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Day of rage

Written By: - Date published: 9:04 am, March 7th, 2011 - 23 comments
Categories: energy, International - Tags: , , ,

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.

23 comments on “Day of rage”

  1. Peter Hollis 1

    We may as well start mining more land as well as we will no longer be able to afford driving out to see it, at least we can use the minerals drawn out of the ground to help with our self sufficient ways we will need to head down. With low oil does this mean we can burn more coal since CO2 emissions will reduce? In the future it may be harder to get the rare earths for wind turbines & electric cars.

    [lprent: Just realized that you’re on the permanently banned list. I’ll leave this message in because it has had responses. ]

    • You are taking the micky arn’t you Peter. Do you have a coal fired car?

      • Colonial Viper 1.1.1

        Back to good ol’ steam power.

      • Robert Atack 1.1.2

        I don’t think Peter was saying we could use coal to run cars, except via electricity(?), and then he rightly pointed out limits to growth re – rare earths for wind turbines & electric cars.
        >With low oil does this mean we can burn more coal since CO2 emissions will reduce?<
        As Lord Oxburgh says 'we' are going to burn the coal anyway http://www.youtube.com/user/oilcrash1#p/u/45/XgbqAtgmALo unless we have a sudden reduction of people living in cities then as we go deeper into the peak oil cliff we will burn as much coal as we can get out hands on, thus sealing our collective doom. Fortunately 'if you think there is a bright future' coal mining is dependent on oil, so peak oil is also peak coal, or darn close to it.
        We will be burning tyers to keep warm, just like in some places and disparate times in Africa they burn cow dung to cook with, well it will be the same with us and whatever we have to burn, as we see with Christchurch, when the system goes tits up (no water flowing through the tap) then the numbers mount up quite fast, unplug New York or any city and see how fast we lose our humanity.
        I was laughed at for suggesting we should look to Cuba to learn what the other side of peak/crash looks like, and how to maintain our humanity, as we slide down the razor blade.

    • bbfloyd 1.2

      panic over peter. i’ve contacted the doctor, and he will be round with some nice men to ensure your sedatives are administered as painlessly as possible… now you can have a good relaxing lie down.

  2. When we hit $2.00 about three years ago every ‘reputable’ state forecaster was saying it was merely a one-off blip and we would be back down to not much above half that within a space of months. (Although, interestingly, private oil company forecasters were just then starting to talk peak oil.) The price has never dropped significantly since then. And, now that it is back at $2, there is nowhere near the outrage or excitement that there was last time – because everyone knows $2 is not a peak, it is the new ‘minimum base-line’. Meanwhile Treasury and MED are still refusing to talk about peak oil as a possibility, let a lone a certainty that we need to prepare for – it is irresponsible that those two ministries do not give their ministers proper advice.

  3. Bill 3

    Question. If you are aware that something is happening that has the potential to undermine the basis of privilege and power that you have in relation to society’s majority, do you…

    a) acknowledge that something bad is happening and risk losing your privilege and power in the short term?


    b) put on a public face of ‘business as usual’ while using the time bought by such a strategy to lay the groundwork that might preserve your position of power and privilege in the long term?

    IMO, b).

    So harping on to ‘deaf’ ears hoping those between those ears will formulate solutions and hand them down is a naive and futile excercise.

    • Colonial Viper 3.1

      Many with the basis of privilege and power will see Peak Oil as another money making and asset grabbing opportunity. Just like they see wars and earthquakes as money making and asset grabbing opportunities.

      Their world view:

      Higher volatility = faster profits.

      And some of them may not realise until too late that (as DTB might put it) money is not a resource. And that there are some situations where even a million dollars will not get you a glass of clean water.

      • M 3.1.1

        CV, couldn’t have put it better myself.

        Had a cup of tea with my righty debater friend but he still does not get that PO will be ever more vicious. He still clings to the idea that spare capacity can be found if demand is great enough and the technology for deep sea drilling will become better, faster -sounds like the bionic man.

        Realising I was chasing my tail, I said we’d have to agree to disagree and I think the only thing that will really drive the point home is the increased cost of his commute or worse unavailability of of fuel which even with his considerable resources he will be unable to obtain.

        • Lanthanide

          I’m not convinced that we have peaked. We might see flows up over 90, maybe even 95m/b day. Timeframe for that would probably be in the next 5 years or so.

