GDP compared to say Sweden which is of comparable size and population density requires only 2 litres per unit of GDP - see graph below -</li>
</ul> <img border="0" height="330" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZu1h-vvO1bz9E53Ood9Z_cV3qcai2gKz1ZsB6yZWRi7UUAgbJwmRlKV3j0jUlRsS1tkfjNxX1HchLVEQZHABJIgNjnJDVC9Jqc4fhjBXKYW7JngXnywVZweMKrh4GSZ9g7_yf8XqM89o/s400/fuel_use_per_unit_GDP.gif" width="400" /><br />
<ul><li>New Zealand has one of the highest per capita car ownership rates in the world</li>
<li>the fuel economy of private cars is low compared to most other OECD countries. Even if New Zealand could achieve a 20% improvement in fuel efficiency by 2030, New Zealand would still be 45% less fuel efficient than Europe in 2030 </li>
</ul><ul></ul><table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhazlcP-NBeopKpQ1aGayNe4es4KAc6TqM-7vbBnr5UBbp2dH9h3yLeYt6RuQ4XhZtdR2EJjmk7KA3tB2nFWv3khX5o1wp4IelRofBZ-DRxmrf5FmNHJmnnQ_axLnaltDiT42Pj73nhOmk/s1600/fuel+economy_NZ_compared_other_OECD.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="252" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhazlcP-NBeopKpQ1aGayNe4es4KAc6TqM-7vbBnr5UBbp2dH9h3yLeYt6RuQ4XhZtdR2EJjmk7KA3tB2nFWv3khX5o1wp4IelRofBZ-DRxmrf5FmNHJmnnQ_axLnaltDiT42Pj73nhOmk/s400/fuel+economy_NZ_compared_other_OECD.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;"></td></tr>
</tbody></table><ul><li>New Zealand has one of the highest levels of vehicle kilometres travelled per capita in the OECD while having one of the lowest levels of personal consumption expenditure per capita</li>
<li>Road transport accounts for 84% of travel in urban areas. Countries like Australia and the US with poor public transport options are however better able to cope with higher oil prices because they have higher GDP per capita</li>
<li>we are far away from key markets for goods and tourism and therefore more affected by oil prices than in most OECD countries</li>
</ul><br />
<b>Report's Conclusion</b><br />
<blockquote><b><i>"if real long-term oil prices continue to increase as forecast <span style="color: red;">New Zealand's economy may suffer more than other economies</span>". </i></b>Overall<b><i> "<span style="color: red;">the transport sectors resilience to increasing all prices is relatively low</span>"</i></b></blockquote>In complete contradiction of the 2011 MED presentation that "new technologies will save us" the 2009 report bluntly states that <i>"New Zealand's vulnerability will be <b>reduced</b> <b>marginally</b> by the combined availability and affordability of new technologies such as electric vehicles and second-generation biofuels"</i><br />
Again completely contradicting the government's position that there is no need for government intervention and that the market will provide all the solutions, the report states <i>"the cost, supply, convenience and reliability of new technologies are <b>key barriers</b> and that <b>without incentives the transport sector's resilience will decrease further</b>"</i><br />
<br />
<b>Our Economic Titanic </b><br />
Unlike the global financial crisis which took most experts and our government by surprise, the severe impacts of rising oil prices on our economy are well understood and thoroughly predictable. The government has received warnings that we are far more exposed than other developed nations to these risks.<br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtk9ezNUfCETY6k-e9we5JOj33f_DYteEGk96uGKEs4kfa-5cWnNqEnkhhMUY51FA-RWUoqPb1P1RWPy3uHhaIsFuAHx5XK7phKJOWW5dARqQY1z8GZEZ7uqr0wVQdOW0f4lYYTL0ki0Y/s1600/titanic1.JPG" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="260" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjtk9ezNUfCETY6k-e9we5JOj33f_DYteEGk96uGKEs4kfa-5cWnNqEnkhhMUY51FA-RWUoqPb1P1RWPy3uHhaIsFuAHx5XK7phKJOWW5dARqQY1z8GZEZ7uqr0wVQdOW0f4lYYTL0ki0Y/s320/titanic1.JPG" width="320" /></a></div>Yet like some delusional captain of the Titanic this government accelerates the ship of state on a collision course with the oil crunch iceberg. Unlike the global financial crisis, the government cannot use the excuse that they were not warned. Its failure to heed these warnings and act decisively will surely go down in history as New Zealand's economic Titanic event.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com5tag:blogger.com,1999:blog-5406957897990753480.post-56892802513411510672011-08-10T14:37:00.001+12:002011-08-10T14:39:08.007+12:00Public Receptive to Peak Oil Debate and Policy Ideas - Survey<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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 <a href="http://climateshiftproject.org/wp-content/uploads/2011/08/AJPH_PeakOilPerceptions_August201.pdf">US survey of public opinion</a> 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. <br />
<a name='more'></a><br />
<br />
<b>Overall nearly 2/3rds -- or 65% -- of all respondents to the US survey said that if oil prices triple it would be "very harmful" to the economy, and 44% said it would be "very harmful" to public health.</b><br />
<br />
These are the key findings of a study published online this week at the American Journal of Public Health.<br />
<br />
Here is the breakdown by idealogy - note: those who identified themselves as "very conservative" were 20% more concerned than those who said they are "very liberal"<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLEVRnY2XqqNuk31gijYfjA3_9lo8Ym8btr7t_Vrt5EPszd1PZjtOF4qXe0X92a4kCCGMxueGDiqyR042VdyYQ1Qjmgv-GfF9TsK1rlc2OAhtEPmqaW8fIOlQbH1Roxw9tJmoHNhyphenhyphen9fj4/s1600/us_survey.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="292" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiLEVRnY2XqqNuk31gijYfjA3_9lo8Ym8btr7t_Vrt5EPszd1PZjtOF4qXe0X92a4kCCGMxueGDiqyR042VdyYQ1Qjmgv-GfF9TsK1rlc2OAhtEPmqaW8fIOlQbH1Roxw9tJmoHNhyphenhyphen9fj4/s400/us_survey.gif" width="400" /></a></div><br />
and here is the breakdown by views on climate change - ( strong concern about peak oil from those who are dismissive of climate change is not an endorsement many would wish for, but it indicates that when peak oil is couched in immediate economic terms, then climate sceptics are almost as worried about oil prices as those who are alarmed about climate change )<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsdU7GtqG140lqZt36qG37ahHmUiYnHpQ3P5Ebhcg2f3nBVehcJI3usKAZtDbeG0yniDAcG1kpr3K2UO2VpNlDfFO4v1n_xiJZumCY7sfuVRSEIUTY1xqx7YxIhMWtBHHKeuo-H5orzV8/s1600/usa_survey2.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="297" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjsdU7GtqG140lqZt36qG37ahHmUiYnHpQ3P5Ebhcg2f3nBVehcJI3usKAZtDbeG0yniDAcG1kpr3K2UO2VpNlDfFO4v1n_xiJZumCY7sfuVRSEIUTY1xqx7YxIhMWtBHHKeuo-H5orzV8/s400/usa_survey2.gif" width="400" /></a></div><br />
<b>New Zealand Poll</b><br />
The US survey findings aligns closely with a <a href="http://www.wwf.org.nz/?4960/Seven-out-of-ten-Kiwis-want-Govt-to-prepare-for-peak-oil">poll carried out by WWF in New Zealand</a> in August 2010. In that poll 72% of New Zealanders believe it is the government's task to plan ahead, and invest now in public transport and alternative fuels before the price of oil rises. The NZ survey did not break down opinion among “liberals” and “conservatives” but it seems likely that ideological results would be similar here. Further polling and focus group surveys would be useful.<br />
<br />
<b>Latent Unease</b><br />
For some time I have sensed a general feeling of unease in the public about oil prices, particularly since the latest spike began in late 2010, so soon after the 2007 -- 08 oil shock. There is a sense that this is not "normal", but for most people they cannot quite put their finger on the reasons for fuel prices rising and being so volatile. This latent sense of unease is confirmed in the US study's conclusions where they say -<br />
<blockquote><i>"although Americans are unlikely to be aware of the concept of peak petroleum, the level of expert agreement on the issue, or the potentially significant impacts on society, the public does possess a latent sense of an impending energy problem"</i></blockquote><br />
<b>What are the takeout messages from the US and New Zealand opinion surveys?</b><br />
<br />
To me they are --<br />
1 there is a <b>broad consensus across the political divide</b> that peak oil/oil price shocks are dangerous and damaging to people's well-being and the economy<br />
<br />
2 to a far greater extent than previously thought <b>"middle New Zealand" as well as those identifying themselves “far left" and the "far right" are open to engagement and debate on peak oil </b>and its implications, from both the media and politicians.<br />
<br />
3 there is sufficient concern to indicate that the <b>public are already receptive to the major political parties proposing bold policies</b> to lower our dependency on imported oil and as to how we might transition to alternative sources.<br />
<br />
