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Adapting to the end of cheap oil

Written By: - Date published: 11:01 pm, August 24th, 2008 - 30 comments
Categories: election 2008, greens, labour, national, transport - Tags:

On August 1, Transit NZ and Land Transport NZ were merged into the NZ Transport Authority. The new organisation’s first major publication shows a welcome shift in thinking and an acknowledgment that the age of cheap oil is over. Managing Transport Challenges When Oil Prices Rise contains a model built on the consensus of a number of international models that has oil averaging US$110 a barrel this year, rising to $150 over the next two years before falling back to current levels. It does not predict peak oil and is conservative but, unlike Treasury forecasts, it faces the reality that oil is not returning to the prices of the past cheap oil is over and we need to adapt our transport planning to suit that.

The study finds that even at the average model prices, public transport will provide the best cost-to-benefit ratio. It predicts petrol will hit $2.50-$2.80 in the next five years.

In light of these realities, it recommends a number of actions more public transport, more rail, urban forming to reduce transport needs, more efficient traffic management, and more fuel efficient vehicles, along with parking management and transport pricing to encourage people into public transport. Total private vehicle use would fall despite the growing population.

All up, the study estimates that, without radical action, oil use per person could be reduced 21% from 1000 litres today to 790 litres in 2028. Personally, I doubt there will be that much to go around but it’s good to see the Government seriously looking steps that will make big cuts in oil consumption; it’s a step in the right direction.

And it will make us better off less money spent on oil, less congestion, less pollution, lower oil imports improving the current account deficit, less subsidisation of economically inefficient transport all up that’s projected to be worth $15 billion (present value) over the next 20 years.

Good to see a government agency taking a realistic view of the future and coming is with sensible solutions. Of course, one can’t help but notice how much like the Greens’ transport policy NZTA’s recommendations look. Will Labour have the courage to follow with a similar, ambitious plan to deal with the transport future after cheap oil? And will National ever begin to wake up? Probably now while Maurice Williamson is promising to borrow for more motorways.

30 comments on “Adapting to the end of cheap oil”

  1. It’s very interesting that the report concludes that per capita motorspirits consumption in 2018 will be the same as it was in 1976 despite twice as many kilometres travelled by private vehicles. It’ll be interesting to see how two-income households cope with that. Assuming we have 10% more preople in ten years time then all that’s needed to acheive that reduction in per capita fuel use is a 10% decrease in km per capita and a 10% reduction in litres per 100 km. MOT household travel survey results suggest that half those improvements can be expected to come solely from the ageing population.

  2. monkey boy 2

    Its more than just the price of petrol. It’s the whole lifestyle, and the damaging impact of car-usage on our culture. When you look at the way NZ has concentrated its shopping facilities into areas only accessible by car, and how the small towns are beholden to private car-usage because there is not enough public transport. You have to ask what will happen to the aging population as petrol rises and if there is still no public trnsport available? So, given the present cultural reliance on private transport, it is safe to assume that as the poulation ages, especially if there is no public transport, fuel use will decline as the elderly die of starvation becaue they can’t get to the Mall or the Warehouse in their spendidly isolated pedestrian-dangerous theme-parks.

    Of course, there will be the pesky issue of those carbon emmissions from the hearses that carry them to the ‘great shopping Mall in the sky’ after they die of starvation and lonliness, but that’s another story.
    I personally would love to see massive investment and incentives for public transport to be provided at practically zero-cost to the user, regardless of age or employment. Everywhere in the country. The costs to the government would be less than the benefits to the people and the economy. It would impact on congestion, and revitalise local commerce, leading to a renaissance of ‘buy local’ diversity in our towns and villages.

  3. Monkey boy,

    You almost sound like a greeny there.

    Were I live we are discovering the commons as a local resource to our village. We are starting communal veggie gardens. Call each other to pool necessary shopping so only one car has to drive into town.
    we help each other to start orchards and veggie gardens in working bees. And we started a cooperative for organic food supplies trying to source them as close to were we live as possible.

    Coming from a big city were everybody was out for their own I really enjoy the wealth and community this creates. I haven’t seen a supermarket for yonks. It is actually quite empowering.

    In the mean time my husband commutes into Hamilton with his hydrogen on demand fuel cell and get three extra days out of a tank of petrol.