          I think oil would be pushing at $200/b though, and the downslope would be significantly sharper (as it’s just moving future production earlier in time).

        • Colonial Viper

          He still clings to the idea that spare capacity can be found if demand is great enough and the technology for deep sea drilling will become better, faster -sounds like the bionic man.

          Yep, its the neo-classical belief in the price/supply curve. As long as the price of something keeps going up, they think that supply will keep going up. There will never be a shortage as long as people are willing to pay what it takes.

          But they’ve not realised that even as trillions in new money is printed, no new oil is being created.

          And they’ve forgotten an even older and truer rule. That sometimes you can’t have the thing that you need or want, for any amount of love or money.

          • George.com

            Whether we are at a peak of production or somewhere near to it is one point of debate. I am not qualified to state one way or the other. I doubt few people are, they can estimate, but we may only likely know when looking back in time. There could be the possibility, given a high enough price of oil to produce speculative exploration, that a number of large oil fields will be found that can substitute for the decline in the older wells and maintain increased demand for a period of time. I believe such large oil fields will be in expensive and difficult to extract places however. The cost of extracting the oil will be high. The matter at what cost for oil globalised free market economies can operate then becomes the question.

            So, the question of peak oil means two things to me. It could be taken to mean a genuine peak when we have actually exhausted 1/2 of the worlds oil reserves and what comes next is a downward slide. It could also be taken to mean a situation where oil is still available to replace what is being drawn down and meet increased demand but at a far higher cost. Which one? Maybe an academic question for peak oil experts to argue over. Either scenario, which ever we are in, spells danger to me.

    • just saying 3.2

      b) put on a public face of ‘business as usual’ while using the time bought by such a strategy to lay the groundwork that might preserve your position of power and privilege in the long term?

      The most cold-blooded, and I suspect Key might be mainly in this camp, are straight out lying about the ‘it’s gonna be fine – “business as usual”‘ while plotting and gathering… there’s probably a clear plan. Others lie to themselves most of the time, as well as to you and me, maybe paying others to say what they want to hear, often being downright self righteous with religion and/or social darwinism.

      But there are different kinds and levels of privilege, and it seems to me most people are lying to themselves and/or others about what’s going on,at least part of the time, often while trying not to be seen to be grabbing and greedy.

  4. exit lane 4

    The AA in the peak oil camp ! without use of the “P” word of course. But as you allude to the response from our media has been pathetic. Meanwhile thousands of articles have appeared in the international press making the link between an oil shock and a renewed global recession

    Is it something about our isolation that so many think we are immune here, or is it the good ole sheel be right attitude?

    But the real villans are BOTH major party’s failure to plan for and mitigate against the impacts of oil shocks which have been thoroughly predictable.

    In an election year where are the policies from not just the Government but from Labour to aggresively front up? We need to act on a war footing. The last 2 weeks in Christchurch show that when confronted with adversity we can respond.

  5. Deadly_NZ 5

    Damn may have to sell the car I can’t afford petrol now let alone reg and wof and it just keeps on going up. And i have just had the cam belt done too, more money wasted :-(

  6. spam 6

    How do you propose that 1.) we generate sufficient electricity for electric cars, and 2.) increase the electrical infrastructure to handle the increased loads?

    • Colonial Viper 6.1

      Who is going to buy me a new electric car? Because I’m definitely not shelling out $65K for one, and neither are most people that I know.

  7. I remember about 6 years ago, when petrol hit $1.20 per litre and we were all aghast.

    Someone commented on another forum, that in the not so distant future petrol prices would skyrocket further, and we’d all reminisce about the days when petrol only cost $1.20 per litre. He said that if we were to hear of a petrol station offering gas at $1.20 a litre we’d all queue up for miles to get it.

    That day is soooooo here.

    I wonder how long til we look back on the good old days when 91 cost “only” $2 a litre.

    • ianmac 7.1

      In Britain last year the petrol was as high as $NZ2.70 pl. Lower in some districts.

    • Bright Red 7.2

      the price last week was $2.06 on average but the importer margin (how local distribution system is funded and local profits) was only two thirds of normal. Without things getting any worse – just on the price rise so far this week and the exchange rate drop, and the importer margin needing to return to normal – the price could lift to $2.15 this week.

      captcha: requirements

  8. Irascible 8

    This talk examines the problems of our current economic system / policies and illustrates for NZ how Key & English & Hide are taking us down the wrong path with their economic policies.

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