<b>Will politicians and media have the courage? </b><br />
<br />
probably not. As <a href="http://www.energybulletin.net/stories/2011-06-17/deus-ex-machina-will-economic-collapse-save-us-climate-catastrophe">Dave Allen</a> colourfully puts it -<br />
<br />
<blockquote><i>"In a country run by responsible adults, these prudent warnings based on the best available science -- would be blaring from every political and cultural orifice. In a country run by amoral, narcissistic, opportunists, they are whispered at the fringes – in the hushed politeness of power-point presentations, on fringe websites, in meagerly-read books, and among small groups of alarmed citizens." </i></blockquote>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com5tag:blogger.com,1999:blog-5406957897990753480.post-68446299330628253172011-08-02T22:47:00.000+12:002011-08-02T22:47:59.574+12:00New Zealand’s Tui Oil Field. - Peak Oil With Bells On<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
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 <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10740828">recent announcement</a> 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.<br />
<a name='more'></a><br />
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We are all used to seeing breathless media announcements of "huge" new discoveries of oil. What we hardly ever hear about is when oilfields inevitably start to rapidly decline. No surprises therefore when the Tui reserve downgrade from 50.5 million to 40 million barrels was buried deep in the business section of our press and never made the front pages. <br />
<br />
<b>The remarkable story about the Tui oil field completely missed, or ignored by the business media, is just how quickly the field reach peak production, and how rapidly it’s decline will be.</b><br />
<br />
It was only four years ago on 30 July, 2007 that Tui began production. 31 million barrels of oil have been produced in those four years. But the remaining 9 million barrels of expected reserves are projected to dribble out over the next 9 years before the field is fully depleted in 2020. <br />
<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzOtxu-aXcJiIE5q1n6uOePkgxvk8S_spjVBWzuy8s9gLWEnaJ2_sW40zq01opdPjD0tliPYHLTxPBEa5tKNE6JCX36xMn3TAeaFiJqxKUKatwuOWMfgVpz4vQlflPu2JWJGCYj3K2LZI/s1600/tui_field_depletion2.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="338" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzOtxu-aXcJiIE5q1n6uOePkgxvk8S_spjVBWzuy8s9gLWEnaJ2_sW40zq01opdPjD0tliPYHLTxPBEa5tKNE6JCX36xMn3TAeaFiJqxKUKatwuOWMfgVpz4vQlflPu2JWJGCYj3K2LZI/s400/tui_field_depletion2.gif" width="400" /></a></div><br />
The steepness of the decline can be seen from this graph from a July <a href="http://dl.dropbox.com/u/31214727/NZOGJuneQBriefing_lr.pdf">2011 New Zealand Oil and Gas report </a>-- (representing its 12.5% stake in the Tui field). If you focus on the dark blue part of the graph at the bottom of each column you can see that NZOG’s share of production will fall from 270 kboe in 2012 to 200 kboe in 2013 -- representing a decline of 26% in oil flows for Tui in just one year. <b> </b><br />
<br />
<br />
<b>The overall decline rate for the Tui oilfield in the four years between 2012 and 2016 is a staggering 59%!</b><br />
<br />
Contrast this with the super optimistic projections for Tui when it was first discovered. As Greg Peel of <a href="http://hken.ibtimes.com/articles/187315/20110727/tui-apos-s-no-longer-new.htm">International Business Times</a> points out -- <br />
<blockquote><i>"Tui's reserves have been constantly upgraded over its life, suggesting a well life beyond 2030".</i></blockquote><br />
The steep decline rate at Tui should not be a surprise. As I pointed out in April, the IEA noted in its <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/new-zealand-joins-peak-oil-club-iea.html">2010 New Zealand Review</a> <br />
<blockquote><i>"recently commissioned producing fields, like Tui for example, are relatively small and have a high rate of depletion"</i></blockquote>Note : The same graph also shows a steep decline of 38% in 4 years for the Kupe oil field (light blue) which is also very high by international standards.<br />
<br />
<b>Why is this important?</b><br />
<br />
It confirms that in the next four -- five years domestic oil production in New Zealand will fall off a cliff, at the very time a global oil supply crisis is unfolding. We are already hugely dependent on oil imports and vulnerable to any disruptions to supply. We will become even more dangerously dependent on a dwindling supply of oil from volatile world markets. <br />
<br />
Meanwhile the <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/new-zealand-governments-response-to.html">government's "response" to peak oil</a> is misguided and pathetic. We have no plan to lower our dependence on imported oil, other than “drill and hope”. No -- it's time to do a Thelma and Louise -- let’s all accelerate down the white elephant billion-dollar <i>"roads of significance to National"</i> and race over the oil crisis cliff!<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUpsvSxDaOAg9A_9fvL1YEvV4FvlH-Rd1_zLj3ezEpTVxHjPbgrILqCYw_E6RdECwZdhAY8tqwclCQW3oxclSUN9eSuTZW0YL-j7QutT-MgCVNvs51MEeVFvsa3wgJISuBQW7-89TK8Ec/s1600/thelma-and-louise-poster.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"></a><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpKSYDSFeWYrj8pkH5xPxuqwbwCV5N27pQzx_mXtvsSx5NZw7rePSZPCjmULz7jbId4uom7ZTHx5PCsA7y_Kv29gImjBIK1Gj5cKCyzZ3IhxSyhBr0TTdDf-e1wy66QN9FlFt3FS80wng/s1600/936full-thelma-and-louise-screenshot.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="136" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgpKSYDSFeWYrj8pkH5xPxuqwbwCV5N27pQzx_mXtvsSx5NZw7rePSZPCjmULz7jbId4uom7ZTHx5PCsA7y_Kv29gImjBIK1Gj5cKCyzZ3IhxSyhBr0TTdDf-e1wy66QN9FlFt3FS80wng/s320/936full-thelma-and-louise-screenshot.jpg" width="320" /></a><img border="0" height="320" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhUpsvSxDaOAg9A_9fvL1YEvV4FvlH-Rd1_zLj3ezEpTVxHjPbgrILqCYw_E6RdECwZdhAY8tqwclCQW3oxclSUN9eSuTZW0YL-j7QutT-MgCVNvs51MEeVFvsa3wgJISuBQW7-89TK8Ec/s320/thelma-and-louise-poster.jpg" width="227" /></div>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-86540620311330601172011-07-20T14:30:00.001+12:002011-07-20T14:32:01.584+12:00New Zealand Government’s Response to Peak Oil – In time we hope something will turn up<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuFyNKCIktvtbfpcQJLN3KihXE4zknodKbn3cUwtV63a49FlvWVGe5wnT_2NoS24H11sB_ZKRBnxis5z2TMx7Zxgqo8ZK8EdyTrUN-2MOqHXV_ipfqfUZPumLfWWwbOOwfvbjAxLALYck/s1600/MED_peak_oil_presentation_July_2011.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="141" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjuFyNKCIktvtbfpcQJLN3KihXE4zknodKbn3cUwtV63a49FlvWVGe5wnT_2NoS24H11sB_ZKRBnxis5z2TMx7Zxgqo8ZK8EdyTrUN-2MOqHXV_ipfqfUZPumLfWWwbOOwfvbjAxLALYck/s200/MED_peak_oil_presentation_July_2011.gif" width="200" /></a></div>On July 8 I attended a forum on peak oil organised by the <a href="http://www.thesustainabilitysociety.org.nz/">Sustainability Society</a>. Dr Richard Hawke from the Ministry of Economic Development gave a <a href="http://dl.dropbox.com/u/31214727/hawke_peak_oil_july2011_%20MED.PDF%20">presentation</a> on behalf of the New Zealand government entitled <i>"Peak Oil - New Zealand's Response"</i>. I came away with emotions ranging from frustration to anger and embarrassment.<br />
<a name='more'></a><br />
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So I thought it would be cathartic to dissect the presentation -- <br />
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Dr Hawke began with a typically confusing introductory slide on electricity generation, when anyone with a basic knowledge of peak oil knows that it's a liquid fuel problem, not an electricity issue. We cannot power our cars, trucks ships and planes on electricity.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEion2Gb0j_PLrqZqjYsFmhWQGn-2QeLond-Nd4HXf1WFoyP1CCj7FeUpaZy_RknzWNgXFD69xM5eVdFQ3TT8hFpYUBkzDH6iRedn-PuV8t1v0eOQJC3yh_P_T6Al4J6bwiA1ci0Y92mTUo/s1600/Hawke_slide8.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEion2Gb0j_PLrqZqjYsFmhWQGn-2QeLond-Nd4HXf1WFoyP1CCj7FeUpaZy_RknzWNgXFD69xM5eVdFQ3TT8hFpYUBkzDH6iRedn-PuV8t1v0eOQJC3yh_P_T6Al4J6bwiA1ci0Y92mTUo/s320/Hawke_slide8.gif" width="320" /></a></div>Next was a cringingly awful attempt to paint peak oil as part of an historical continuum of false prophecies on oil production. Awful because all of the examples used were from the 19th century or early 20th century before the concept of peak oil was understood. Who cares what someone said in 1865? The glaring omission from the examples given was of course the prediction from US Shell geologist Dr King Hubbert. He predicted in the 1950s that US oil production would peak in 1970 -- which it did, and has declined steadily ever since in spite of the best technology, most intensive drilling on the planet and record high prices. Similarly omitted were the projections of Colin Campbell and other peak oilists in the late 1990’s who predicted that global crude oil production would peak around 2005 -- 2006 -- which it also did.<br />