    We are laughing all the way to the bank. LOL

  4. monkey boy 4

    well trav that is my endgame too, hopefully in the next year or so. I will go further, and assert that supermarkets are evil entities, and that mod NZ is stuck in an ‘america in the fifties’ mindset about shops and cars.
    As remarked to me once ‘NZ’s clean and green image is just that – an image.’

  5. outofbed 5

    Monkey boy, go here and join the movement

  6. monkey boy 6

    I can’t outof because I hate Labour

  7. monkey boy 7

    It’s a flippant response I know, but i just think that the Green Party is propping up a morally questionable situation, and probably will again post-election if it gets the chance. I dont have answers, perhaps the answers lie in a rejection of centralised government ofr localised, i really dunno.

  8. Monkey boy,

    You’ll find that inflation stops the moment you start growing your own food and bartering (No, I’m not suggesting that we go back in time, I love my second hand dish washer I got for free from the freecycle group for example but as a local support system nothing beats bartering) Enough free milk for my free range eggs to make my own French and Dutch cheese (It’s in the genes I think. LOL). My “once a week’ day free labour for all the potatoes and veggies we can wish for all year round. It’s awesome. For the first time in my life we can actually save on a one person income.

    And frankly I agree with you about supermarkets they are “evil” corporate entities monopolising (only 5 Corporations control the worlds food supply, how scary is that) our food supply and making us dependent on international rather than cheap local food, keeping us from food self sustainability. Which I think NZ was only a few decades ago.

    Good on you for going of the grid but make it sooner rather than later because it’s going to collapse faster than most people think.

    In the next few months but possibly weeks the two biggest mortgage giants in the US Fannie mae and Freddy mac are going to go under and with it the entire Western financial system.
    GM and Ford have just applied for a $ 50 billion emergency bail out or they are gone too and that is only just the beginning.
    Banks are collapsing in the US like you wouldn’t believe.

    Come to think of it we might yet get cheaper oil for a while as the Americans can’t afford it any more. LOL

  9. MB are you talking about Global warming?

  10. Good post. Compare this with National’s policy sort of disclosed by Maurice Williamson this morning in the Herald. Their remedy is roads, more roads and more roads. Williamson does not even understand that traffic flows are extraordinarily likely to go down, not up, and that our current roading system may be more than sufficient. The new roads will all apparently be constructed through PPPs and funded by tolls. I bet that there are no takers from the private sector as the business risks are far too high.

    The paper makes a compelling case for the cancellation of the Waterview project and Transmission Gully and putting this money into the rail system, particularly the proposed tunnel up Queen Street.

  11. Savage 11

    Alarmist claptrap. I just looked outside and everything seems to be ticking along just fine. Supermarkets are evil? Give me a break.
    Centralised government is bad? Okay lets all go tribal and grow mung beans in our communal gardens.

    I’d join the Greens if they weren’t a complete non-event. The Greens lack the three P’s – Personality (simply hearing Jeanette Fitzsimons’
    voice makes me sleepy), Policy, and Purpose (no direction, could get a lot more votes if they knew how to play the game.)

    Sure one day the petrol will stop flowing and the trucks that take the food to the supermarkets will stop doing just that and the people who live in urban areas will get all hungry and grumpy from a distinct lack of food but until then I will continue to exist in a state of semi-informed bliss.

  12. Gustavo Trellis 12

    Every party is dropping the ball on this one. Public transport has been neglected by all, and there is no alternatives for many many commuters. The price of petrol is unfortunate, and it’s a shame Labour has chosen to implement a regional tax on users who have paid for a transport system many times that they never got.

    Tolls are equally retarded and should be shelved immediately. We’ve got a number of very experimental replacements for carbon-based fuels, but we seem to be picking the most sensationalist ones. Bio fuels are a disaster, but there are cellulosic fuels that can be made of any plant matter, not just food crops. Still, we don’t hear much about those.

    We’ll see what happens with fuel. I don’t think it’s going to be the end of private transport, more likely it is just the end of the world of fossil fuels. There are plenty of others lining up to take their place.

  13. Draco TB 13

    For the first time in my life we can actually save on a one person income.

    Reviving the Household Economy – Part 1 Part 2

    We’ll see what happens with fuel. I don’t think it’s going to be the end of private transport, more likely it is just the end of the world of fossil fuels. There are plenty of others lining up to take their place.

