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Running on empty

Written By: - Date published: 3:42 pm, July 11th, 2008 - 68 comments
Categories: economy, transport - Tags:

A worrying report on the future of petrol prices is out today. It predicts petrol could hit $10 a litre in a decade. Nearly all of that increase will be caused by the supply of oil falling as demand pressure grows.

Rationing will probably be introduced before that point, otherwise only the rich will be able to get fuel for their vehicles and the whole economy will suffer from a working class that can’t afford to get to work but, either way, with petrol at $10 a litre, Transmission Gully and Waterview Tunnel will be, as the Greens’ Russel Norman says, ‘modern day Easter Island statues’.

This report tells us quite clearly that current patterns of travelling by private vehicle will be unaffordable for most within a decade. There is no hope that alternative fuels can be available on the necessary scale in time (currently, hybrids make up only a couple of percent of new car sales and materials for the batteries are in short supply already). Two responses need to be begun now, before it’s too late: a massive investment in public transport and a shift to building new, low-energy housing developments designed to minimise the need to commute and provide alternatives to driving. There is also a need to consider the massive increase in electricity demand that a shift to electric and plug-in hybrid vehicles caused by petrol prices will cause and where the generation capacity is going to come from.

It’s worth noting that this report was based on data through to March, when the price of a barrel of oil was $115US. Last week, it hit $145US.

68 comments on “Running on empty”

  1. mondograss 1

    Rationing may work domestically (though I doubt it) but what about the international trade? Can anyone really see the US and China giving up a single barrel? Russia will be laughing with all its reserves. Luckily NZ produces about 55% of its oil domestically so we might be not too badly off.

  2. I’m talking domestic rationing. But, yeah, we have to get the stuff here first, at least we have decent and growing local production.

  3. an outline of how rationing would work is in MED’s oil emergency response plan, page 20. http://www.med.govt.nz/upload/60607/780059_2.pdf

  4. T-rex 4

    So basically we need to implement what’s been Green Party policy for… what… at least the last 9 years?

  5. chris 5

    Why,why did I sell the XY wagon with two 75L cng tanks in the back.

  6. T-rex 6

    I actually really liked the rest of Normans quote too Steve:

    “Our new motorways would be monuments to short sightedness and profligate waste of resources.”

    Yes, yes they will be. If we ditch them we could even justifiably cut the RUC and petrol taxes. Rather than just cutting them because people hate paying for things no matter how reasonable the cost.

    I find it quite remarkable that people pack such a hissy fit over 1.5 billion to get a complete and modernised national rail network, yet see no problem with spending 1 billion JUST ON TRANSMISSION GULLY.

    Modernised National Rail Network, COMPLETE cost – 1.5 Billion

    27kms of highway – 1 billion

    I know where I’d spend MY money.

  7. mondograss 7

    Yeah, I figured you meant domestic rationing. I see from that MED plan that it distinguishes between an IEA and a non-IEA emergency. I’m glad they’ve made that distinction because the IEA has been predicting oil supply to continue to climb on a basically straight-line basis for the next 20+ years, while most serious analysts point out that supply plateaued at 85 million barrels a few years ago and has barely increased since, nor is it likely to based on any of the new discoveries that have been announced.

    I think the move towards free public transport for 65+ was excellent. A good circuit breaker for Labour would be to add in all children and tertiary students and then roll forward from there, a bit like they did with the GP subsidies.

    This is something we just can’t afford to ignore and hope it goes away.

  8. T-rex 8

    Oh, and lets not forget: SH20 Waterview connection – 2.3 Billion

  9. Monty 9

    a 500% increase over ten years – sorry – but i do not see that as credible – the world economy would come to a grinding halt. – Countries would go bankrupt, wars for control of oil would start. Much more likely that other forms of energy would become affordable – and the whole mindset would change.

    Intersting debating point as to what would happen should energy increase 500%. My car would cost $800 to fill. (interesting since it is probably worth only $800.)

    literally nothing would be affordable. Starvation would become rampent, no one would be able to afford the energy to heat their home (a 500% increase in oil prices would affect every form of energy renewable or not)

    maybe NZ could go nuclear?

  10. lemsip 10

    Steve this post is SENSATIONAL!

    Deborah Stone would be proud.

    I can see why your lefty bottom feeders are lapping it up without even glancing at the report. I mean how could the integrity of your posts ever be questioned? You always provide the caveats and help illuminate the grey areas. It’s your use of the word “could” I especially like. Such a small word which you make contain so much information. How did you compress it all in there? You are with out a doubt a GENIUS!

  11. Tane 11

    Lemsip, great contribution mate.

  12. Scribe 12

    Steve,

    Yesterday you had a post headed “Lots of ideology, not argument”. Am I to assume this post could just as easily been headed “Not ideology, lots of argument”?

  13. T-rex 13

    lemsip – I assume you’re referring to the range of estimates for the final price. I agree that the $2-$3 range is more likely, but that doesn’t change a bloody thing about the appropriate responses. Unless you think petrol is affordable at its present price?

    You’ll also note that that price is contingent upon a “fast technology response”.

    This response will act to reduce demand, obviously. So… we should be developing systems to allow us to reduce demand. Like the ones the greens propose in their transport policy, and the ones steve mentions above.

    I encourage everyone to at least read the executive summary – it’ll only take you a minute.

  14. Have any of you spent time over at TheOilDrum.com ? If you haven’t, it’s worth a look.

  15. lemsip. If you want to call people bottom feeders, do it on Kiwiblog, you’ll be in good company there.

    I actually think the study is conservative. We’re 2 years ahead compared to where prices are expected to be in the ‘worst-case’ peak oil price model that leads to $10 a litre petrol in ten years. Peak oil is happening faster than the worst case scenario..