<br />
<div class="separator" style="clear: both; text-align: center;"></div>Dr Hawke then attempted to paint peak oil proponents as pessimists who underestimated oil reserves, exaggerated future demand, while not giving enough emphasis to substitution and technological advances -- the archetypal cornucopian view. Firstly, the argument about reserves is a straw man because peak oil is essentially concerned with the flows -- production of oil -- (which have been flat since 2005 despite record high prices and advances in technology) rather than how much oil might or might not be in the ground. <br />
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As to exaggerating future demand, surely the government is not seriously suggesting that soaring demand from China, India, Middle East and other developing nations is magically going to decline? Again this is a typically Western-centric view which wrongly transposes the declining oil demand trends in OECD nations like New Zealand to the world as a whole.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAOdjvpiW9yr5mVlaeCWMMbv7VnOciNnyIdjwdHblnWEwvjoGYaBqZSgDgFXun5nzeuOHEOtVUQTEvzKAmxl90EYqrvFzHDiVKX2-p88aItuTSIpWNZLO7gdRpN5nnMxPpG6KUh12pqA8/s1600/_slide16.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAOdjvpiW9yr5mVlaeCWMMbv7VnOciNnyIdjwdHblnWEwvjoGYaBqZSgDgFXun5nzeuOHEOtVUQTEvzKAmxl90EYqrvFzHDiVKX2-p88aItuTSIpWNZLO7gdRpN5nnMxPpG6KUh12pqA8/s320/_slide16.gif" width="320" /></a></div>The presentation then suggested that technology and alternatives will be the silver bullets that saves us. But the presentation conveniently fails to mention the higher cost, much lower energy return on energy invested and the planet-frying effects of using alternatives such as the tar sands in Canada. The slide actually shows the the extreme and dangerous depths to which drilling must go!<br />
<br />
But what really got me wound up was the selective use of the International Energy Agency's information, which the government believes provides <i>“credible information on the global oil market”</i>. On the one hand the government takes as gospel the projections of the IEA that as yet undiscovered fields and unconventional oil will meet demand out to 2035. This selective faith in the IEA is maintained despite -<br />
• the IEA forecasts on oil production having to be revised downward in huge chunks every year for the last six -- eight years<br />
• peak oil scientists having been far more accurate with their production forecasts in the same timeframe<br />
• peak oil experts such as those at <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/must-watch-australian-report-on-peak.html">Uppsala University providing analysis</a> that shows the IEA’s forecasts for finding undiscovered oil fields are around three times greater than historical norms<br />
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But on the other hand the government is quite prepared to ignore other recent IEA announcements - calling for large-scale government intervention - because it does not suit its “the markets will solve everything” ideology . The IEA said in its <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/new-zealand-joins-peak-oil-club-iea.html">2010 Report on NZ</a> that the government should <i>“give priority to enhancing energy efficiency in the transport, commercial buildings and industry sectors by defining clear objectives for the sector <b>supported by adequate cost-effective measures and long-term investments"</b></i> <br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAMu3ThphfRAZxQKs0382qEworX355vDKld55eneA34NfDYoIGW7lyGFDWDjJiLSgMJwh9d_Sep16-YooIFEemVyDNF71NK8n3Fj300RlcSVEmhWGX1DBz9y3YQawX58OFozUN8H-a1z8/s1600/hawke_slide20.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="225" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiAMu3ThphfRAZxQKs0382qEworX355vDKld55eneA34NfDYoIGW7lyGFDWDjJiLSgMJwh9d_Sep16-YooIFEemVyDNF71NK8n3Fj300RlcSVEmhWGX1DBz9y3YQawX58OFozUN8H-a1z8/s320/hawke_slide20.gif" width="320" /></a></div>The next slide shows the government’s blind faith reliance it has in the IEA's flawed oil price modelling. The slide shows an oil price in 2035 – (24 years from now) at $US135 a barrel under the (worst-case) “existing policy” scenario. Does anyone seriously think the world oil price will be only $US15 higher in 24 years than it is now? Yet the government continues to place faith in IEA price modelling.<br />
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The next slides selectively depict various scenarios for future oil production. But only the most optimistic scenarios are shown - a “new policies" scenario and a “green revolution” -- 450 ppm Co2 or 2° of warming" scenario. Post Kyoto there is scant evidence of world governments actually implementing either of these scenarios. So why is the far more pessimistic "current policy" scenario omitted from the presentation?<br />
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<b>Domestic policies</b><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFwO1E9BhxqChKLcxyTXVKwE3Dk2CkQbOqnLKrZGkO6rhRfKcDeN7d9YHgkp1GQD40z2o4as7dkW_PVDSapgqXAbgR9xXP7TXDn6vQramn3WwmqnVWtE1DlAuKUqWoLLiYodyWjnCMnLw/s1600/Hawke_slide25.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="222" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiFwO1E9BhxqChKLcxyTXVKwE3Dk2CkQbOqnLKrZGkO6rhRfKcDeN7d9YHgkp1GQD40z2o4as7dkW_PVDSapgqXAbgR9xXP7TXDn6vQramn3WwmqnVWtE1DlAuKUqWoLLiYodyWjnCMnLw/s320/Hawke_slide25.gif" width="320" /></a>This is where the government's so called "response" to peak oil is set out. Four actions to "reduce our dependence on oil" are outlined –<br />
• New Zealand Emissions Trading Scheme<br />
• Encouraging entry of biofuels and electric vehicles to the NZ market<br />
• Investment in public transport infrastructure; and<br />
• The Petroleum Action Plan<br />
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I want to concentrate on the government's response on biofuels and electric vehicles and its Petroleum Action Plan, as the ETS and funding for public transport infrastructure have been well canvassed elsewhere.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXY6ex2ewxtxi681qlwcT8oDz0M6byg-3b1DjLpgVrvjFlBpRj2Hae5biunkJeNnNKYMq6Oqwf_Alu1i86bUBN0_5Q679v9BQHBjHpca08ZG-4GdlrWZXSVzCvNpoxjr3JJZaxBfAGRaQ/s1600/Hawke_slide27.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="226" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjXY6ex2ewxtxi681qlwcT8oDz0M6byg-3b1DjLpgVrvjFlBpRj2Hae5biunkJeNnNKYMq6Oqwf_Alu1i86bUBN0_5Q679v9BQHBjHpca08ZG-4GdlrWZXSVzCvNpoxjr3JJZaxBfAGRaQ/s320/Hawke_slide27.gif" width="320" /></a></div><b>Biofuels Grant Scheme</b><br />
Slide 27 brazenly suggests that the government is actively encouraging biofuels and electric car uptake as serious policy initiatives as a response to peak oil. Frankly I found this an insult to the intelligence of the forum audience and the public at large. Why? -- <b>Because these are minuscule and pathetic policy responses. </b><br />
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<a href="http://dl.dropbox.com/u/31214727/wwf_nzes_analysis_08.10.doc">Here is t</a>he analysis of these 2 policies done by WWF....<br />
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<br />
<blockquote><i>“In the first eleven months of operation (July 2009 – May 2010), an average of 44,620 litres of biodiesel were covered by the scheme, which is roughly equivalent to 38 tonnes of fuel. Extrapolating this average over a whole year equates to 456 tonnes per year. Total oil consumption in NZ in 2008 was: 5,737,000 tonnes. <b>At this rate, biodiesel covered by the scheme would comprise 0.008% of total NZ oil consumption</b>.”</i></blockquote><br />
<b>Road User Charges Exemption for Light Electric Vehicles </b><br />
<blockquote>WWF <i>“The government predicts 127 electric vehicles will obtain the exemption by 2012 when the scheme expires, with combined annual revenue foregone in road user charges over its four year duration is projected to be less than $105,000.”</i></blockquote><b>$105,000 is less than 0.002% of the government’s planned spending on roads</b><br />
<br />
<br />
<b>Petroleum Action Plan</b><br />
