Waking up to the oil crisis

Written By: - Date published: 11:05 pm, October 13th, 2010 - 73 comments
Categories: Economy, sustainability, transport - Tags:

Parliament has published a research paper called The Next Oil Shock. It’s a pretty sober look at the difficulties the world is facing in producing enough oil to meet demand. The conclusions are inescapable: we can’t produce enough oil and a cycle of oil-driven recessions is coming. Are our leaders finally waking up to the impeding crisis of peak oil?

The research paper was authored by Clint Smith, whom long-time readers might remember. Here’s the key points:

  • Low-cost reserves of oil are being rapidly exhausted, forcing oil companies to turn to more expensive sources of oil. This replacement of low-cost sources of oil with higher costs sources is driving the price of oil higher.
  • While the world will not run out of oil reserves for decades to come, it cannot indefinitely continue to produce oil at an increasing rate from the remaining reserves. Forecasts indicate that world oil production capacity will not grow or fall in the next five years while demand will continue to rise.
  • If oil production capacity does not rise as fast as demand, the buffer of spare production capacity disappears. In such a ‘supply crunch’ the price of oil ‘spikes’ to high levels. High oil prices can induce global recessions.
  • Organisations including the International Energy Agency and the US military have warned that another supply crunch is likely to occur soon after 2012 due to rising demand and insufficient production capacity.
  • There is a risk that the world economy may be at the start of a cycle of supply crunches leading to price spikes and recessions, followed by recoveries leading to supply crunches.
  • New Zealand is heavily dependent on oil imports and will remain so for the foreseeable future. While there is potential to substantially increase domestic production, domestic oil production cannot insulate New Zealand from global oil price shocks because New Zealand pays the world price for goods like oil.
  • Key export-generating industries in the New Zealand economy including tourism and timber, dairy, and meat exports are very vulnerable to oil shocks because of their reliance on affordable international transport.

If you’re familiar with the basics of peak oil then most of the paper will be covering old ground and if anyone still doubts it’s going to happen, check out the list of quotes from international organisations:

  • The US Joint Forces Command forecasts that: “by 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly10mb/d.”
  • The UK Industry Task Force on Peak Oil and Energy Security predicts: “as early as2012/2013 and no later than 2014/2015, oil prices are likely to spike, imperilling economic growth and causing economic dislocation.”
  • Lloyds of London says: “an oil crunch is likely in the short to medium term” and “appears likely around 2013.”
  • A German military report states: “some probability that peak oil will occur around the year 2010 and that the impact on security is expected to be felt 15 to 30 years later… [there will be] “partial or complete failure of markets… [including] shortages in the supply of vital goods could arise.. A restructuring of oil supplies will not be equally possible in all regions before the onset of peak oil.”
  • The IEA writes: “current global trends in energy supply and consumption are patently unsustainable…the era of cheap oil is over.”

But the section on the economic implications is what really caught my eye:

As demand rises faster than production capacity, the world’s oil supply buffer is whittled away. The supply crunch raises the price. Once the price reaches a certain level it tips economies into recession. This lowers demand, recreating the supply buffer, and results in a lower price. This enables economies to recover, which increases their oil demand, which decreases the supply buffer, and so on.

Once production capacity starts to fall, rising demand will eat up the supply buffer at lower and lower levels…

…Rather than a single sharp period of economic decline following the point where oil production starts to fall, what analysts are calling a ‘corrugated plateau’ or ‘undulating plateau’ could take place: a cycle of successive periods of growth, supply crunch/price spikes, recessions, and recovery leading to the next supply crunch, all underlain by a rising cost base driven by the exhaustion of cheap reserves…

… As a country that is reliant on oil imports and heavily dependent on cheap oil for its major sources of income, New Zealand is highly exposed to oil shocks. Domestic oil production is insufficient to meet New Zealand’s oil needs. Equally, increasing domestic oil production would not protect New Zealand from either the direct or indirect effects of price spikes caused by global supply crunches.

The Government is not unaware of the coming oil crisis. It’s just that its solution is stupid: build more roads and hope to dig up more oil for the cars while saying “Ultimately uptake of new energy sources and technologies will depend on the decisions made by consumers as they respond to oil prices”. But how can people choose to move away from oil the Government is failing to provide options other than highly oil-dependent, car-centred lifestyles? Public transport is full to capacity but the money keeps going on white elephant motorways.

