MoT reveals massive budget shortfall from peak oil

Written By: - Date published: 7:33 am, February 4th, 2012 - 36 comments
Categories: energy, transport - Tags: ,

Almost missed among all the blacked out paragraphs of the Transport Briefing to the Incoming Minister are 2 interesting graphs. While not explicitly mentioning peak oil, the graph of the National Land Transport Fund shows a massive shortfall in revenue in a ‘high oil price, low growth’ scenario. The other shows how low-quality National’s highway spending is.

Now, the ‘high oil price’ in the scenario is not actually a high price – it’s $173 a barrel (in 2010 dollars) in 2030. That’s a 100% increase in 19 years. For comparison, there’s been a 187% above-inflation increase in the last decade and 300% increase in the last two decades.

And the ‘low growth’ is 1% below Treasury’s long-term assumption of 2%. Again, average growth of 1% is hardly outlandish: the average in the last decade was 1.5% and in the last five years growth has averaged 0.5%.

A 100% increase in oil price and growth only cut by 1% per annum is an optimistic outlook in the peak oil future. As the world’s available supply of oil diminishes and more and more of it is tied up by domestic consumption in producer countries and local-term supply contracts to China, the price will rise much more rapidly than that – all that will constrain them is demand destruction in the form of successive recessions and anemic recoveries (we’re already in this cycle, in case you haven’t noticed).

So, this is the Ministry of Transport’s ‘weak peak oil’ projection. And look at what it does to the revenue coming into the NLTF:

That’s a $15 billion shortfall by 2030, over 20% of the projected spending on transport in that period. The annual shortfall will be more than $1.5 billion by 2030.

And this, remember, is a weak peak oil scenario.

The smart money would be in using the resources we have left to build a less oil dependent (and to an extent than means less transport dependent) economy. Unfortunately, we’re using the money to build highways to nowhere instead. Here’s another graph from the MoT BIM showing the Benefit:Cost ratios of the government’s state highway spending:Still think those ‘Roads of National Significance’ are money well spent?

36 comments on “MoT reveals massive budget shortfall from peak oil ”

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  1. james 111 1
    4 February 2012 at 7:48 am

    Another week, yet another peak oil prediction from James H ! yawn yawn yawn

    • lprent 1.1
      4 February 2012 at 7:50 am

      What prediction? Did you read the post?

      Evidentially not…

      • Colonial Viper 1.1.1
        4 February 2012 at 8:54 am

        evidently james 111 thinks that drowning is a yawn. Right up until minute 3 1/2.

        • Bored 1.1.1.1
          4 February 2012 at 4:16 pm

          We will take gratuitous pleasure watching James fall off his bike as he comes to the sealed end of a road to nowhere. Better get some practice in on the velocoped Jimmy because techno narcism or not you wont be driving in 20 years.

          • james111 1.1.1.1.1
            4 February 2012 at 5:18 pm

            Bored intresting comment road to nowhere. Electric cars go on roads, Your cart and donkey can go on a road. Your Solar powered bike could go on a road. Peak oil has been reached really. They are finding copious quantities of oil all the time.

            Russia is extracting Oil from 40000 feet below the surface. Having worked on Oil rigs off North West Shelf , Taranaki ,and Great South Basin I kno there are huge amounts of oil still around that havent even been touched because it was to deep for production platforms.

            You and your ilk will protest every time they try to drill because it proves your theory wrong.
            Remember Global Warming yes thats right the world was warming up at an alarming rate.

            Then the climate activists found it was actually going in to a cooling phase,and couldnt explain it away despite trying to destroy evidence ,and eamails by corruption all well documented.

            Now we have to call it Climate change because the name covers a multitude of sins gives them something to hide behind whilst they still get their research funding. Its all a big game Bored ,and you are one of those being played just like James H

            • Colonial Viper 1.1.1.1.1.1
              4 February 2012 at 5:26 pm

              Russia is extracting Oil from 40000 feet below the surface. Having worked on Oil rigs off North West Shelf , Taranaki ,and Great South Basin I kno there are huge amounts of oil still around that havent even been touched because it was to deep for production platforms.

              You’re quite right. The world will never run out of oil.