  16. Monty. Understand, there are no alternative fuels that can be rolled out in sufficent quanities within ten years. It’s just not logistically possible. The factories don’t exist. And (I wonder sometimes whether people actually take anything in from the posts) we’re already having trouble getting the batteries for hybrid cars, we can’t double even hybrid production within a year, let alone increase it 30-40 fold so all new cars could be hybrid (and even if we did that most cars on the road would be all internal combustion for another 5 years).

    “a 500% increase over ten years – sorry – but i do not see that as credible – the world economy would come to a grinding halt. – Countries would go bankrupt, wars for control of oil would start. Much more likely that other forms of energy would become affordable – and the whole mindset would change.”

    – just because it’s bad doesn’t mean it won’t happen.

  17. mondograss 17

    Well, Brent International Crude has gone from about $18 per barrel in May 1999 to $120 per barrel in May 2008 and it’s currently about $140.

    So let’s see, that’s a pretty big increase right there isn’t it? Most of that spike has been in the last year, May 2007 price was $60 per barrel.

  18. Scribe. I’m not sure what you’re getting at. my post related the findings of a 44 page study by the CSIRO in Australia, which I’ve read and I think the methodlogy is sound, if conservative.

    Just because yesterday I was one of many who ripped apart a hack job of a report because its methodology was stupid does not mean I think all studies are stupid.

    But I don’t blindly believe any study, I look at how it was conducted first before deciding what i think of its conclusions.

  19. mondograss 19

    Some weekend reading for folks: Twilight in the Desert by Matt Simmons

  20. Scribe 20

    Steve,

    I would say that each of the reports/studies in the last two days comes from people with certain preconceived ideas and they both seem to produce findings that are what you’d expect from the respective groups.

    I’m glad you find this study “sound, if conservative”. I don’t, partly for the reasons I’ve mentioned. Studies that make me sit up and pay attention are the ones that run contrary to the person or group’s own ideology. They are rare, I know.

  21. Ari 21

    So basically we need to implement what’s been Green Party policy for what at least the last 9 years?

    Welcome to the peak oil party, fellesses and fellows! Grab an empty drum to sit on, there’s plenty.

    Yes, major oil groups and the analysts and consultants that rely on their data have been progressively coming out more and more strongly in favour of peak oil.

    Even if we find significant extra oil reserves, oil will eventually peak, and it’s a very large job changing the engine in every car over to an alternative fuel, let alone providing that fuel, too. If we go electric, there’s also other problems to solve like how to reconcile charging with long-distance trips. (Motels might essentially become “petrol stations” as well as accommodation)

  22. are you accusing the CSIRO of Australia, Australia’s leading scientists, in a report for a forum sponsered by 18 major companies and organisations including Caltex, the Australian Automobile Association, and Holden of having preconcieved, unjustified, ideas that peak oil is a major problem?

    On what grounds?

    What ideology are you accusing the CSIRO of having and what faults in their methodology can you identify?

    You haven’t even looked at the study, you just don’t want to believe its conclusions.

  23. Monty,

    [q]wars for control of oil would start[/q]

    Uh deuh,
    Iraq, Afghanistan and next Iran?

    [admirably short comment, trav. Few words can say so much. SP]

  24. randal 24

    smash ’em bro!

  25. sean 25

    T-Rex – I think you’re slightly off on the figure of 1.5 billion for a “modernised” rail network. As I see it, a modernised network that can replace car travel requires (relatively) high speed trains such as in Asia and Europe.

    Unless we have passenger trains that run a lot faster than now, I can’t see people getting rid of their cars.

    Additionally, Auckland and Wellington would most likely need light-rail networks.

  26. When we are all happy on horse and cart will the gummint charge us pooh tax and hoof user charges? Fuel and food cost the earth now days.

  27. Bill 27

    $10 per litre. Simple solution is to stop using cars. Why’d you start using them in the first place? Somebody sell it to you as a damn fine idea?

    Boss wants you to go to work (although christ knows how industry will run without oil)… tell him he has to get you there.

    THEN industry will be hollering for govt subsidised transport. Can’t wait.

    There was a time when workers housing concentrated around the factory. I’m not suggesting that was necessary a good thing, but it was industry that foisted the car mentality on us and the idea of commuting. I believe there actually was a guilty verdict on a charge of conspiracy against oil and tyre manufacturers who bought up and shut down public transport in L.A.?

    Anyway. With the industrial base so utterly dependent upon oil ( from electricity generation through lubrication of machinery, transport and as a component of the manufactured products), it would seem reasonable to suggest that manufacturing industry is about to find itself up shit creek without a paddle.

    Unless manufacturing as a means of procuring profit gives way to speculation. And a lovely scenario where (maybe) 20% of the population are catered to and the other 80% are left to twist in the breeze. Actually, isn’t it that the way it is already? Just that where today those twisting in the breeze live in the ‘South’, tomorrow the ‘South’ will be your doorstep.

    And you can open your door to a never ending series of recessions and depressions with all the repressive measures practised in the ‘South’ today being rolled out on you and me tomorrow. Betcha the army and the police will have enough petrol to run their vehicles…and probably be rather excellently paid for keeping the angry directionless rabble at bay.

    Option B would be to start getting ready and leave the ship now. Government will always service the needs of big business, so don’t hold your breath waiting for them to side with common sense and the general population any time soon.

    What’s that Leonard Cohen song about how everybody knows the ship is sinking and how everybody knows the captain lied? Oh yeah…”Everybody Knows”.

    So why is our individual knowledge not leading to the necessary collective action? Is it because we are waiting for someone else to act on our behalf? Like the Government? (See above.)

  28. randal 28

    plenty of stone left after the stone age and plenty of oil will be left after the oil age. unfortunately all the adventitious hot house flowers kept alive by the profligate use of energy will wither and die. thats progress for ya mate.but the working class will still have to protect itself from rentiers, compradores and other selfish greedy persons psychologically disposed to dominate for pleasure using the contemporary economic activity as their instrument.