The second much touted “response” is the Petroleum Action Plan (PAP) the aim of which is to develop New Zealand's petroleum potential.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhciSP2K2J7sW2cFI2B5Sbg9Kye76VQ2_brj_etOTuBy6cz7yOiqP3IIK8NAEN9L4tZOperx3dAbuvteEQs4tQhZ3jB62VNArN5Bdd_nD4Cf2k-m5l0LiNT4Rsp-unSRG-EMyF5g4e-XFE/s1600/Hawke_slide29.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="224" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhciSP2K2J7sW2cFI2B5Sbg9Kye76VQ2_brj_etOTuBy6cz7yOiqP3IIK8NAEN9L4tZOperx3dAbuvteEQs4tQhZ3jB62VNArN5Bdd_nD4Cf2k-m5l0LiNT4Rsp-unSRG-EMyF5g4e-XFE/s320/Hawke_slide29.gif" width="320" /></a></div>In <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/governments-energy-strategy-grade-f-for.html">previous posts</a> I have described this policy as "<i>drill and hope</i>" or “<i>hope to drill</i>” Guess what? The government has confirmed that is exactly what it is! There quite unashamedly in slide 29 is the statement --<br />
<blockquote><i>"<b>in time it is hoped</b> this will improve our net position and reduce our dependence on imported oil". </i></blockquote><br />
<blockquote>Let's just repeat that - a major policy plank of the government's response to peak oil is -</blockquote>"<i>in time</i>" (7 -- 10 years at best before any flows of new oil can be expected, but with the oil crisis unfolding right now)<br />
"<i>it is hoped</i>" (would it help if we all got down on our knees and prayed?) that something will turn up. Yet this is put up as a credible response to peak oil which is already causing<a href="http://oilshockhorrorprobe.blogspot.com/2011/07/high-oil-prices-cause-large-effect-on.html"> higher inflation</a> and <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html">substantial and negative impacts on GDP</a>?<br />
<br />
Already huge cracks are appearing in the petroleum plan ….<br />
• In late 2010 <a href="http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10679766%20">Exxon pulled out of exploration in the Great South Basin</a> <br />
• despite a record number of wells being drilled offshore of Taranaki, <a href="http://oilshockhorrorprobe.blogspot.com/2011/01/nz-oil-and-gas-in-steep-decline.html%20">very little new oil has been found</a> in the last two years <br />
• Petrobras is angry with the government that it was confronted with major protest action offshore from East Cape which disrupted its exploration work. The company left early, and who knows whether they will return.<br />
• Grey Wolf has withdrawn its application for offshore drilling in Golden Bay<br />
• <a href="http://www.scoop.co.nz/stories/PO1107/S00187/wheels-coming-off-govts-deep-sea-oil-plans.htm">Not one company has taken up available exploration permits off the coast of Northland</a>. The government surreptitiously placed this news on the MED website in the past few days with no ministerial press release. When confronted the government said the global financial crisis and the Gulf of Mexico oil spill was to blame. Well hello! Was that not blindingly obvious when the PAP was formulated.? I pointed out these issues in <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/governments-energy-strategy-grade-f-for.html%20">an earlier post</a> .<br />
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Yet in spite of these major setbacks in five different much touted offshore oil basins, the government's presentation has the gall to put up this graphic suggesting we will be "saved" by new oil discoveries.<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYpC5puM3ZZOfuBgFb_RAiv3zxea8wATt2PJtTJpkzRcTS_5c5pf_xXk6A9zjDtVM44j_T5GCxbNUrzEbYHXYycZ1x9PTZBxORGTVg14sOKq_1U1TauqIUe6f1WHwpCMzmUV-7muUKTcA/s1600/ann+gas+production+NZ.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="219" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYpC5puM3ZZOfuBgFb_RAiv3zxea8wATt2PJtTJpkzRcTS_5c5pf_xXk6A9zjDtVM44j_T5GCxbNUrzEbYHXYycZ1x9PTZBxORGTVg14sOKq_1U1TauqIUe6f1WHwpCMzmUV-7muUKTcA/s320/ann+gas+production+NZ.gif" width="320" /></a></div><br />
As I <a href="http://oilshockhorrorprobe.blogspot.com/2010/11/nz-hits-peak-oil-in-2010-zero-oil.html">pointed out in a post in November last year</a> about this very same graphic -- if you strip away these yet to be discovered oilfields -- you are left with the <b>real world situation</b> <b>of New Zealand oil production having already peaked and declining steeply to zero by 2023.</b><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpMVQ-k7OsdCDE5MnWDbk04S2atPVYzP1NswaFDmJf4abkq1Xkl7_AIhKafbkjZEg2OGLE3dxOzef6104UipV52C5QCeHxxduG8_dIiJyZfy4r50zUgTNBCpPFgMHN5GbYSagjq4NxejQ/s1600/ann+oil+production+NZ+current+and+forecast.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="182" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjpMVQ-k7OsdCDE5MnWDbk04S2atPVYzP1NswaFDmJf4abkq1Xkl7_AIhKafbkjZEg2OGLE3dxOzef6104UipV52C5QCeHxxduG8_dIiJyZfy4r50zUgTNBCpPFgMHN5GbYSagjq4NxejQ/s320/ann+oil+production+NZ+current+and+forecast.gif" width="320" /></a></div><br />
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<b>Conclusion</b><br />
This was a non-response to peak oil. It was a "let's pretend is not happening" and if it turns out it is happening "let's hope and pray that something will turn up"<br />
<br />
Am I my feeling any better having got this off my chest? Well not really -- because <a href="http://www.nzta.govt.nz/resources/research/reports/357/docs/357.pdf">there are effective policy responses that the government can make.</a> But due to its ideological blinkers, they will continue to ignore them.<br />
<br />
Labour has yet to announce its energy policy for this year’s election. Whether it too is unprepared to take bold and effective action on peak oil remains to be seen. I expect to be equally disappointed.<br />
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Note: Prof Bob Lloyd of Otago University also gave an excellent presentation on peak oil at the forum which you can view<a href="http://www.thesustainabilitysociety.org.nz/"> here </a>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com6tag:blogger.com,1999:blog-5406957897990753480.post-2849257988681124932011-07-14T14:32:00.000+12:002011-07-14T14:32:33.131+12:00Even more pain at the pump this year<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiJxT7biQVuntOoeEEBi36B3AuX4PYMY2xX7pVG0yP_Qj1gk7sUMmkUJoizHdsS2hktYDG_e8JTzwSXfFn5Y5XBKiUuDwGO87cyPd_92xjhTs2EZVOy6OHRtiaZDn2OLLYwdKVPnbGr-I/s1600/Nateperkins-PainAtThePump164.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="150" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiiJxT7biQVuntOoeEEBi36B3AuX4PYMY2xX7pVG0yP_Qj1gk7sUMmkUJoizHdsS2hktYDG_e8JTzwSXfFn5Y5XBKiUuDwGO87cyPd_92xjhTs2EZVOy6OHRtiaZDn2OLLYwdKVPnbGr-I/s200/Nateperkins-PainAtThePump164.jpg" width="200" /></a></div><div style="font-family: inherit;"><span style="font-size: small;">I am usually loathe to predict what oil prices will do, certainly in the long term. As Yogi Berra famously said <i>"it's hard to make predictions, especially about the future"</i>. 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 <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html">already damaging</a> current oil price shock. </span></div><a name='more'></a><div style="font-family: inherit;"><span style="font-size: small;"><br />
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</span></div><div style="font-family: inherit;"><span style="font-size: small;"><b>International Energy Agency desperate</b></span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;">For years now the IEA has issued coded messages about the looming oil crisis such as "<i>the era of cheap oil is over"</i>. But lately their statements are becoming ever more strident and urgent.</span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;">Their June 2011 report states quite plainly that unless OPEC can increase production by at least 1.5 million barrels a day, the world faces a supply/demand mismatch and price crunch in the second half of 2011. If supply cannot meet the expected demand of 89 million barrels a day this year, prices at the pump must rise again -- and sharply.</span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;">A sure sign of the IEA’s desperation was its recent decision to release 60 million barrels from members strategic reserves (New Zealand was exempted from this requirement because our stockpiles are so tiny.) 60 million barrels amounts to just 16 hours of world oil demand. </span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;">Not surprisingly the IEA release held down prices for only a week. They have already returned to pre-release levels. The strategy failed for the very reason warned about in their June report – the oil markets expect demand to exceed supply -- and soon.</span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;"><b>OPEC upheavals continue</b></span></div><div style="font-family: inherit;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjueGNcC1rlF1GjNYYgMnngeIeIfduXDpKcY6_RSgjlQuSc0siH1ezspqA_Nu0Bmf7FKLZ9xPprGW2p5Zfu9Fn09IgUYYvF8kr0PiNzaqkShUDt_Sf9g06qMhRwvc0hiASlUSbpoBlZBkY/s1600/oil-barrels-s35.