    That, though, is the problem. There isn’t any fuels lining up that can fully replace fossil fuels in transport. What we’re getting has a much lower EROEI than what oil or even coal has.

  14. Rimu 14

    Sure, there are a lot of things central government can do to help our society to adapt to peak oil, but in the end it’s up to communities to take responsibility for making their own changes. Without grass-roots support, government can’t do much.

    Fortunately, towns and cities all over New Zealand are doing just that! 🙂

  15. Gustavo Trellis 15

    Draco – I didn’t say they’re ready – I said they’re lining up. It’s gonna be a while; put it this way, I’m not holding my breath.

  16. Draco TB,

    Thanks for the links.

    Rimu I agree. We’ve recently started a transition town project.

  17. bill brown 17

    No Maurice, that’s not the Secret Agenda!

  18. Also worth checking out is TheOilDrum:ANZ, for some pretty engaging discussion about our local energy future.

  19. roger nome 19

    I wonder if the NZ Transport Authority has read any of the work by the peak-oil modelers. The following is an abstract of a Swedish PHD (that’s why the English isn’t the most eloquent), in which the modeler predicts peak oil occurring between now and 2018. It’s been around for a couple of years now, but so far I haven’t seen any critique of it. If the argument of this thesis turns out to be correct petrol prices could be much, much higher than $2 per liter within the next 5-10 years.

    Since the 1950s, oil has been the dominant source of energy in the world. The cheap supply of oil has been the engine for economic growth in the western world. Since future oil demand is expected to increase, the question to what extent future production will be available is important.

    The belief in a soon peak production of oil is fueled by increasing oil prices. However, the reliability of the oil price as a single parameter can be questioned, as earlier times of high prices have occurred without having anything to do with a lack of oil. Instead, giant oil fields, the largest oil fields in the world, can be used as a parameter.

    A giant oil field contains at least 500 million barrels of recoverable oil. Only 507, or 1 % of the total number of fields, are giants. Their contribution is striking: over 60 % of the 2005 production and about 65 % of the global ultimate recoverable reserve (URR).

    However, giant fields are something of the past since a majority of the largest giant fields are over 50 years old and the discovery trend of less giant fields with smaller volumes is clear. A large number of the largest giant fields are found in the countries surrounding the Persian Gulf.

    The domination of giant fields in global oil production confirms a concept where they govern future production. A model, based on past annual production and URR, has been developed to forecast future production from giant fields. The results, in combination with forecasts on new field developments, heavy oil and oil sand, are used to predict future oil production.

    In all scenarios, peak oil occurs at about the same time as the giant fields peak. The worst-case scenario sees a peak in 2008 and the best-case scenario, following a 1.4 % demand growth, peaks in 2018.

    You can read the whole thing at the following URL:

    http://publications.uu.se/theses/abstract.xsql?dbid=7625

  20. roger nome, It is important that petrol prices keep rising in the run up to peak oil to ensure that the energy efficiency rebound effect is minimised and to ensure that consumer desire remains for car companies to implement the incremental improvements to fuel efficiency that the car companies have developed but which car buyers were previously unwilling to pay for. As businesses and governments are major purchasers of new cars high fuel prices are needed to keep the accountants satisfied that a few hundred dollars extra on the purchase price will be recovered in fuel savings over the normal three year company car lifetime. For the rest of us who buy those cars second hand we can cope with peak oils approach simply by utilising the seating capacity that we have traditionally regarded as surplus to requirements for daily commuting.

    Impacts of Fuel Price Changes on New Zealand Transport
    http://www.ltsa.govt.nz/research/reports/331.pdf
    found that
    The preferred model implies that a 10% (real) rise in the price of petrol will affect petrol consumption as follows:
    • Petrol consumption will decrease by 1.5% within a year;
    • Petrol consumption will decrease by 2% after two years;
    Further modelling indicated that the short-run elasticity (the impact of prices on petrol consumption over the first year) is expected to be constant over time. This elasticity showed no indication of increasing or decreasing with time.

    The study covered the period since 1970, but the highest real price in that period was just shy of $3. I wouldn’t be too surprised if the elasticity is non-linear at prices above $3 or if the relationship is actually with percent of household income rather than price alone.