As the paper points out, we pay the global price for oil even if we produce it (just like we do for milk etc). If there’s a global shortage, we feel the consequences too. And it’s not as if our oil prospects are great anyway, an international consortium just gave up their drilling rights in the Great Southern Basin because they didn’t find anything worthwhile.

The Greens and the WWF have picked up the paper and used it as a basis to call for the government to adopt a more sensible energy strategy. The Greens say:

“This report makes it clear that the Government’s decision to spend over $11 billion on horrendously expensive new expressways is short-sighted and irresponsible … Continuing to spend the vast majority of the transport budget on roads will only make us more dependent on oil, and more vulnerable to high prices.”

The WWF adds:

“The timing of this report is fortunate. Right now the government is redrafting its Energy Strategy and needs to take heed of this research as well as the views of the thousands who provided input on the first draft. There is still time to put a plan in place that can help New Zealand transition towards being a more sustainable, less oil dependent country. WWF calls on the government to develop a coherent strategy that includes investment in more sustainable transport options and the development of home-grown biofuels.”

Do you think the Government will listen? Or will John Key just smile and wave while Gerry Brownlee chants ‘drill, baby, drill’?

73 comments on “Waking up to the oil crisis ”

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  1. alloverrover 1
    13 October 2010 at 11:25 pm

    congratulations to Clint Smith on an truly excellent paper on global oil depletion with a NZ perspective. The emphasis on imminence of the next oil shock (2012?) and its profound effects on NZ’s economy is what stands it apart. eg. the conclusion that domestic oil production cannot insulate New Zealand from global oil price shocks because New Zealand pays the world price for goods like oil.
    There is more on the hype and hoopla about NZ’s “potential” oil reserves and how they cannot save us from the effects of the next oil shock here…
    http://oilshockhorrorprobe.blogspot.com/2010/10/peak-hype-on-new-zealands-offshore-oil.html

    • ZeeBop 1.1
      13 October 2010 at 11:37 pm

      I love peak oil. It means sanity returning. Politicians having to more than read the poll tea leaves.
      Also it means noisy boy racers days are numbered. Horse drawn veggie stalls, the rag and bone
      man, all becoming economical again. Sure and broadband.

  2. BLiP 2
    13 October 2010 at 11:32 pm

    When was the election – November 2008? Well, four weeks later, National Ltd™ had repealed legislation that would have been of great assistance right about now.

  3. ZeeBop 3
    13 October 2010 at 11:33 pm

    The reason why the National Party keeps making bad policy is its named National.

    National they don’t think they have to doing anything, they’re already ‘it’.

    If they were called Conservative they would attract
    people for their conservatism, similarly the Liberals in Australia attracts economic
    liberals.

    What we need is a proper NZ business party named Conservative, Liberal, or something
    that means something more than ALL OF US IN THE SAME BASKET.

  4. Draco T Bastard 4
    14 October 2010 at 1:29 am

    There was tourism coming to NZ in the 19th century but it was only the fabulously wealthy that did so as they were the only ones who could afford the 6 month, each way, trip. This report highlights the fallacy of trying for more tourist dollars – they’ll dry up along with the oil.

    It’s also a pointer to what I’ve been saying for some time: We need to get back to being self-sufficient. Without oil we’re not going to be either importing or exporting – the costs of doing either will be far too high due to our geographic location. This requires foresight and planning – none of which seems to be available in any, including the Greens, parties presently in parliament. If we want computers and the internet in the future we’re going to have to make the equipment ourselves. Thankfully, we actually have the resources available to do so – both the physical resources and the knowledgeable and skilled people. And we won’t be looking for competing firms in a capitalist socio-economic system either as it just costs too much.

    Once the oil crunch comes – we’ll be alone. The oil producing countries are going to holding to their oil for their own populations and our “friends” in the US and UK will have their own problems as well. They won’t be concerned about us unless they want something we have and that’s not likely.

    • ZeeBop 4.1
      14 October 2010 at 10:41 am

      I disagree. As billions of westerners get out of cars because they cost too much, and
      shift to working closer to home, or at home over broadband, as oil prices are allow to
      rise, new smarter more leaner companies will enter the market. The problem is the
      wealthy countries are forcing oil prices lower in the short-term crying financial collapse,
      actually what they are trying to do is hold back the damn on a lot of losses that will
      end their political careers, neo-liberalism is on the line people!