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="246" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjueGNcC1rlF1GjNYYgMnngeIeIfduXDpKcY6_RSgjlQuSc0siH1ezspqA_Nu0Bmf7FKLZ9xPprGW2p5Zfu9Fn09IgUYYvF8kr0PiNzaqkShUDt_Sf9g06qMhRwvc0hiASlUSbpoBlZBkY/s320/oil-barrels-s35.jpg" width="320" /></a></div><span style="font-size: small;">It is not looking likely that OPEC can increase supplies. At best Saudi Arabia can only offer heavy sour oil when the world wants light crude oil such as Libya could produce. There are no signs of an end to conflict there. And as <a href="http://oilshockhorrorprobe.blogspot.com/2011/03/do-saudis-have-spare-capacity-and-why.html">noted before</a> -- the excess capacity Saudi Arabia is purported to have is of the fictional variety. Attacks on oil infrastructure have increased in Iraq as US forces are set to withdraw.</span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;"><b>Asian oil demand still on the rise</b></span></div><div style="font-family: inherit;"><span style="font-size: small;">China has a major drought affecting hydro generation, and Japan has had a nuclear meltdown. Although these economies are slowing both have major power shortages forcing them to burn more diesel, leading to more demand for oil.</span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;"><b>Convergence</b></span></div><div style="font-family: inherit;"><span style="font-size: small;">All these converging trends point to an oil price crunch in the next few months. This leaves the IEA with a quandary. Will it release more oil from strategic reserves and repeat its failed strategy of just a few weeks ago? </span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><b><span style="font-size: small;">Consequences?</span></b></div><div style="font-family: inherit;"><span style="font-size: small;">We have been saved from even higher pump prices by the record high of the NZ dollar against the US dollar. Even so,<b> average</b> fuel prices in New Zealand are already above those seen in the last oil shock of 2007- 08. </span></div><div style="font-family: inherit;"><br />
</div><div style="font-family: inherit;"><span style="font-size: small;"> Also, prices have already reached levels which historically have induced recessions.The IEA's </span><span style="font-size: small;">January 2011 Oil Market Report uses the term ,</span><span style="font-size: small;">“oil burden”, to quantify how higher oil prices impact the global economy. </span><span style="font-size: small;">Oil burden is defined as global oil expenditures divided by global GDP. At $100 per barrel the oil burden is 5 per cent . Prices have been above this level for months - a level which historically causes a global recession. And the IEA warns that import‐dependent developing countries (read New Zealand) are particularly vulnerable.</span><br />
<span style="font-size: small;"> </span> </div><div class="MsoNormal" style="font-family: inherit; line-height: normal; margin-bottom: 0.0001pt; text-align: justify;"><div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2b8aCP3cCq7t0-YLUV3Br7qVYcPF52gZByBwijGJv5b2a0N3OECqqqRHt4wLSy_TOyeA-atLqRVRptmw0QprBfbFyKrw-Xr680SODMbjxSLl4aeotMuVYZCF42Jxkac08Km55NZ7PS34/s1600/oil_price_2000_to_2011.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="300" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEg2b8aCP3cCq7t0-YLUV3Br7qVYcPF52gZByBwijGJv5b2a0N3OECqqqRHt4wLSy_TOyeA-atLqRVRptmw0QprBfbFyKrw-Xr680SODMbjxSLl4aeotMuVYZCF42Jxkac08Km55NZ7PS34/s400/oil_price_2000_to_2011.gif" width="400" /></a></div><br />
</div><div class="MsoNormal" style="font-family: inherit; line-height: normal; margin-bottom: 0.0001pt; text-align: justify;"></div><div class="separator" style="clear: both; font-family: inherit; text-align: center;"></div><div style="font-family: inherit;"><span style="font-size: small;"> </span></div><div style="font-family: inherit;"><span style="font-size: small;"><b>Good news -- bad news</b></span></div><div style="font-family: inherit;"><span style="font-size: small;">The "good news" is that oil prices may well fall sharply if we see a repeat of the demand destruction in OECD nations in 2008- 09</span></div><div style="font-family: inherit;"><span style="font-size: small;">The bad news is that it will take another oil-induced global recession before demand is reduced and causes prices to fall again.</span></div><div style="font-family: inherit;"><span style="font-size: small;"><br />
</span></div><div style="font-family: inherit;"><span style="font-size: small;">Happy days indeed</span><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1Ziz35TTaGYlrUVRW81ie3C8HFQLQQddW4dPVzo0xOEMsPF2yKF2h7kEEXnqT58a9Um7WDRMe8XEJv9uxbPTqLAs1HLoMZMmjgERUoGbsLuOgdr66YNWFYmrJzk-AD4AkH7SHncJ8ts8/s1600/hummer.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="199" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1Ziz35TTaGYlrUVRW81ie3C8HFQLQQddW4dPVzo0xOEMsPF2yKF2h7kEEXnqT58a9Um7WDRMe8XEJv9uxbPTqLAs1HLoMZMmjgERUoGbsLuOgdr66YNWFYmrJzk-AD4AkH7SHncJ8ts8/s320/hummer.jpg" width="320" /></a></div></div>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com2tag:blogger.com,1999:blog-5406957897990753480.post-60807732512886349272011-07-07T12:49:00.007+12:002011-07-07T21:46:58.361+12:00Infrastructure Plan wilfully oblivious of peak oil<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitVVIKhSbSBLi-OPMJZrysEiByJ_qjhkGeH_-Dd-TRmhoADPT5G_oiYG6bkt6V_YW3rutEzpUUdkSIEmJo6c0OTNGeD19m8kq5iQ8CmuTCZKqRf3TnMXnju3OLEq_fYf_zZRabl4-389g/s1600/Infrastructure_plan_2011.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEitVVIKhSbSBLi-OPMJZrysEiByJ_qjhkGeH_-Dd-TRmhoADPT5G_oiYG6bkt6V_YW3rutEzpUUdkSIEmJo6c0OTNGeD19m8kq5iQ8CmuTCZKqRf3TnMXnju3OLEq_fYf_zZRabl4-389g/s200/Infrastructure_plan_2011.gif" width="140" /></a></div>The government's <a href="http://www.infrastructure.govt.nz/downloads/pdfs/nip-jul11.pdf">Infrastructure Plan</a> 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.<br />
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Okay, peak oil does get a mention -- just once in the 68 page document. Here is the quote...<br />
<blockquote>"<i>A number of high level trends will shape our economy (including global trends around climate change, technology and peak oil), and with it the demands for infrastructure</i>."</blockquote>But that's it. <b>None of the subsequent analysis and strategic planning takes any account of the likely impact of higher fuel prices and shortages.</b> This, in spite of the advice from the Reserve Bank that oil shocks are already <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html">substantially lowering GDP</a> and <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/high-oil-prices-cause-large-effect-on.html">causing higher inflation</a>.<br />
<br />
It gets worse. The transport/roading projections - see graph - totally ignore the <a href="http://oilshockhorrorprobe.blogspot.com/2011/03/ideology-trumps-common-sense.html">available data </a>that vehicle kilometres travelled have not increased and freight tonnes per kilometre have actually fallen. The plan magically conjures up substantial increases in the next 20 years which exceed even the misnamed "current growth path" ! (Even this a fiction as there is no "current growth", and it does not follow the flat or declining trend of the past 5 years or so.)<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzDFb86ssrZk2vxLEPUhXejfOde99mpm1Mcq8GuUUh_u59d_4QM87Ec79k3dCmlV5jkQs0JYGDQnBbowmfcmlindF0xO2AK5_h92ZBEp0WDJzoKox4_dM9FyVpEUaPUTFhhWgoW_dhlro/s1600/Infrastructure_plan_vehiclefreight_projection.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="313" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjzDFb86ssrZk2vxLEPUhXejfOde99mpm1Mcq8GuUUh_u59d_4QM87Ec79k3dCmlV5jkQs0JYGDQnBbowmfcmlindF0xO2AK5_h92ZBEp0WDJzoKox4_dM9FyVpEUaPUTFhhWgoW_dhlro/s400/Infrastructure_plan_vehiclefreight_projection.gif" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">click to enlarge</td></tr>
</tbody></table><br />
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One obvious reason for these absurd predictions is that they are based on <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/new-zealand-governments-oil-price.html">hopelessly optimistic forecasts of oil prices</a><br />
<br />
<b>What would a peak oil aware infrastructure plan look like?</b><br />
<br />
The <a href="http://www.aspo-australia.org.au/">Association for the Study of Peak Oil</a> (ASPO) in Australia made a compelling <a href="http://dl.dropbox.com/u/31214727/ASPO_InfrastructureAustralia_Oct2008.pdf">submission on the Australian Infrastructure Plan</a> in 2008.<br />
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These extracts could be applied directly to New Zealand infrastructure planning word for word!<br />
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<blockquote><div class="separator" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em; text-align: center;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiploSAYwbi_9_3Y9zRp5hminUy4lb7ALUdWlkxgaUsfGo_w0vXK9IUmn8lFvxtJXiKJ2ay0EQAy5-ttEYTiyAx_rrqrp8Umx9ORXD55-NPIy9rsNZBc8DtdAMginIIQvebjdeFCxcBk6k/s400/aspo_australia_infrastructure_submission_2008.gif" width="280" /></div><i>"<b>Existing shortcomings in transport infrastructure planning are largely attributable to discredited oil price forecasts and flawed transport projections by official government agencies, which ignore the onset of peak oil and its various socio-economic impacts.</b> </i><br />