  29. Steve

    This report is based on the fact that demand will keep increasing at its current rate, so that would mean that countries such as China and India would continue to grow at the rate they have for say the past 5 years. There is growing evidence that this will not be the case as both of these economies rely heavily on cheap fuel in order for them to grow. In fact India recently had to bail out a government agency with a few billion dollars to stop it going bankrupt, the agencies job? The subsidization of fuel to Indian citizens. China has also recently had to pass on increases in fuel to its citizens as it can no longer afford to subsidise petrol at its current level.

    These moves were met with outrage in both countries as the people of these nations are not paying the market value, and when they do, not if but when, you will see a huge drop in demand. Of course this will only dely the ineviatable, there can be no doubt that the time of cheap fuel is gone but I can not see a price hike of that much in such a short space of time.

    By the way, is it true all you guys are working for parliment and blogging on taxpayers time? So out of touch just like your leader. Voted for Labour when they first came in but never again.

  30. george.com 30

    Some interesting statistics in the executive summary (which is all I have read so far). If oil supplies decline rapidly, I understand that is the $10 per litre territory, passenger & freight travel may be reduced by up to 40%. That to me means one thing at least, prioritising. Essential services receiving petrol first, focus on movement of food & other core supplied (medical etc). The more profligate, luxury items, could be squeezed out and we would still get buy, I hope. The rampant consumption we currently enjoy would be severely curtailed. Plastic toys from China or fashion clothes items, as examples, would come low down my list compared to food & getting to work, fire & police.

    The executive summary speculates perhaps a 3% drop in GDP. I find that scenario remarkably light. I would have thought economic growth would tank a whole lot more than 3%. For a start, many people who make their living on consumption would be out of work. Retail, Malls, so called ‘lifestyle’ occupations, advertising etc etc. hell of a lot of people, hell of a lot of consumption based spending, hell of a lot of jobs. many of the socially non-productive jobs would be at risk.

    A major concern for NZ would be tourism. We derive a reasonable GDP% for tourism (9% springs to mind but I could be well off with that figure). Few internationsl tourists visiting us would surely make a bigger dent than 3% of GDP.

    $10 a litre of oil is based on several assumptions it seems, there are a number of probable outcomes. That is one. Still,if you do not consider it you are short sighted. Some of the Kiwiblog right will foam at the mouth and wildly label everyone ‘a COMMUNIST kh**t’ or a ‘SOCIALIST K**T’, as they often do, for even suggesting the likes of peak oil. Often when you strike such a nerve amongst the Kiwiblog right, you know there is truth to what you say.

  31. Draco TB 31

    And you can open your door to a never ending series of recessions and depressions …

    Catabolic Collapse

    So why is our individual knowledge not leading to the necessary collective action? Is it because we are waiting for someone else to act on our behalf? Like the Government?

    Yep, seemingly a large portion of the population still expects a savior/leader to pop up and save them.

  32. Bill 32

    Just because there is a tendency to point to the consumptions of China and India.

    From http://english.aljazeera.net/business/2008/07/200879184520258575.html

    China additional oil consumption in 2007 = 377 000 barrels per day
    India additional oil consumption in 2007 = 150 000 barrels per day

    Japan and Germany decreased oil consumption = 380 000 barrels per day

    World daily consumption = 86 000 000 barrels per day

  33. May I remind people that it is estimated the populous nations ,China and India, are predicted to increase in population by 123 Million in the next 18 months.

    Show time!

  34. gomango 34

    Oil is more expensive than its historic inflation adjusted high but not as over the top as most people would think. Read Paul Krugman here:

    http://krugman.blogs.nytimes.com/2008/02/19/feeling-a-bit-peaked/

    I’m not entirely sure about the peak oil argument or at least the timing of the peak. There is not actually a shortage of oil in the world right now – particularly with the reduction in demand we are seeing and will see over the next year or two with the slowdown in global growth which is leaking out of the US. The primary reason for the price spike in oil is that commodities have become an investible asset class for most real money managers around the world just in the last 3 to 5 years, and thats been accompanied by an acceptance that commodity investment via indices based on futures bring very satisfactory characteristics to a portfolio. Do some simple seat of the pants math. Take the global pension fund industry – Morgan Stanley recently estimated globally this has USD20 trillion in FUM. Lets make up some numbers and say 10% of these funds put 5% of their assets into commodities. The energy complex typically makes up around 50% of any commodity index – so an asset allocation on that scale would have moved USD2.5 billion into the crude futures. And this isn’t even looking at the weight of money coming from hedge funds, mutual funds, sovereign wealth funds etc.

    Personally, I think oil will be back under a $100 within the next 6 months – I have no science for that prediction so little point in arguing with me – due to a combination of high price leading to more exploration and exploitation of otherwise marginal sources of oil (eg oil sands in Canada alone contain more oil than all of OPEC added together. Anywhere north of around $60 per bbl, it is economic to mine these though deeply costly to the environment). And slowing global growth, high prices do that – nothing will put the wind up capital scum investors like me more than the prospect of being long in a falling market.

    I vote for the only two sensible and truly green alternatives out there – nuclear power, and space based electro-photovoltaic generation. Wind power, tidal etc all sound really nice but they don’t provide consistent high load base capacity.

  35. gomango 35

    Just having read that the comment the 2.5 billion doesn’t make too much sense. What I was trying to say that a very, very conservative estimate of new money into oil over the last 3 years is 2.5 bln. Initial margin on a contract is currently about $10,000, a contract is a thousand barrels so that makes margin around 7% atm. So that 2.5 billion of new cash is more like USD35 billion of oil buying power. Open interest in Nynex futures is probably about (guessing) 1.2 million contracts so (say) 1.2 billion barrels of oil, worth around (say) $170 billion, so any of you that did at least rudimentary economics in form 4 and can remember supply/demand graphs will probably realise that for a good with a long production lead time, price will go up when demand increases.