              Just oil that we can afford. At $3/L petrol, millions (probably tens of millions) of car kilometres are going to disappear off NZ roads annually.

              And look what Greece is facing today – petrol prices which hav doubled in just three years. Over 5% of Greece GDP is now spent importing oil (much of it from Iran), and of course that is 5% less GDP which can be put into debt repayments and social services.

              http://www.zerohedge.com/news/europe-celebrates-its-latest-recession-record-high-gas-prices

            • Lanthanide 1.1.1.1.1.2
              4 February 2012 at 5:39 pm

              Do some reading, educate yourself, james:
              http://physics.ucsd.edu/do-the-math/2011/11/peak-oil-perspective/

              Of course I don’t expect you’ll actually make the effort.

              • james111 …
                4 February 2012 at 5:59 pm

                Lanthanide thanks I have read it in regards to the sarcasm I probably read a bit to much for you ,and just dont believe what I am being spoon fed by activists. The telling comment is the one below, and I quote ” Since 1946 For every 3 tonnes of oil we are consuming we are finding 5 tonnes hmmmmm interesting.

                If hydrocarbons are renewable-
                then is “Peak Oil” a fraud?

                by Joel Bainerman 31 Aug, 2005

                The question is critical due to the enormous amount of coverage the issue of “Peak Oil” is receiving from the mainstream press. If the supply of hydrocarbons is renewable- then the contrary to the conventional wisdom being touted throughout the mainstream press today- the world is NOT running out of oil.

                Professor Emmanuil Chekaliuk told the conference on Petroleum and Petroleum Geology in Moscow that:

                “Statistical thermodynamic analysis has established clearly that hydrocarbon molecules which comprise petroleum require very high pressures for their spontaneous formation, comparable to that required for diamond…

                To suggest that hydrocarbon molecules spontaneously evolve in the regimes of temperature and pressure characterized by the near-surface of the Earth, which are the regimes of methane creation and hydrocarbon destruction, does not even deserve consideration.”

                Contrarily, the statistics of the international petroleum industry establish that, far from diminishing, the net known recoverable reserves of petroleum have been growing steadily for the past fifty years. Those statistics show that, for every year since about 1946, the international petroleum industry has discovered at least five new tons of recoverable oil for every three which have been consumed….

                As Professor P. Odell of the London School of Economics has put it, instead of “running out of oil,” the human race by every measure seems to be “running into oil”…. Continues

                posted by FintanDunne

                • Colonial Viper …
                  4 February 2012 at 6:18 pm

                  Those statistics show that, for every year since about 1946, the international petroleum industry has discovered at least five new tons of recoverable oil for every three which have been consumed….

                  Misleading. But lets humour you for a moment longer.

                  Recoverable oil is not the same as ‘proven reserves’.

                  Currently the world consumes approx 84Mbb/d. In a 30 day month that’s 2.5B barrels consumed.

                  Your bullshit quote claims that 5 new recoverable barrels of oil have been discovered for every 3 which have been consumed. In other words, that 4.2B bb/m of new oil is being discovered on a monthly basis. Where, haha?

                  • RedLogix …
                    4 February 2012 at 6:37 pm

                    I think you’ll find that the fly in the ointment is the date 1946. I can’t be arsed googling it right now but from memory the great bulk of oil discoveries were made in the immediate post-WW2 era up until about the mid-60’s.

                    New discoveries peaked some 30-40 years before consumption did.

                    So while the statement itself may be true it’s hugely misleading because it doesn’t tell you anything useful. If you used a later date …like 1980 for example… you’d get a completely different answer.

                • Draco T Bastard …
                  4 February 2012 at 10:50 pm

                  Since 1946 For every 3 tonnes of oil we are consuming we are finding 5 tonnes hmmmmm interesting.

                  No, it’s not interesting, it’s pure delusion. Oil discoveries peaked in the 1960s and have been declining ever since. For the last decade we’ve been using about 4 times more than what we discover.