<i><br />
</i><br />
<i>These projections either ignore oil prices as an ‘externality’ or make unsupportable assumptions about alternative fuels and propulsion systems, in terms of scale, time, cost and the laws of physics. </i><br />
<i><br />
</i><br />
<i>Underlying assumptions about perpetual economic, employment and population growth are also highly questionable. No detailed studies into the nature and magnitude of peak oil mitigation have been undertaken in Australia to support these assumptions.</i><br />
<i><br />
</i><br />
<i><b>The absence of an Australian equivalent of the Hirsch Report, coupled with widespread ignorance and/or denial of peak oil, has resulted in the predominance of wishful thinking rather than rigorous, objective analysis.</b>"</i></blockquote><br />
The key recommendation from ASPO in Australia was therefore to:-<br />
<blockquote><i>“Commission an independent study into the implications of peak oil for transport planning, in order to determine realistic planning assumptions.”</i></blockquote><br />
Here are ASPO's other recommendations (which again could be transposed to New Zealand almost without change) :-<br />
<ul><li>Include the need to “reduce Australia’s oil vulnerability” in Infrastructure Australia’s goals and strategic priorities.</li>
<li>Mandate the conduct of oil vulnerability assessments in the feasibility studies for significant infrastructure.</li>
<li>Establish a strategic petroleum reserve.</li>
<li>The Federal Government should invest directly in renewable, distributed energy infrastructure.</li>
<li>Allocate a high priority for world class public transport and enhanced freight rail infrastructure.</li>
<li>Allocate a low priority for airport expansions.</li>
<li>Investigate the feasibility of high speed passenger rail to connect capital cities and regional centres.</li>
</ul><br />
The contrast between the rigorous objective analysis from ASPO and the wishful thinking from the government could not be starker.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-73443882585305457702011-07-06T12:17:00.008+12:002011-07-06T12:35:45.641+12:00Oil Shock Horror blog -- the story thus far<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
9 months after a tentative start last September, and with 45 posts clocked up here at <i>Oil Shock Horror Probe</i>, I thought it was time to re-cap. What are the trends and themes that have emerged so far?<br />
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<b>It's the economy stupid</b><br />
Higher oil prices are<b> already</b> negatively impacting our economy<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQzkHw37ttlMUIZdP_TM3A3V2ix6Dikppc7S3KS_lk0YgTm0_MRwKRO1CZhG-8pqsW1GxB_ItcWpuUDWz6jwy-eIzgIoDLfH3Jz2WWHXcYRSu1w_is13ZvNUVxomy3NrP9ahg04YgNVu8/s1600/5067764.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="200" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQzkHw37ttlMUIZdP_TM3A3V2ix6Dikppc7S3KS_lk0YgTm0_MRwKRO1CZhG-8pqsW1GxB_ItcWpuUDWz6jwy-eIzgIoDLfH3Jz2WWHXcYRSu1w_is13ZvNUVxomy3NrP9ahg04YgNVu8/s200/5067764.jpg" width="165" /></a></div><ul><li><a href="http://oilshockhorrorprobe.blogspot.com/2011/03/earthquake-nz5-billion-oil-quake-more.html">$2 billion sliced off New Zealand's GDP</a></li>
<li>$1 billion in spending power lost to New Zealand households already</li>
<li>reports confirmed <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html">substantial negative effects on GDP</a> and are causing <a href="http://oilshockhorrorprobe.blogspot.com/2011/07/high-oil-prices-cause-large-effect-on.html">much higher inflation</a></li>
<li>an ongoing reduction of just 7-10% in fuel supply <a href="http://oilshockhorrorprobe.blogspot.com/2010/09/peak-oil-could-halve-nzs-economy-says.html">will shrink New Zealand's economy by $115 billion in five years</a></li>
</ul><br />
<b>Our oil import dependency puts New Zealand at huge risk</b> <br />
<ul><li><a href="http://oilshockhorrorprobe.blogspot.com/2011/06/new-zealands-oil-security-how-dependent.html">we import 97% of our oil</a></li>
<li>shrinking domestic oil production is exported</li>
<li>reports from <a href="http://oilshockhorrorprobe.blogspot.com/2010/11/nz-hits-peak-oil-in-2010-zero-oil.html">Ministry of Economic Development</a>, <a href="http://oilshockhorrorprobe.blogspot.com/2011/01/nz-oil-and-gas-in-steep-decline.html">Venture Taranaki</a>, and the <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/new-zealand-joins-peak-oil-club-iea.html">International Energy Agency</a> all confirm New Zealand domestic oil production has peaked and will decline sharply</li>
<li>this will leave New Zealand even more vulnerable to oil shocks</li>
<li>"yet to be discovered" oil offshore and <a href="http://oilshockhorrorprobe.blogspot.com/2010/12/10-reasons-why-converting-lignite-coal.html">coal to liquids </a>is at best a 7 - 10 years away, there are huge environmental and economic downsides and they will not solve our current liquid fuel crisis</li>
<li><a href="http://oilshockhorrorprobe.blogspot.com/2011/03/oil-price-response-plan-for-new-zealand.html">comprehensive plans to lower our oil dependency</a> have been ignored </li>
</ul><br />
<b>Evidence of peak oil is overwhelming</b><br />
<ul><li>IEA confirmed conventional oil peaked in 2006 and pushes for urgent government intervention</li>
<li><a href="http://oilshockhorrorprobe.blogspot.com/2011/04/imf-warns-of-oil-scarcity-and-end-of.html">IMF warns of oil scarcity and end of "growth"</a></li>
<li><a href="http://oilshockhorrorprobe.blogspot.com/2010/10/nz-parliament-report-warns-of-imminent.html">New Zealand Parliament Report</a> warns of imminent oil shock</li>
<li><a href="http://oilshockhorrorprobe.blogspot.com/2010/11/nz-defence-report-ignores-peak-oil-us.html">US and German military</a> warn of serious consequences of looming oil supply shortages</li>
<li>UK government develops <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/uk-government-to-develop-oil-shock.html">Oil Shock Response plan</a> and <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/obamas-energy-plan-picks-winners-we-can.html">President Obama</a> mandates fuel conservation measures</li>
<li><a href="http://oilshockhorrorprobe.blogspot.com/2011/03/ideology-trumps-common-sense.html">traffic volumes in New Zealand are falling</a></li>
</ul><br />
<b>But New Zealand government has ears, eyes and lips firmly closed</b><br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFv9-aY-CVUj-YdAadP-ZhUuTWY0CIGWNCAZtiuY-4mEvhOo7hoMAEriEuvclwyAXwa33PKPQiTxXqWGVuxnJjqCmg7qt5bIY3OrCvuSBbV8CRmgGC7v3Ae5eDo8d0CGWpcEd0pz_GS8o/s1600/wildlife-monkeys-hear-no-evil-see-no-evil-speak-no-evil.jpg" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="240" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFv9-aY-CVUj-YdAadP-ZhUuTWY0CIGWNCAZtiuY-4mEvhOo7hoMAEriEuvclwyAXwa33PKPQiTxXqWGVuxnJjqCmg7qt5bIY3OrCvuSBbV8CRmgGC7v3Ae5eDo8d0CGWpcEd0pz_GS8o/s320/wildlife-monkeys-hear-no-evil-see-no-evil-speak-no-evil.jpg" width="320" /></a></div><ul><li>has <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/uk-government-to-develop-oil-shock.html">no oil shock plan</a></li>
<li>believes <a href="http://oilshockhorrorprobe.blogspot.com/2011/03/oil-prices-were-rising-steeply-before.html">"leaving it to the market"</a> will solve the fuel crisis</li>
<li>ignores negative impact of oil shock and peak oil in its <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/nz-budget-2011-ignores-oil-shock.html">Budget,</a> <a href="http://oilshockhorrorprobe.blogspot.com/2011/04/governments-energy-strategy-grade-f-for.html">Energy Strategy</a>, <a href="http://oilshockhorrorprobe.blogspot.com/2011/03/oil-price-response-plan-for-new-zealand.html">transport planning</a>, and <a href="http://oilshockhorrorprobe.blogspot.com/2010/11/nz-defence-report-ignores-peak-oil-us.html">Defence White Paper</a></li>
<li>relies on <a href="http://oilshockhorrorprobe.blogspot.com/2011/03/n-zs-oil-policy-based-on-flawed.html">oil price forecasts</a> which are always wrong</li>
</ul><br />
<b>NZ Media also ignores peak oil</b><br />
in spite of <a href="http://oilshockhorrorprobe.blogspot.com/2011/02/starting-to-join-dots-finally.html">widespread coverage</a> of peak oil in overseas media, <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/must-watch-australian-report-on-peak.html">in a must watch Australian TV documentary</a> , the New Zealand media continues to ignore peak oil (with a few <a href="http://oilshockhorrorprobe.blogspot.com/2010/12/peak-oil-reported-in-mainstream-nz.html">notable exceptions</a>)<br />