    The other point I didn’t make well is that pension funds are the most conservative of investors. Hedge funds, mutual funds and CTA’s are way more aggressive. What is interesting to look at is the growth in open interest over the last 5 years – when I get back to work I’ll produce that graph. As an aside, same arguments work for grain prices – the law of unintended consequences (biofuels) is the real reason we have rampaging grain prices. Again look at open interest in futures – the open interest for wheat is now greater than the total annual US physical production of wheat. Wheat is up not because it is a biofuel feedstock but because wheat farmers are substituting into corn which is a biofuel feedstock. So greenies feel happy about mandating compulsory ethanol usage, food crops get taken out of production, food prices rise. The real irony is that ethanol produced from corn is only viable because of subsidies, and actually requires more energy input (and carbon footprint) than is actually contained in the ethanol itself. Bad policy is so funny to think about.

    I support the environment, I like nuclear power. Then you can have your battery powered car. I’ll still drive my xr6 turbo though.

  36. K1 36

    gomango, even the people producing the oil sands don’t forecast more than a few million barrels a day max output, under most favourable conditions. Doesn’t matter how much there is, it’s how fast and how cheap you can produce it.

    And to go back to the first comment from mondo:
    “Luckily NZ produces about 55% of its oil domestically so we might be not too badly off.”
    I understood we could only effectively refine the crappy sour stuff, not what we produce in Taranaki, so we may not be in such good shape? But I may be flat wrong on this.

    For those who want to get on with a solution, and not argue the exact timing and price characteristics of the inevitable peak, check out Transition Towns at http://www.transitiontowns.org.nz, or the UK site.

  37. Lint Remover 37

    How do you guys feel now that you have been exposed as labour party and union trolls- oh thats right the same way you felt last time you were exposed, and the time before that, and the time before…
    losers

    [read our about page, hell, read the front page – labour movement blog, written by individuals in their personal capacities with no funding or direction from any organisation. If you want to call people trolls, bugger off to Kiwiblog. No more attempts at threadjacking will be tolerated. SP]

  38. gomango 38

    K1, thats mostly true but from what i recall the last time i looked at this canadian oil sand production is about 1.3 million bbl per day and by 2010 will be 3 mm bbl per day. And that was projected when when oil was around $70-80 per bbl. and average cost of production is circa 30 bucks a barrel. at 3 mm barrels a day that s around 4 to 5% of global consumption which is significant. But don’t misunderstand me, I’m not trying to argue that the oil complex will continue unchanged, but just like any market, changes in supply demand price cause very predictable market responses. I kind of hope i’m wrong and oil does stay high as that will motivate investors to invest in more sensible alternative energy sources than are currently available.

  39. Kevyn 39

    Steve, You might be too young to remember this but in the 1970’s the real price of petrol increased from less than a dollar a litre in 1970 to almost two dollard in 1980 and peaked at $2.55 in 1985. Traffic growth stalled so the government decided to stop building motorways because they wouldn’t be needed anymore. 30 years and !00% traffic growth later Transit finally got a big enough share of the petrol tax to restart those motorway projects. Dr. Norman is being premature in dismissing investing in motorways.

    The assumption that people are fleeing from private transport to public transport is not supported by the Wellington statistics. There hasn’t been enough growth in PT ridership to account for even 5% of the reduction in traffic at the Ngauranga interchange in the morning peak period. If the missing commuters had switched to trains it would have almost doubled the number of passengers arriving at Wellington station. A simpler explanation of what has happened to the drivers of the missing 10,000 cars is that two out of every ten drivers is now travelling as a passenger, still on the motorway. So the motorways are still meeting the needs of the motorway commuters, but now in a more economically and environmentally efficient manner.

    So if doubling the price of petrol in the last ten years hasn’t sent people fleeing from cars to buses, trains, and bicycles should we be gambling that another doubling will trigger a different response?

    With regard to the time it takes to replace the vehicle fleet two things are worthy of mention.
    1) It will happen several times faster than replacing the housing/factory stock with the more sensible system we had before the Town Planning Act gave us single use zoning.
    2) Log-book studies show that the youngest third of the vehicle fllet accounts for half of all vehicle km travelled. (rounded fractions).

    Remember what made Ralph Nader famous? Claiming that road deaths could be cut in half using technologies the carcompanies already had “sitting on the shelf” at very little additional cost to car buyers. When the federal government forced car makers to fit those improvements they also forced car buyers to pay for them and prevented car makers from being sued for not having fitted them to previous models. Three barriers were present, not one, although the big nasty corporation was definitely one of those barriers. The fact is technology to double fuel economy does exist, it can be added to current cars, but only if buyers are prepared to pay fot it, and they haven’t been in the USA until this year. The improved CAFE standards will partially adress the market impediments in the same way that safety standards did 40 years ago. There is no need to go hybrid or electric when you can go 50 mpg for a tenth of the cost. How high will fuel prices have to go before carbuyers are willing to pay that extra tenth is the big imponderable. The tech changes I am talking about are no more radical than the responses to the 70s oil shocks, which were mainly 5-speed gearboxes, aerodynamic bodywork, electric radiator fans and weight-saver tyres (now called space-saver), etc. Come to think of it, this was the front wheel drive revoltion, and it only took ten year for every small and medium sized car to make that change. Perhaps we are about to see a similar revolution for composite fibres?

    Quick summary:
    1. don’t count on a huge reduction in traffic, it might happen but equally it might not.
    2. don’t count on a paradigm shift from private transport to public transport, that has never ever happened in the past unless you count walking as private transport.
    3. don’t count on urban renewal. It will happen but not fast enough.
    4. do expect fundamental changes in the way cars are designed but not in the way they are propelled. Those on-the-shelf technologies are mainly in the area of reducing parasitic loads and drivetrain losses.