            • Draco T Bastard 1.1.1.1.1.3
              4 February 2012 at 10:42 pm

              You’re the one being played james111. You actually believe the bullshit that you’ve been told despite the fact that it’s been proven to be bullshit. I’ll take just one of the lies that you spouted:

              Then the climate activists found it was actually going in to a cooling phase,and couldnt explain it away despite trying to destroy evidence ,and eamails by corruption all well documented.

              See, all of the shit that came out of Climategate was lies as the reports that vindicated them shows.

              Eight committees investigated the allegations and published reports, finding no evidence of fraud or scientific misconduct.[14] The scientific consensus that global warming is occurring as a result of human activity remained unchanged by the end of the investigations.

              The fact that you’re still spreading these lies as if they’re gospel proves that you’re just not worth listening to because you’re a fuckwit.

    • wtl 1.2
      4 February 2012 at 12:45 pm

      Ahhh! So you still think most of the biomass of the planet was in the form or large animals, like dinosaurs? And obviously this proves that everyone else is wrong and you are one of the few people who knows where oil REALLY comes from?

    • mickysavage 1.3
      4 February 2012 at 3:00 pm

      I don’t know what is worse about james 3, his obnoxious trolling or his stupidity.  

      • McFlock 1.3.1
        4 February 2012 at 8:31 pm

        I find his comment “I probably read a bit to much for you ,and just dont believe what I am being spoon fed by activists” endearing. The way he immediately follows it with a cut&paste job. Not only does he obviously expect us to believe what he is actively spoonfeeding, he didn’t even remove the “posted by FintanDunne” line – he’s cut&pasting a cut&paste and expecting people to believe that he sn’t a victim of activist spoonfeeding. As it is he looks like postmodern satire of tory morons, the Borat or Ali G of NZ blogs.
          
        He could have at least googled the original article (the author seems to tick the majors “nutbar” boxes. Eager to lecture, won’t just tell you what governments and academics want you to hear, yadda yadda).
         

    • Draco T Bastard 1.4
      4 February 2012 at 4:14 pm

      Peak Oil was predicted for 50 years and then it happened as predicted thus it’s no longer a prediction. And, no, that perfectly flat blue line after the peak isn’t going to happen. The fact that it’s perfectly flat should tell even you that it’s the IEA grasping at straws.

  2. muzza 2
    4 February 2012 at 9:12 am

    “Unfortunately, we’re using the money to build highways to nowhere instead.”

    Big Oil – big corruption, big proaganda, big revenues to protect, and even bigger lies to protect them with!

    • Colonial Viper 2.1
      4 February 2012 at 9:23 am

      The cliff is right ahead of our civilisation. And the incentives, mindset, and bias built into our current system of crony capitalistic society says to us “…just push the pedal down a bit harder”.

      • muzza 2.1.1
        4 February 2012 at 9:40 am

        Agreed, and one could debate hard that its being done on purpose!

        Change is not possible when lies are the standard MO!

  3. Colonial Viper 3
    4 February 2012 at 9:29 am

    Japan experiences first trade deficit in 31 years, driven by peak aging and Fukushima pushing up the economic costs of imported fuel use.

    http://www.telegraph.co.uk/finance/economics/9036792/Ageing-Japan-faces-chronic-trade-deficit-after-Fukushima.html

    For those of you who understand that Japan’s massive budget deficit and massive public debt has been funded for the last 20 years by its (now historical) trade surpluses, and that Japan’s aging population now means that fewer Japanese are going to be lending the Japanese Government more money, but will in fact be taking money out of the Japanese Government by cashing in their government bonds to pay for their retirement (cash that the Japanese Government does not have as they already spend 49% of their tax income servicing existing debt. Put another way, if the average cost of Japanese borrowing doubles from 1% p.a. to 2% p.a., Japan’s entire government tax take will be wiped out), you’ll realise that we are well and truly in the end game.

    James: I believe that the title of your piece could just as well been

    “MoT reveals massive budget shortfall post peak oil”

  4. Spam 4
    4 February 2012 at 11:11 am

    Big Oil – big corruption, big proaganda, big revenues to protect, and even bigger lies to protect them with!
    When you say “big oil”. to whom are you referring?