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Feedback is always welcome. Leave a comment or use the Contact Me tabDenis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-33598780973196879482011-07-01T10:23:00.000+12:002011-07-01T10:23:01.315+12:00High oil prices cause "large" effect on inflation - NZ Report<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
<br />
A 2005 study by New Zealand Reserve Bank economist Felix Delbruck <i>(<a href="http://dl.dropbox.com/u/31214727/2005dec68_4delbruck_oil_and_NZ_economy.pdf">"Oil prices and the New Zealand economy</a></i>" - Reserve Bank of New Zealand: Bulletin, Vol. 68, No. 4) has found that the inflationary effects of higher oil prices were <i>"quite large".</i> Specifically that :-<br />
<ul><li>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%</li>
<li>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 -- <b>a total 0.6% increase in the CPI for every $.10c a litre increase in fuel. </b></li>
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At first blush a 0.6 % effect may not seem that large. But when you consider that fuel prices have risen by 40-50 cents per litre in the past year alone, and that the Reserve Bank's target is to keep inflation between 1 - 3 % per annum, - the 0.6% effect for every 10 cent /L increase assumes very worrying proportions.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYu31VP9Jcbq93rgym5dsfCdE7tXD7cGPwz4HQJ0wzHXimJccZp8iX1qheZXkFIvqOvZsMEGn5ulSIzdLLWLZDZd3gGdJ-7nma-FiziQJZaBfNdSap9O5oFGQf04WLd9RBBoEFRfh9vFU/s1600/NZ_oil_use_relative_to_GDP_2002.gif" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="303" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgYu31VP9Jcbq93rgym5dsfCdE7tXD7cGPwz4HQJ0wzHXimJccZp8iX1qheZXkFIvqOvZsMEGn5ulSIzdLLWLZDZd3gGdJ-7nma-FiziQJZaBfNdSap9O5oFGQf04WLd9RBBoEFRfh9vFU/s400/NZ_oil_use_relative_to_GDP_2002.gif" width="400" /></a></div>The report compares New Zealand's oil use with that of other countries. Relative to GDP our oil use is high - closer to gas guzzling nations like the US and Canada than the OECD Europe and the UK. Which of course leave our economy more vulnerable to inflation, plus the<a href="http://oilshockhorrorprobe.blogspot.com/2011/06/2007-08-oil-shock-caused-substantial.html"> strongly negative impact on GDP </a>highlighted in my post last week.<br />
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New Zealand is a relatively heavy user of transport fuel, and….<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTcnPcUmaHmmY58nDOqhCUae4rpWSrjL1dvKICqkwrApHC6sNeyz3kgDLM5ljYRqAUcWlWl_-wE69XnUcV_Oa8eA90jlK5BOjsLf68gKlNw_Ak1SZT8m_GpGRF9-J3dWZDuE_n5g8z82w/s1600/oil_use_per_capita_transport_purposes.gif" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><img border="0" height="338" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgTcnPcUmaHmmY58nDOqhCUae4rpWSrjL1dvKICqkwrApHC6sNeyz3kgDLM5ljYRqAUcWlWl_-wE69XnUcV_Oa8eA90jlK5BOjsLf68gKlNw_Ak1SZT8m_GpGRF9-J3dWZDuE_n5g8z82w/s400/oil_use_per_capita_transport_purposes.gif" width="400" /></a></div><i>"more than in other OECD countries, our use of transport fuel is weighted towards diesel and jet fuel. This suggests that the indirect effects of higher oil prices on inflation and the economy, through an increase in the cost of providing transport services and other goods and services, may be relatively large".</i><br />
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The report says while the inflationary impacts are large, they may be underestimated because the calculations do not take account of the effect international oil prices have on the non-oil imports due to higher international transport costs and to the fact that overseas products for example plastics -- are more expensive.<br />
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Other "second round" effects are identified as a series of wage/price increases that leads to medium term inflation. Alternatively if wages and prices are held down, then higher oil prices mean less spending on other consumer goods and lower profits for business. <br />
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"Third round" negative impacts arising from higher oil prices identified in the report are an increase in New Zealand's imports and net foreign debt <i>"which needs to be paid for by lower consumption and investment later on". </i>Also higher oil prices reduce economic activities in many of our trading partners. -- reducing demand for New Zealand exports and reducing the number of inbound tourists.<br />
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In a speech to Canterbury businessman in 2010 entitled <a href="http://www.rbnz.govt.nz/speeches/3208927.html"><i>‘Coping with Shocks - a New Zealand Perspective’ </i></a>Reserve Bank Governor Alan Bollard confirmed the extent of the inflationary impact of higher oil prices identified in the Delbruck report. He stated that since 2004 around 0.5% has been added to the CPI <b>every year</b> due to oil price rises.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-30041658613105380562011-06-24T15:33:00.000+12:002011-06-24T15:33:00.088+12:002007-08 oil shock caused "substantial" decline in New Zealand's GDP say Reserve Bank economists<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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In a <a href="http://dl.dropbox.com/u/31214727/deveirman_oil_price_shocks_Nz_feb_2011.pdf">recent report</a>, two New Zealand Reserve Bank economists have estimated the real effects of oil price shocks on New Zealand’s GDP. The economists conclude --<br />
<ol><li>a 5% permanent increase in retail fuel prices implies a decline in NZ's GDP of 0.3%</li>
<li style="color: red;">a succession of oil price shocks such as those in 2007-08 had <b><i>"a substantial effect on real GDP in New Zealand"</i></b></li>
<li>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.</li>
<li>real wages decline in response to an oil shock, as they are eroded by inflation.<a name='more'></a></li>
</ol><br />
<div class="separator" style="clear: both; text-align: center;"></div><div class="separator" style="clear: both; text-align: center;"><a href="http://dl.dropbox.com/u/31214727/deveirman_oil_price_shocks_Nz_feb_2011.pdf"><img border="0" height="263" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj2yZyb8T8XlYGD7qEX5MVmD8cm4ktv7pv-3gx08Qz-L3KQuKB5HoWzXxDG9zXC5nebUn7NsreWfBoSwDsiTU8mSRm8ZohP8IngQK69kf16AvjSuc6DOGiQzdYY-o79wymbATy_RQcKYPs/s320/Reserve_bank_report_2011.gif" width="320" /></a></div><br />
<b>Commentary</b><br />
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<b>Why is the Reserve Bank not listening to its own economists?</b><br />
Oil prices spiked in 2007-8, and retail fuel prices have increased by about 25% since mid-2010. <span style="color: red;"><span style="color: black;">Average fuel prices for the last quarter to March 2011 are now higher than those at the height of the 2007-08 price spike</span>. </span>(<a href="http://dl.dropbox.com/u/31214727/NZEQ_March_2011%20-%20Copy.pdf">NZ Energy Quarterly March 2011</a>)<br />
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<span style="color: red;">If a 5% fuel increase implies a 0.3% decline in real GDP, then a 25% increase implies GDP falling by around 1.5%</span>. Such a decline is in line with the projections of the UK government -- see my previous post <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/nz-budget-2011-ignores-oil-shock.html">here</a><br />
Why are these conclusions of Reserve Bank economists being almost completely ignored in the Bank's most recent official <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/nz-budget-2011-ignores-oil-shock.html">forecasts for "growth"</a>. And why, given the advice from his own economists, is the Governor Alan Bollard, still prepared to <a href="http://www.rbnz.govt.nz/speeches/3208927.html">"look through" oil shocks</a> (code for ignore?) and their inflationary impacts?<br />
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<b>The report has a very narrow focus on GDP.</b> <br />
It does not seriously examine the other direct and indirect and very serious impacts of oil shocks on the economy. These are summarised in the <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/uk-ignores-peak-oil-warnings-nz.html">UK report on peak oil</a> and include --<br />
<ul><li>deterioration in New Zealand's balance of payments as an oil importer - set to worsen as we become <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/new-zealands-oil-security-how-dependent.html">even more oil import dependent</a></li>
<li>higher inflation and increased input costs - found to be large for NZ in a <a href="http://dl.dropbox.com/u/31214727/2005dec68_4delbruck_oil_and_NZ_economy.pdf">2005 Reserve Bank Bulletin</a> <i>"Oil prices and the New Zealand Economy"</i> by Felix Delbruck</li>
<li>lower investment</li>
<li>real wages decline (this is mentioned briefly)</li>