  40. Kevyn 40

    Steve, You might be too young to remember this but in the 1970’s the real price of petrol increased from less than a dollar a litre in 1973 to almost two dollars in 1980 and peaked at $2.55 in 1985. Traffic growth stalled so the government decided to stop building motorways because they wouldn’t be needed anymore. 30 years and 100% traffic growth later Transit finally got a big enough share of the petrol tax to restart those motorway projects. I think history tells us that Dr. Norman is being premature in dismissing investing in motorways.

    The assumption that people are fleeing from private transport to public transport is not supported by the Wellington statistics. There hasn’t been enough growth in PT ridership to account for even 5% of the reduction in traffic at the Ngauranga interchange in the morning peak period. If the missing commuters had switched to trains it would have almost doubled the number of passengers arriving at Wellington station. A simpler explanation of what has happened to the drivers of the missing 10,000 cars is that two out of every ten drivers is now travelling as a passenger, still on the motorway. So the motorways are still meeting the needs of the motorway commuters, but now in a more economically and environmentally efficient manner. Perhaps Transit could do a head count and see if there are more than 1.1 people per car now, to test my theory.

    So if doubling the price of petrol in the last ten years hasn’t sent people fleeing from cars to buses, trains, and bicycles should we be gambling that another doubling will trigger a different response?

    With regard to the time it takes to replace the vehicle fleet two things are worthy of mention.
    1) It will happen several times faster than replacing the housing/factory stock with the more sensible system we had before the Town Planning Act gave us single use zoning.
    2) Log-book studies show that the youngest third of the vehicle fleet accounts for half of all vehicle km travelled. (rounded fractions).

    Remember what made Ralph Nader famous? Claiming that road deaths could be cut in half using technologies the car companies already had “sitting on the shelf” at very little additional cost to car buyers. When the federal government forced car makers to fit those improvements they also forced car buyers to pay for them and prevented car makers from being sued for not having fitted them to previous models. Three barriers were present, not one, although the big nasty corporation was definitely one of those barriers. The fact is technology to double fuel economy does exist, it can be added to current cars, but only if buyers are prepared to pay fot it, and they haven’t been in the USA until this year. The improved CAFE standards will partially adress the market impediments in the same way that safety standards did 40 years ago. There is no need to go hybrid or electric when you can go to 50mpg for a tenth of the cost. How high will fuel prices have to go before carbuyers are willing to pay that extra tenth is the big imponderable. The tech changes I am talking about are no more radical than the responses to the 70s oil shocks, which were mainly 5-speed gearboxes, aerodynamic bodywork, electric radiator fans and weight-saver tyres (now called space-saver), etc. Come to think of it, this was the front wheel drive revoltion, and it only took ten years for every small and medium sized car to make that change. Perhaps we are about to see a similar revolution for composite fibres?

    Quick summary:
    1. don’t count on a huge reduction in traffic, it might happen but equally it might not.
    2. don’t count on a paradigm shift from private transport to public transport, that has never ever happened in the past unless you count walking as private transport.
    3. don’t count on urban renewal. It will happen but not fast enough.
    4. do expect fundamental changes in the way cars are designed but not in the way they are propelled. Those on-the-shelf technologies are mainly in the area of reducing parasitic loads and drivetrain losses.

  41. Ari 41

    plenty of stone left after the stone age and plenty of oil will be left after the oil age. unfortunately all the adventitious hot house flowers kept alive by the profligate use of energy will wither and die. thats progress for ya mate.but the working class will still have to protect itself from rentiers, compradores and other selfish greedy persons psychologically disposed to dominate for pleasure using the contemporary economic activity as their instrument.

    That’s not what peak oil means.

    Peak oil means even though in raw quantities there is a large amount of oil left, it’s all either tricky stuff that’s very expensive to get at, or cheap stuff that will come very slowly because most of it has already been pumped out. At the same time, demand is increasing because countries like China have been developing at an astounding rate, and they’ve been using oil to do it. And with the amount of debt China has been lending to the USA, you can bet that if anyone is going to be buying other countries’ oil once the effects of approaching/reaching peak oil is really noticable, (ie. a few years from now) it will be China.

    Technically speaking, you’ll never “run out” of oil. The problem is when it becomes too expensive to be worth using- and we have put sweet FA into preparing viable alternatives.

    So countries like New Zealand will only be able to rely on about half of the oil we’re currently using, and only for as long as our domestic supplies last. It will get prohibitively expensive for most New Zealanders and we will need to have comprehensive public transport ready in time to minimise our fuel use- whether that fuel is oil or electricity or both.

  42. deemac 42

    grimmie2’s post is proof (as if we needed it) that right wing trolls don’t actually read (or possibly understand) what they are commenting on. Time to get rid of these waste of space comments and let people who want to debate ideas to do so without having to scroll thru the dross!

  43. T-rex 43

    Well, would you look at this. Looks like Digipoll are a bunch of push-polling hacks. Cheers guys.

    On another note – who knows about video editing?

  44. 2_dead_dogs 44

    deemac, don’t you mean:

    “let people who want to agree with each other to do so without having to scroll thru the debate!”

    Anyway… the AA has come out today and said the $10 prediction is at the extreme end of the predicted range of prices and is a worst case scenario.

    Why are leftie-environmentalists so dishonest?

  45. T-rex,

    what program do you run?

  46. Ari 46

    Assuming I’m reading you right 2DD, $10/l is still an enormous price to pay for petrol when you consider that the cost of petrol is effectively added to every item that needs to be shipped any significant distance. That means food prices, appliances, anything imported including currently cheap goods from the Warehouse, and anything you buy off the internet are all going to be significantly more expensive.