    • Bored 4.1
      4 February 2012 at 4:22 pm

      I suspect the big oil companies, auto companie setc etc…my take is that the “corruption” is systemic rather than deliberate i.e we are all implicated because we live within the model of modern fuel use and wont do anything about it. Who really wants to give up the car, the air con, the IPod etc etc? Who really wants to be told the party is over?

  5. DH 5
    4 February 2012 at 11:43 am

    “Still think those ‘Roads of National Significance’ are money well spent?”

    I thought Labour missed a good opportunity to hit back at National over these roading projects. Fiscally they don’t make much sense, the economic returns from new roads take a very long time to eventuate and we’re running an operating deficit. They’re certainly nice to have but the country also can’t afford them at the moment. They will make no contribution to bringing us back into surplus, wrong time frame for that, so why have they persisted with these large capital projects when the borrowing to fund them sends us further into debt?

    • Draco T Bastard 5.1
      4 February 2012 at 4:17 pm

      Because borrowing to fund them sends us further into debt making it easier to turn us all into serfs. NAct do have a plan it’s just not one that has the benefit of NZ at its heart.

      • Bored 5.1.1
        4 February 2012 at 4:31 pm

        I have had no doubt that for years that financial and corporate interests have distorted the economy to their own interests and that this is reflected in the infrastructural manner in which we operate.

        I would hazard that “happy motoring”, and in particular trucking loads for overnight delivery etc will be a thing of the past by 2025. We will be using more rail and shipping and will become more localised. The real point of the article was to challenge the projections and consequent spending: the tragedy is that we can and should build trains and ships here, powered by hydro and wind energy.

        My vision would be less cash leaving NZ via oil imports, trains and boats manufactured locally by state owned entites and private sector contractors, all local. Profits and jobs kept here in NZ…..heresy I know for which the great Invisible Hand will forever damn me.

        • Colonial Viper 5.1.1.1
          4 February 2012 at 4:38 pm

          I would hazard that “happy motoring”, and in particular trucking loads for overnight delivery etc will be a thing of the past by 2025.

          What you have to look at are volumes; stuff will still move on the roads but it will end up being smaller and smaller volumes of higher and higher priority goods. Everything else can go snail mail.

          Coastal shipping and rail will make a come back, if that infrastructure survives this Tory bullshit.

        • james111 5.1.1.2
          4 February 2012 at 5:32 pm

          Bored I had no idea that well know Climate Activists like Dr Mann would try and stop the real truth coming out that showed he lied. Yet people like you and millions of others still believe this discredited liar.

          Dr. Michael Mann, lead author of the discredited “hockey stick” graph that was once hailed by the UN Intergovernmental Panel on Climate Change as the “smoking gun” of the catastrophic man-made global warming theory, has asked to intervene in American Tradition Institute’s Freedom of Information Act lawsuit that seeks certain records produced by Mann and others while he was at the University of Virginia, for the purpose of keeping them hidden from the taxpayer.

          Specifically over the weekend ATI’s Environmental Law Center received service from two Pennsylvania attorneys who seek the court’s permission to argue for Dr. Mann to intervene in ATI’s case. The attorneys also filed a motion to stay production of documents still withheld by UVA, which are to be provided to ATI’s lawyers in roughly two weeks under a protective order that UVA voluntarily agreed to in May. Dr. Mann’s lawyers also desire a hearing in mid-September, in an effort to further delay UVA’s scheduled production of records under the order.

          Dr. Mann’s argument, distilled, is that the court must bend the rules to allow him to block implementation of a transparency law, so as to shield his sensibilities from offense once the taxpayer – on whose dime he subsists – sees the methods he employed to advance the global warming theory and related policies. ATI’s Environmental Law Center is not sympathetic.

          “Dr. Mann’s late-hour tactics offer the spectacle of someone who relies on the media’s repeats of his untrue claims of having been ‘investigated’ and ‘exonerated’ – that is, when he’s not sputtering ad hominem and conspiracy theories to change the subject,” said Christopher Horner, director of litigation for ATI’s Environmental Law Center. “Mann has tried whatever means possible to ensure he remains free of any serious scrutiny, and this just appears to be his last gasp.”