    If Chine and India stop subsidising fuel prices it could take the heat out of demand growth and ensure a sufficiently ling plateau to allow adaptation without dislocation. I believe that town planning over the lasr 50 years is at the heart of the problem and unless preparations for peak oil correctly account for the transport impacts of the modern urban form we will find ourselves with horrendously expensive half built rail systems that meet few of the travel needs of modern city life. My preference is to spend the money converting diesel buses to PHEV using existing trolley bus infrastructure on arterial roads. As commuters respond to peak oil by car pooling they will free up enough lane capacity for buses to achieve speeds comparable with dedicated rights-of-way. But it will cost a whole lot less, and with Trolley and hybrid buses already being manufactured in Ashburton the balance of payments can be protected as well.

  21. Steve, The $15bn saving didn’t take into account “less subsidisation of economically inefficient transport”. 80% of the saving is for fuel and vehicle operating expenses, the remainder is reduced external or social costs of private transport. The study doesn’t delve into subsidisation of economically inefficient transport. I presume you mean that as people switch to PT fare revenues will increase allowing less subsidisation. If that doesn’t happen, or happens only on a per rider basis, and subsidisation of economically inefficient transport continues at current rates for the next twenty years it will cost road “consumers” $6bn, or half the reduction in fuel and vehicle operating expenses, even though most of that saving won’t even come from switching to PT. There is nothing in the study on the cost of higher parking charges or congestion charges etc, but as these are intended to pay for road maintenence I am assuming these costs will be offset by reduced rates.

  22. Iprent, Is there a response from me to roger stuck in your filter system? Or did I just hit a wrong button somewhere somehow?

    [lprent: Probably – I didn’t free it, but it looks like it’d get stuck in the spam trap. Naked links are one of the things that the spam trap goes for. They usually get freed when one of us happens over it. After you get caught a few times you learn what not to do. But it literally stops thousands of junk getting through per week. ]

  23. Bob 23

    Well this makes interesting reading on Helens new ETS scheme. You have to wonder if we should shut the country down now if she gets it through. Still will raise her profile at the UN thats all that is important I guess

    http://www.nzier.org.nz/Site/Publications/Emissions_Trading.aspx

  24. Matthew Pilott 24

    That you Rob the putting one sentence infront of another not using full stops makes it obvious using the word “interesting” is a giveaway I thought you were banned interesting you are still commenting I see the avatar is the same welcome back Rob at least this is vaguely on topic but not really you should try some analysis yourself link the document to the thread somehow.

  25. lprent 25

    It is going to be interesting seeing what the greens do today on the ETS in their caucus.

    It will say as much about their ability to adapt as anything else.

    Do they go for something that they consider is flawed (but may be upgradeable), or for hoping for a better deal after a Lab victory, or for the uncertainties if the Nat’s manage to cobble together a coalition.

    I have no idea.

  26. Bob 26

    The real problem with the ETS which Helen is trying push through the house today was clearly illustrated by a Farmer today. He cant get $25 per tonne for carbon. If he puts his whole farm into trees will make $250 k a year selling Carbon. So why not give up farming and grow trees none of us can eat carbon. What will happen to our primary industries? What will happen to World Food stocks? What will happen to World Food Prices. At the end of the day if they are pushed in a direction by the Government then that is the direction they will take. Watch our standard of living rapidly decline as this transition takes hold.

  27. Bob, Smart dairy farmers have already found a way to make the ETS a money spinner.
    http://www.stuff.co.nz/thepress/4672469a6531.html

    ReCaptcha: sunk germs (pretty much sums up this tech)

  28. Iprent, How do we put links in so they don’t get caught by the spam filter? I haven’t needed to learn this technique for frogblog or gblog.

    [lprent: Try Linking. I don’t think either of those blogs get quite the number of spam that gets sent here. Slightly over half of all comments are spam. We ran out of time to clean up the ones that get past the recaptcha, so I had put in akismet. ]

  29. Anita 29

    Kevyn,

    Try this link.

  30. Anita, Thanks. Just basic HTML. But I always like to flick through the instruction manual before resorting to the “by guess or by god” method. Especially when something belongs to somebody else. Consequence of having an old fashion upbringing – respect for other poeple and their property.

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