    T-rex: Cheers, I thought there was something fishy about them asking questions about whether climate change would cost more than $20. I’m sure it’s unintentional, (because honestly, who expects the Herald to bother finding out how much climate change would cost when it’s clear they don’t believe the facts on it?) but that’s exactly the same type of error that is deliberately used in push-polling. More research please, Heraldry. 😉

  47. T-rex 47

    I’ve never used it before – I’ve got both blender and windows movie maker.

    Just finishing making up the actual content, will start to look at creating a composite shortly, was just after recommendations and (possibly) expert help.

    It’s quite funny that you replied actually, I was actually going to get in touch with you yesterday and see if you were interested in helping (on account of it being a good example of big government trampling on the rights of the common man) but then we ended up calling eachother dickheads again so I thought I’d leave it 🙂

  48. T-rex 48

    Travellerev – Don’t worry about it for now, I’ve started using moviemaker and it’s sufficient for what I need. This is bloody easy actually!

    If you’re a visual effects guru though I’m still happy to take tips 🙂

  49. I was just responding to you.
    I have experience with Studio 9.
    I just had a look at moviemaker and it looks like a piece of piss to use and quit versatile too but you have come to the same conclusion already.
    No, I’m not a visual effect guru.

    Blender sounds like fun. I’ve done workshops with Maya 3d in a distant past and a different live.

    What’s the project anyway?

  50. mondograss 50

    To come back to an earlier question someone had about NZ’s oil. Much of NZ’s oil comes from the Tui field and is “Sweet & Light” which is the highest grade and the easiest to refine. Our refining is usually done in Singapore and is sold under the TAPIS index which is the most expensive. There are other oil fields in NZ and it’s possible that they are lower grade, but more than half comes from Tui.

    I don’t know what grades the Marsden Pt refinery can handle.

    It is important to make the distinction about grades of oil. Venezualan oil is “Heavy & Sour” and I believe is mostly refined for non-transport uses. The Canadian Tar Sands are also “Heavy and Sour” so very little use for transport without extensive refining.

  51. roger nome 51

    gomango:

    “so an asset allocation on that scale would have moved USD2.5 billion into the crude futures.”

    Each day 85 million barrels of oil consumed, each with a spot market value of $150. So 85 million multiplied by 150 is $12.75 billion per day, and $4.6 trillion per year. The impact of that hypothetical extra $2.5 billion in demand would be insignificant.

  52. roger nome 52

    Kevyn:

    “You might be too young to remember this but in the 1970’s the real price of petrol increased from less than a dollar a litre in 1973 to almost two dollars in 1980 and peaked at $2.55 in 1985.”

    But that supply crunch was due to above-ground political factors. This time (at least in non-OPEC countries) its due to geological factors – i.e. “we canny pump any faster captain” (ok, that came wrong, but I’m still keeping it). Even if OPEC hasn’t peaked yet, non-OPEC production will definitely will soon, meaning that if production is to continue increasing we are relying on the good will of the dictators to give us cheaper oil, meaning lower profits for them. Not a good bet hey?

    And then we have to accept that a global near-term peak (oil at $10 per barrel) is a very real possibility. It has been modelled using a variety of different techniques. Look at this Swedish phd thesis for instance:

    The belief in a soon peak production of oil is fuelled 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.

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

  53. roger nome 53

    heh – that was supposed to be “And then we have to accept that a global near-term peak (petrol at $10 per lire) is a very real possibility.”

  54. T-rex 54

    Roger – if you’re offering forward contracts I’m in for a few billion barrels at the 10$ per figure you mention above 😉

    I think it’s extraordinarily unlikely oil will ever hit $10/barrel.

    People will just stop paying for it before then. There will be some equilibrium at which demand starts to collapse. The issue is whether economies will collapse, or we’ll find a replacement. I’m betting on the latter, but replacements don’t just happen. You actively pursue them. And you don’t do that by spending all your money on stupid highway projects.

    I wonder if anyone in the government has thought about the kind of R&D project we could have on next generation vehicles for the $4 billion planned allocation to the tranmission gully and auckland waterfront motorway projects.

    If I could work out a way to make a small, high efficiency vehicle, that $4 billion dollars would pay for about 800,000 of them. Like, enough for one for every household in NZ (ish). Free. Congestion would be a thing of the past, oil dependence would plummet, everyone wins. Especially me 🙂

    edit: awwww, you spotted it before i got my comment in! that’s no fun 🙁

  55. T-rex 55

    Travellerev – See the discussion on the “drop the immigration bill” thread, or check out http://stopthebill.wordpress.com/

    The project is creating a simple and engaging summary. Summary is perhaps generous – maybe more “attention grabber”.

    Blender is quite cool, my poor laptop is a bit on the sickly side as far as memory and processor power are concerned though, the further I get through the tutorials the trickier it becomes. Teach me for buying an ultraportable. Looking forward to being of-fixed-abode again so I can get blow some pennies on a decent desktop.

  56. roger nome 56

    Too true T-rex – I reckon there’s a lot of scope for increased efficiency as well.

    i.e. Tata’s $2,500 car gets 25 km per litre, and as it’s my understanding that the average NZ family car only gets 10-12 litres per km. But with petrol at $10 per litre would this really matter? Particularly when commodity prices sky-rocket, and we have less disposable income to spend on petrol/desil as well. As you will appreciate, the problem is a compound one.

    Also, as you know, I don’t have your optimism when it comes to finding alternatives in the case of a near-term peak. If say oil production drops at 5% per year (well within the realms of possibility according to the various models) business confidence will go gloomy, demand will drop and financial markets will contract – so, in this context where are firms going to get the capital to fund this massive industrial revolution?

    My opinion is similar to the conclusion of the Hirsh Report.

    1) Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.

    2) Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.

    3) Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.

    http://en.wikipedia.org/wiki/Hirsch_report

    Unfortunately we probably have options 1 and possibly 2 available to us. In any case we both agree that we should be directing a large portion of the current roading budget toward public transport and other demand-reduction measures.