      As we shift to using fuel for food, mass transport, and away from getting the milk
      from the corner dairy, we will have a huge desire to spend and ability to move around
      the world much more! Businesses still will need to have their business travel, and
      will need mass public to subsidies it, in the same way the rich get a huge benefit by
      the majority having access to food, they get to air-frieght caviar and truffles.
      A populated world will mean travel, tourism will change, but they will be even more
      desire to come him, get away from living closer to home, and doing something
      truely different. What could be more different that an empty paradise at the bottom of
      the world, with mean jumping up and down wielding stick and shouting obsenities in
      a foriegn language.

      Look back! Look back at a time of steam! Big huge Titanics took tourism to the
      far reaches of the world. Ships will always have coal, coal is not running out.

      As for the tecno babble of the stupid right, fact is we will have the energy but it
      will cost more and cause people to behave differently. Running up and down the
      motorway to get a part will become ordering it online and it being fast couriered
      to your door or the local corner shop for pickup and payment.

      All that’s needed is for oil prices to reflect their true worth, rise and stay at $140?

      • Draco T Bastard 4.1.1
        14 October 2010 at 11:53 am

        As we shift to using fuel for food, mass transport,…

        Um, what? We already use fuel for food and mass transport. The problem is that we’re running out fuel. There’s huge stocks of coal ATM but that’s only relatively true because we’re not using it. As soon as we start using it for mobility we’ll run out in a few decades. Throw the massive amount of pollution that it generates and watch Climate Change really heat up.

        The rest of what you wrote made even less sense than that bit.

        • ZeeBop 4.1.1.1
          15 October 2010 at 6:41 am

          We waste huge amounts of energy in producing los of very unhealthy food, running cars in very inefficient journeys, using resources up once that should be recycled. We’re reached this point by using up very cheap crude, high energy fuels to go to the dairy rather than Mars, to have large parties than build a world that can get the huge excesses of food we have to everyone on the planet. There are many sources of energy, when we price in the real cost of waste and inefficiency (by having a capitalist market freed from corporate govt) and we fall back on some of the slower energy processes like walking, cycling, working close to home again, then the energy equation will be fine. I have travel to many places around the world, and consider tourism to have become like the McDonalds you find there, boring, repeative and uninspiring, tourism before oil used to be far rarer and impossible, tourism after oil will be very possible and much more added value than now either at the bottom of the market with working holidays or lavish global crusiers taking people around the world in a year after a long life of work. There are just too many people around in the future, they have to do something.

  5. Brokenback 5
    14 October 2010 at 1:54 am

    Three key points arising from this timely report that are topical and require , urgent concerted action
    [not likely from the John&jerry show ]

    Tourism- a sunset industry .

    Auckland- the energy blackhole/Albatross that will drag us all into economic chaos.
    The political Bullet has to be bitten and Urban dwellers compelled by draconian fines to cease creating gridlock by utilising motor vehicles as single person coccoons.

    Rail & Coastal shipping to reduce the energy cost of the productive economy.

    All politicians to be vetted by the “spine” test , details available on request.

    • Bored 5.1
      14 October 2010 at 7:44 am

      Brokenback / Draco, you both call for action now, planning and a rational approach to energy descent. I would like to be optimistic that people will act in this way BUT I have the mental image of Churchill calling for resistance to the Nazis in the 30s, his prediction of reality not listened to until events forced others to listen. By then it was too late for an easy solution. Or perhaps the story of Frodo leaving the party to destroy the Ring, the partygoing hobbits in blissful ignorance of their impending doom.

      Our approach may be to try and inform others of the danger of inaction, what I predict is that until the enemy has slaughtered a goodly number of them the proponents of the current status quo will ignore it, or come up with techno centric faith in “alternative energy”. Which means we wont be able to plan as a polity or society, we will just react. Thats the bad bit.

      The good bit is that those of us with awareness can subtely change our arrangements, get rid of our dependence on of our own “rings of power”. Where the mainstream leads to a dead end we can replace it with self reliance (now doesnt that fly in the face of “free enterprisers”, independence from their markets) and community co-operation. Our current techno compulsion is only a century old, we can revert whilst taking advantage of the new knowledge. its over to us, not the status quo, good luck.

