You know things are bad when the AA is saying that high petrol prices are here to stay and there needs to be more investment in public transport. Global supply and demand is so tight that tiny disruptions are causing massive spikes. What if Saudi Arabia erupts?
The pat response from drivers’ organisations during oil price spikes is usually to call for reductions in tax on petrol. Which is stupid, because the government has to make up the by taxing us more somehow else, cutting spending, or borrowing more without the fundamental problem being solved. It seems the AA now gets this. Speaking about current prices and the likelihood they will exceed the previous record, the AA spokesman said:
“We have to get used to the idea that as global demand increases and supply doesn’t, we are going to be facing these kinds of price fluctuations, and whenever any little crisis comes along it’s going to lead to price spikes. The only way we can manage that is by reducing our consumption.”
Btw, what is up with the Herald journo who wrote that article attributing the 2008 record price to Hurricane Katrina, which happened in 2005?
I guess it’s part of the media’s general unwillingness to examine the fundamentals underlying the oil price situation. Of the several articles on petrol prices in the Kiwi media over the last few days, none mention peak oil, except for the AA spokesman’s allusion to it. I guess it’s far easier, and more reassuring, to blame one-off events than face the realities of peak oil.
Previously, the Libyan crisis would not have affected oil prices much. The country produces just 2% of the world’s supply, which could easily have been covered when there was plenty of surplus production capacity. Now, there is claimed to be just 5% extra production capacity worldwide, most of it lower grade crudes that not all refineries can handle and which produce less useable oil. Libya and demand growth would eat up most of that spare capacity alone, if it even exists. Many analysts think Saudi Arabia, which claims 90% of the spare capacity, is exaggerating and can’t supply an extra 4 million barrels a day even if it wanted to, and why should it want to?
Nonetheless, the only reason that oil prices haven’t gone absolutely stratospheric is the hope that the Saudi spare capacity will be there when needed. Which makes stability in the Kingdom vital to the global economy. And that’s why everyone in the know is holding their breath for Friday, the Muslim holy day when a ‘ day of rage’ like those that have started revolts across the Arab world is planned for Saudi Arabia. The regime has sent ten of thousand of extra security troops to the oil-producing Qatif region, which is populated by Saudi Arabia’s discriminated-against Shi’ite minority, to try to smash any uprising. If the Saudi people rise up for change, and I fully support them in doing so, and especially if the Shi’ite oil workers strike, then you’ll look back on the days when you could get petrol for $2.10 a litre with fondness.
I like to end these oil posts with a bit on what we can do to ease the problem. The key is to lessen our reliance on oil. That means no more white elephant motorways. It means investing in public transport, which should be electrically-powered where possible. It means that the rebuilding of the Christchurch CBD needs to have low-energy use at the heart of its design – zero-energy buildings, pedestrian and public transport-centred layout, mixed commercial and residential space to reduce commuting.