  57. T-rex 57

    Did you read my final post on that “ambitious for peak oil” thread where I calculated the actual energy requirement to replace oil in a high efficiency light vehicle fleet in terms of wind-energy-equivalent?

  58. T-rex

    I’m downloading Blender. Didn’t realise it was for free.
    I should be sweet with my new vista powered beast.LOL

    Curious about what you’re going to come up with

  59. Kevyn 59

    Roger, Peak oil will result in less cars on our roads – in the sense that a Ford Focus is less car than a Ford Explorer. That switch of market share has already happened in the USA with Explorer (14mpg) sales falling by more than a quarter in a single year and with Focus (29mpg) sales almost doubling in the same time. In NZ the Corolla is comfortably outselling the Commodore for the first time in twenty years.

    With most cars having 3 empty seats average fuel economy can be tripled without spending a single cent of “government” money. In fact the Wellington stats suggest that average Wellington commuter fuel economy has improved by 20% using this simple technique of filling up empty seats in cars.

    With the threat from peak oil we really should be moving away from thinking in terms of fuel used per vehicle km to fuel used per occupant km, which is how PT energy efficiency is measured by the US DoE and by Virgin Trains.

  60. Kevyn 60

    oops, the editor thingy didn’t work. Try that last para again.

    With the threat from peak oil we really should be moving away from thinking in terms of fuel used per vehicle to fuel used per occupant km, which is how PT energy efficiency is measured by the US DoE and by Virgin Trains.

    [lprent: jams sometimes on different browsers – usually IE. There is a later version, but it jams a *lot* so I had to remove it. Waiting for a stable version.]

  61. roger nome 61

    Kevyn:

    First you opine:

    Peak oil will result in less cars on our roads – in the sense that a Ford Focus is less car than a Ford Explorer.

    Then you go on to state:

    With most cars having 3 empty seats average fuel economy can be tripled without spending a single cent of “government’ money.

    In the first statement you’re of the opinion that there will be no fewer cars on the road in any peak oil scenario (i.e. bumpy plateau, or 8% reduction in production per annum). But then you tell us that there could be only 25% of the traffic that there currently is if we go from 1.2 passengers per trip, to 4.

    Also, you miss the point that a lot of heavy freight currently on the roads will go to rail, as it’s by far the more fuel efficient option.

    You do correctly point out that cars will get much lighter.

    So, the combined effect of these things will be much less weight on our roads, meaning that roading budgets will be able to be heavily reduced, and spending on rail, to accommodate the increased freight, will be able to be increased. This is what should be happening now, but it isn’t.

  62. Swampy 62

    “I find it quite remarkable that people pack such a hissy fit over 1.5 billion to get a complete and modernised national rail network, yet see no problem with spending 1 billion JUST ON TRANSMISSION GULLY.”

    How about hissy fit over both. both are flagrant examples of government spending wastage.

    If you look at who wants TG built it is
    – the government
    – and local government
    – and Nimbys in places where the current motorway goes who don’t want that traffic in their back yards.

    In other words the usual suspects who either like throwing money around like it’s going out of fashion, which is easy to do seeing as it’s other people’s money, or who want something as long as it isn’t in their back yard.

  63. Swampy 63

    “Also, you miss the point that a lot of heavy freight currently on the roads will go to rail, as it’s by far the more fuel efficient option.”

    Rail is only more efficient when you can get a lot of it in a single place without double handling, like bulk shipments of coal direct out of the mines to the port, and the like. When you have small quantities of stuff being moved around by trucks at each railhead especially for shorter distances there is no efficiency gain.

    In NZ the population is spread out quite well and there are many small businesses, result is that the efficiencies aren’t seen all that much and that explains why we do not have the rail network that European countries or the UK have with their much bigger populations.

  64. Kevyn 64

    Roger, Sorry for not responding earlier, somehow I missed seeing your comments till just now. Even more embarrasingly i’m not sure which of your earlier comments I was referring to but what I wrote does seem to read the way you read it, contradictory, which it wasn’t meant to. Merely proves that there are a great many ways that we will reduce our oil consumption in response to peak oil. I find the arguments for peak oil and global warming convincing I just don’t find the arguments for public transport as the saviour convincing.

    The only claim where you are in error is “the combined effect of these things will be much less weight on our roads, meaning that roading budgets will be able to be heavily reduced, and spending on rail, to accommodate the increased freight, will be able to be increased.”
    Two simple things you have overlooked.
    1) roughly two-thirds of maintenance costs are due to environmental factors. There are plenty of studies on the shelves of the engineering libarary at the university identifying why this is so. Thats a fixed cost of around $800 million annually that wont reduce when traffic reduces.
    2) The damage caused by diesel car and truck mass is recovered through RUCs hence revenue will fall as fast as the maintenance cost so there wont any spare money for spending on rail.

    That is essentially what happened in the 1970s, although the change from the gross weight mileage tax to the 3rd power axle weight RUCs hid the full extent of the loss of value of the petrol tax during that decade. Adjusted for inflation maintenance spending remained constant but capital investment fell by 75% hence the single Terrace Tunnel, the right-exit Hobson St offramp, and the two lane southern motorways in Christchurch and Dunedin.

    Are you good with numbers? I recently stumbled accross some NZ rail fuel economy figures in an Ecan report. Maybe you can work out how they compare with long-haul trucks. The figures were
    Christchurch-Timaru (approx 200km) 0.25 litres per freight tonne, 2500 tonne train, one locomotive.
    Christchurch-West Coast (300km or 400km??) 4.0 litres per freight tonne, 1500 tonne train, two locomotives.