<li>higher unemployment</li>
<li>consumer and business confidence falling</li>
<li>tax revenue falling</li>
<li>social unrest</li>
</ul><br />
<b>New Zealand is at far greater risk from oil shocks</b><br />
This is because we have much less capacity than other nations to lower our oil use (one third the capacity of US). The report identifies three reasons --<br />
<ol><li> much of our oil use is essential for agriculture and forestry, or for long-distance transport between New Zealand cities. Similar conclusions were reached in a <a href="http://dl.dropbox.com/u/31214727/2005dec68_4delbruck_oil_and_NZ_economy.pdf">2005 Reserve Bank Bulletin</a> <i>"Oil prices and the New Zealand Economy"</i> by Felix Delbruck</li>
<li>compared to the US we use less oil for leisure, so we have less capacity to voluntarily reduce consumption</li>
<li>New Zealand households do not have the wealth to substitute to newer and more fuel-efficient cars. We are one of the most car intensive nations on earth, but our fleet is one of the oldest (average age 12 years)</li>
</ol><br />
<b>Oil shocks cause recessions</b><br />
A graph from the report shows that in 2007-08 oil as a percentage of NZ GDP moved above 5%.<br />
<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh57ELhIuZR-bIPC3Lk_fccdTpiHwvjZ5sU9iVELh57gXGvFncRyy1a65o3avk8xAgedIxxoB82O0A8EDg5CAOTD5fw701VvbnYoU6X8iJ_tdTJfooVinXa1EkylPP4YmW8mrifONu_1KQ/s1600/oil_share_gdp_NZ.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="106" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh57ELhIuZR-bIPC3Lk_fccdTpiHwvjZ5sU9iVELh57gXGvFncRyy1a65o3avk8xAgedIxxoB82O0A8EDg5CAOTD5fw701VvbnYoU6X8iJ_tdTJfooVinXa1EkylPP4YmW8mrifONu_1KQ/s400/oil_share_gdp_NZ.gif" width="400" /></a></div><br />
Studies from other economies confirmed that once this threshold is reached, nations go into recession <br />
<a href="http://oilshockhorrorprobe.blogspot.com/2011/04/next-oil-induced-recession-are-we-there.html#more">Why would we expect New Zealand to be immune</a>? Mainstream commentary has concentrated on sub-prime mortgages and the credit/debt bubble as the cause of the global and New Zealand's financial crisis. But the <a href="http://dl.dropbox.com/u/31214727/PCReader-Whipple-Oil_Great_recession.pdf">price of oil is another underlying cause</a> of New Zealand's recession that has been totally overlooked by business commentators and politicians<br />
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As far as I can judge this is the only recent New Zealand-based report examining the effect of oil shocks on our economy. The focus on GDP is narrow and tells only a small part of the story. But at least it's the beginning of a discussion. The Report should now become a catalyst for an urgent debate on these issues by business commentators and politicians. The Report was presented at universities late last year and was published in February 2011. Since then there has been no mainstream commentary on it’s conclusions that I can discover. So sadly, I'm not holding my breath on that one.Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com0tag:blogger.com,1999:blog-5406957897990753480.post-18916484845035618172011-06-16T13:07:00.003+12:002011-06-16T19:15:40.536+12:00UK Ignores Peak Oil Warnings - NZ Pretends It's Not An Issue<a href="http://www.twitter.com/denistegg"><img alt="Follow denistegg on Twitter" src="http://twitter-badges.s3.amazonaws.com/t_small-a.png" /></a><br />
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 <a href="http://www.guardian.co.uk/environment/2011/jun/15/peak-oil-warning">UK ministers have ignored peak oil warnings.</a><br />
<a name='more'></a><br />
The UK government commissioned a report five years ago in 2007 --<i> "Report on the risks and impacts of a potential future decline in oil production"</i> <a href="http://dl.dropbox.com/u/31214727/UK-decc-report-2009-oil-decline.pptx">(PowerPoint). </a> The report was finished in June 2009 but has only been made public in the last week, and only after protracted official information appeals due to the UK government trying to keep the report secret.<br />
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The first part of the report written in 2007 begins with a generally dismissive approach to peak oil, but the updated sections written in 2009 contain many stark warnings should peak oil happened before 2015.<br />
<blockquote><i>"if peak oil happened before 2015, this would have significant negative economic consequences for some of the main importers of UK goods and services resulting in a negative impact on the UK economy in the longer term."</i></blockquote><br />
A report also examined the direct and indirect impact on the UK economy -- as you can see from the extract below the impacts are many and profound.<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJc1om5AA4a1G8QNkagnS_XW0-zesbKUPvmwJ1hO4fKaXJ431Ps4MGaemI1EVtRjFqnGSJQqs451zj4KFgjbW0YVYuI9JbptBjSEIHJk-qyw9RL5bFC0bZvsDr_nWcCwVRGku5bvt6DfU/s1600/UK_DECC_impacts_slide.gif" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJc1om5AA4a1G8QNkagnS_XW0-zesbKUPvmwJ1hO4fKaXJ431Ps4MGaemI1EVtRjFqnGSJQqs451zj4KFgjbW0YVYuI9JbptBjSEIHJk-qyw9RL5bFC0bZvsDr_nWcCwVRGku5bvt6DfU/s640/UK_DECC_impacts_slide.gif" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Click to enlarge</td></tr>
</tbody></table><br />
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And the report has a bleak outlook for those cornucopians who suggest that there will be a smooth transition to alternatives –<br />
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<blockquote><i>“In the event of peak oil, the ability to substitute away from oil consumption will be crucial to the economy’s resilience. <b>However, few viable alternative energy sources exist for road and air transport and demand remains fairly unresponsive to rising prices</b>.”</i> and </blockquote><br />
<blockquote><i>“Alternative fuels are available, however few are yet commercially viable and there are still concerns around sustainability and wider deployment. <b>Mass deployment of alternative fuels will take time and it will take time before it will have a significant impact upon fossil fuel consumption in the transport sector.</b> Government may have a role to play in increasing the speed with which these alternatives are brought to market.”</i></blockquote>To its credit, the UK government has recently had a <a href="http://oilshockhorrorprobe.blogspot.com/2011/05/uk-government-to-develop-oil-shock.html">major rethink</a> and has agreed to engage with, and consult peak oil experts. It has also<a href="http://www.decc.gov.uk/en/content/cms/meeting_energy/int_energy/global_oil/cfe_crude_oil/cfe_crude_oil.aspx"> released other papers on peak oil </a>on its Department of Energy and Climate change website.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIEJVLPVpm9F3WKcPqNOgcgBV6RxWoexc2NFzI1YeK8YPtQenQqpbcdOIq2tWn6ImmgeIqz2EJj_NPOBUzRmjDLAMtbJDp6X0hD-2szC_SWAzlXbCQvJJTvr6yr3dKLUIQsPb5wRRqhSM/s1600/Elephant-in-the-Room-Harrison.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><img border="0" height="152" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjIEJVLPVpm9F3WKcPqNOgcgBV6RxWoexc2NFzI1YeK8YPtQenQqpbcdOIq2tWn6ImmgeIqz2EJj_NPOBUzRmjDLAMtbJDp6X0hD-2szC_SWAzlXbCQvJJTvr6yr3dKLUIQsPb5wRRqhSM/s200/Elephant-in-the-Room-Harrison.jpg" width="200" /></a></div>It seems the UK government has finally seen the elephant in the room. <b> </b><br />
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<b>Meanwhile the response from the New Zealand government is to continue to pretend that peak oil is not a problem. Either no NZ reports on peak oil have been obtained, or if they have they have been kept secret. There is certainly no engagement with peak oil experts or the public here.</b><br />
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This in spite of the fact that New Zealand has a <a href="http://oilshockhorrorprobe.blogspot.com/2011/06/new-zealands-oil-security-how-dependent.html">much higher net oil import dependency </a>than the UK, (UK close to zero - NZ 70%) and New Zealand is one of the most oil intensive nations in the OECD, while UK is one of the least intensive.<br />
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<div class="separator" style="clear: both; text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEii2l0aI3r-0QDPxPH5SLCgIfz6FrJH14ojApSTsLZUKm1N7wW189Yrh7Z3GTICWRZ7RSZYk7G3TPw8OdWz-FQ2N4aDabB72q6ZMAlGiENokXZPSU01X37bZltJ0z6wiWjsUr4qhctFEZ0/s1600/energy_ratio_NZ_and_other_OECD.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="371" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEii2l0aI3r-0QDPxPH5SLCgIfz6FrJH14ojApSTsLZUKm1N7wW189Yrh7Z3GTICWRZ7RSZYk7G3TPw8OdWz-FQ2N4aDabB72q6ZMAlGiENokXZPSU01X37bZltJ0z6wiWjsUr4qhctFEZ0/s400/energy_ratio_NZ_and_other_OECD.gif" width="400" /></a></div>Denis Tegghttp://www.blogger.com/profile/08786000866647551189noreply@blogger.com2