          [Dr Mann’s hockey stick has been re-affirmed by about a dozen other studies since. The rest is unattributed drivel that you’ve copied from somewhere but without a link. Care to supply one? …RL]

          • mickysavage 5.1.1.2.1
            4 February 2012 at 7:37 pm

            Dear Crosby Textor

            Can you send someone better than James 3?  He is not able to argue coherently and keeps cutting and pasting from obscure texts and thinking that it wins the arguments.  The trouble is he does not understanding what he is pasting.

        • DH 5.1.1.3
          5 February 2012 at 10:39 am

          “I have had no doubt that for years that financial and corporate interests have distorted the economy to their own interests and that this is reflected in the infrastructural manner in which we operate.”

          I often try to convince myself otherwise but you’re probably right, we’re just not in any position to prove it. This lot here are a good example, they’re a well funded lobby group. Check out the members list;

          http://www.nzcid.org.nz

          Ostensibly a bunch of concerned Kiwi businesses who want better infrastructure because it will make us all wealthier. All motivated by love of queen & country of course. In reality a rogues gallery of those who want the contracts or clip the ticket on these big projects.

          Founder was Jim McClay when he was boss of MacQuarie NZ. MacQuaries are an Aus investment bank with no economic, social or patriotic interest in NZ. They are, however, one of the worlds largest investors in PPPs. They don’t even use any NZ infrastructure, they only want to own or control it & collect monopoly rents from it, so why would they fund & set up NZCID? People might recall McClay as our PMs ‘mentor’, among other things.

  6. Bored 6
    4 February 2012 at 4:33 pm

    Talking “roading” Shonkey Jonkey WHERE is our cycleway????????????????

  7. Georgecom 7
    4 February 2012 at 5:24 pm

    Two (obvious) things struck me after reading this post.

    One, the ‘low hanging fruit’ motor way improvements appear to have finished. We are now into the incremental improvement projects. The big bang for the bucks roading projects are finished.

    Two, future forecasts in the price of oil seems somewhat naive. Recent price spikes, that have occurred despite the absence of seismic geo-political events that dramatically cut the supply of oil, seem to have been overlooked as a predictor of what is happening with the long run price of oil.

  8. RedLogix 8
    4 February 2012 at 9:06 pm

    Another really interesting pie-chart is found on page 8 of this MoT report. It’s a breakdown of Share of total logistics costs by cost component.

    Have a look. It turns out that the component called “Port Costs” are a mere 6.3% of the total. Given that labour costs are about 33% of total port cost that makes them about 2% of the total.

    And given PoAL’s stated desire to slash this labour content cost by 20% .. this amounts to about about a 0.4% potential reduction in the total cost of importing or exporting goods.

  9. johnm 9
    5 February 2012 at 12:29 am

    Now we are past Peak Oil and due to slide down the slope of supply decline:

    Toward An Economy Of Earth
    By Guy R. McPherson
    Refer link: http://www.countercurrents.org/mcpherson030212.htm
    “The industrial economy is destroying every aspect of the living planet. And, as it turns out, we need a living planet for our own survival.

    The world’s industrial economy mainlines ready supplies of inexpensive crude oil. The lifeblood of western civilization, cheap oil infuses our daily lives. Petroleum products transport us easily and conveniently, thus allowing for exchange of materials and ideas. Without inexpensive crude oil to deliver water, food, and building materials, the world’s industrial economy declines.

    There is little doubt that future spikes in the price of oil will prove sufficient to terminate the industrial economy, taking us on a one-way trip to the post-industrial Stone Age.
    Already, expensive oil is overwhelming the ability of central banks and central governments to provide the illusion of economic growth by printing fiat currency. As nearly occurred in 2008 in the wake of oil priced at $147.27 per barrel, western civilization faces an abrupt termination in the face of expensive crude oil.”

    Guy McPherson is pretty well unique. Most of us are selfish money grubbers looking after number one but this man gave up a hugely profitable academic post to live in a sort of voluntary poverty which he believes once this fossil fuel age is over all of us still alive will have to live.

  10. BLiP 10
    5 February 2012 at 1:16 am

    Looks like we might need that 3000km, concrete paved, Kaitaia-to-Bluff cycle way after all. How’s it coming along, John, still got your officials working “actively and aggressively” on that one?