    Christchurch-Timaru is .00125 letres per tonne km. A B-train might manage 45 litres per 100 km = 90 l/200km = .45 l/km divide by 22.5 tonnes of freight = .02 litres per tonne km, 16 times worse than the train. This is a four times bigger difference than found in the US and Canadian studies I’ve seen. Doubling the trucks fuel consumption does result in the West Coast rail figure being four times better than the truck, which is probably closer to most NZ rail. But as the Canadian study pointed out, large trucks there account for 80% of tonne/km but only 60% of diesel consumption. Realisticly getting half the fright tonne/km shifted from road to rail will reduce truck kms by 1/3 and and road damage and fuel use by 1/4 (broad fractions) simply because it is the trucks competing with rail that have the the most freight tonnes per km travelled and the best fuel economy per tonne/km because of there superior tare/load weight ratio. The road damage bit is complicated by the reduced damage from air suspension which is more common on large trucks than smaller ones.

    IMHO the whole freight needs to be electrified for the buy back to really be environmentally worthwhile.

  65. Kevyn 65

    Roger, Sorry for not responding earlier, somehow I missed seeing your comments till just now. Even more embarrasingly i’m not sure which of your earlier comments I was referring to but what I wrote does seem to read the way you read it, contradictory, which it wasn’t meant to. Merely proves that there are a great many ways that we will reduce our oil consumption in response to peak oil. I find the arguments for peak oil and global warming convincing I just don’t find the arguments for public transport as the saviour convincing.

    The only claim where you are in error is “the combined effect of these things will be much less weight on our roads, meaning that roading budgets will be able to be heavily reduced, and spending on rail, to accommodate the increased freight, will be able to be increased.”
    Two simple things you have overlooked.
    1) roughly two-thirds of maintenance costs are due to environmental factors. There are plenty of studies on the shelves of the engineering libarary at the university identifying why this is so. Thats a fixed cost of around $800 million annually that wont reduce when traffic reduces.
    2) The damage caused by diesel car and truck mass is recovered through RUCs hence revenue will fall as fast as the maintenance cost so there wont any spare money for spending on rail.

    That is essentially what happened in the 1970s, although the change from the gross weight mileage tax to the 3rd power axle weight RUCs hid the full extent of the loss of value of the petrol tax during that decade. Adjusted for inflation maintenance spending remained constant but capital investment fell by 75% hence the single Terrace Tunnel, the right-exit Hobson St offramp, and the two lane southern motorways in Christchurch and Dunedin.

    Are you good with numbers? I recently stumbled accross some NZ rail fuel economy figures in an Ecan report. Maybe you can check my maths on how they compare with long-haul trucks. The figures were
    Christchurch-Timaru (approx 200km) 0.25 litres per freight tonne, 2500 tonne train, one locomotive.
    Christchurch-West Coast (300km or 400km??) 4.0 litres per freight tonne, 1500 tonne train, two locomotives.

    Christchurch-Timaru is .00125 letres per tonne km. A B-train might manage 45 litres per 100 km = 90 l/200km = .45 l/km divide by 22.5 tonnes of freight = .02 litres per tonne km, 16 times worse than the train. This is a four times bigger difference than found in the US and Canadian studies I’ve seen. Doubling the trucks fuel consumption does result in the West Coast rail figure being four times better than the truck, which is probably closer to most NZ rail. But as the Canadian study pointed out, large trucks there account for 80% of tonne/km but only 60% of diesel consumption. Realisticly getting half the fright tonne/km shifted from road to rail will reduce truck kms by 1/3 and and road damage and fuel use by 1/4 (broad fractions) simply because it is the trucks competing with rail that have the the most freight tonnes per km travelled and the best fuel economy per tonne/km because of there superior tare/load weight ratio. The road damage bit is complicated by the reduced damage from air suspension which is more common on large trucks than smaller ones.

    IMHO the whole freight needs to be electrified for the buy back to really be environmentally worthwhile.

  66. T-rex 66

    IMHO the whole freight needs to be electrified for the buy back to really be environmentally worthwhile.

    Amen.

    Though as you prove above, it’s still worth it while running diesel locomotives – the chch -> greymouth track is a pig of a thing, I don’t know what the rest of the lines around NZ are like but I’d expect Dunedin -> Picton to deliver similar efficiency to Chch->Timaru. That’s a big opportunity for improvement over road freight.

    If the govt buys new diesels I’ll be extremely disappointed however.

    What I’d really like to see is electric rail over the whole country, and electric trucks in the centres (completely feasible if the hub-to-destination distance is low). Then core freight transport infrastructure would be pretty oil ‘resistant’.

    I found out yesterday that Germany is just putting in a power plant about the size of huntly with a grid-to-rail converter out the back putting half the power it generates straight onto the rail grid (Grid is 50 or 60hz, rail is 16.7hz). JK – Incorporate THAT into your vision and the greens coalition might not be such a pie in the sky 🙂

  67. Kevyn 67

    T-rex, I think the fuel economy on the Chrcistchurch-Timaru run will be unique that service simply because that section of track is like crossing the Nullabor, straight, flat and no stops along the way if the train is travelling from Port Timaru to the Chch railyard. If the train is all containers then the aerodymics will be as close to perfect as any vehicle could ever acheive. The remainder of the line between Picton and Dundein is a mixture rolling hills, rugged hills and coastal running. It’s the cuves and gradients and their impact speed variation that closes the gap with trucks simply the trains aerodynamis advantage gets overwhelmed. Curves also create lateral wheel/rail friction which is absent on the Chch-Timaru run. On the other hand the highways don’t even make a pretence at being straight or flat. Ever driven the Kilmogs or the Hundalees? IMHO the starkest comparison between road and rail alignments are the Dashwood and Welds passes between Blenheim and Seddon. Truck fuel economy must really take a hiding.

  68. T-rex 68

    hmm, it would be interesting to see the stats. I’d be surprised if friction losses through the corners were particularly high – long as the radius wasn’t too small. Take the point on ups/downs – but that’s not a significant issue with an electric system because you can regenerate coming down the hill.

    Can you find out the picton-dunedin stats from the same place as you got the others?

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