      • Draco T Bastard 5.1.1
        14 October 2010 at 8:59 am

        We can do that but we also need to make enough noise about oil decline that people start listening. I actually think people are, it’s the politicians who aren’t and our elected dictatorship means that it’s the politicians that need to move and I have some doubts as to this happening because all the politicians are owned by the corporates.

        • Colonial Viper 5.1.1.1
          14 October 2010 at 11:38 am

          Continuous mass action and mass pressure Draco. Its the only way Parliament has ever worked for the people instead of just the elite.

  6. Libertyscott 6
    14 October 2010 at 4:49 am

    Those who scaremonger about oil prices going sky high are rarely seen buying oil futures and gambling on their own beliefs with their own money. Funny that, as if one truly believed it then one would also belief that it would be an ideal pension plan.

    More seriously though, the internal combustion engine is getting ever more efficient and the car will not be replaced by other modes simply because the price of oil goes up. It is far more likely to be replaced by other fuels. None of these are economic at the moment, second generation biofuels can extend the fuel efficiency of the internal combustion engine, with higher and higher blends. Fuel cells are probably a technology to nowhere due to cost, but electric vehicles are now being built without the acceleration or range issues of the past. It all comes down to economies of scale. In due course oil prices will continue to grow faster than inflation, and there will be a shift away from existing fuels.

    The most flexible and economically efficient piece of land transport infrastructure for most freight and passenger movements is the road, simply because it is ubiquitous and not a closed network. Railways only compete for long distance bulk and high volume freight, or seriously high volumes of people over short to medium distances. New Zealand doesn’t have much of the former and precious little demand for the latter.

    Railways have seen three major eras of closures and curtailment (1920s-1930s when most rural branch lines lost passenger services, 1950s-1970s when most rural branch lines closed and 1980s-1990s when most rural railway (freight) stations closed), all due to the rising efficiencies and lowering costs of road transport. Meanwhile railways still carry more freight on a per tonne km basis today than they did at any stage when it was a department (pre 1982).

    One “visionary” in the past (Rob Muldoon) thought he could make NZ immune from oil shocks and wasted a billion dollars (in 1984 values – easily closer to 2 billion today) trying to do so, and failed. I doubt the Greens are in any better place to know better (and they certainly baulk at buying up oil futures to put their money where their mouths are).

    • Bored 6.1
      14 October 2010 at 6:57 am

      Liberty, your comments draw a two word answer, ill-informed and myopic. Your viewpoint is unfortunately well behind reality (as opposed to techno faith, market babble and cornucopian optimism). For your own sake do some real research on this subject and understand little things such as the inability of our technology now or in the future to break the laws of thermodynamics, or the inability of a close system (earth) to absorb continuous growth in consumption.

    • Eddie 6.2
      14 October 2010 at 7:08 am

      “Those who scaremonger about oil prices going sky high are rarely seen buying oil futures and gambling on their own beliefs with their own money. Funny that, as if one truly believed it then one would also belief that it would be an ideal pension plan.”

      but we don’t live in that selfish mindset, liberty.

      We don’t want economically damaging oil prices, let alone to increase them and selfishly profit off them.

      Btw, which of the official quotes in the piece are you disagreeing with?

    • Marty G 6.3
      14 October 2010 at 7:19 am

      I see oil is up over $83 a barrel today. In NZD, it hasn’t been below $100 for a year.

      Anyone else see a link between the anemic recovery that keeps under-performing to economists’ expectations and the high and rising oil price?

      We’ll be looking at over $2 a litre shortly.

    • Armchair Critic 6.4
      14 October 2010 at 9:09 am

      Those who scaremonger about oil prices going sky high are rarely seen buying oil futures and gambling on their own beliefs with their own money.
      A couple of points, Liberty.
      First, a lot of people who are gambling on oil futures are doing so with borrowed money, rather than their own money.
      Secondly, and more importantly, if the people who you say should be betting oil futures are correct then the money won’t be much use to them, or anyone, when oil becomes scarce. After all, it’s just scraps of paper (or plastic) and metal.

      • Robert Atack 6.4.1
        14 October 2010 at 9:25 am

        I more than trebled an investment in oil futures my barrel went from $35.00 to $60.00, but alas it was borrowed money and I didn’t have a say on the sale date … that share is now worth $83.00
        Going back into the market now would be extremely scary, and as you say what for? In the end in a post peak world, the paper would only be good for starting fires.
        Just think how much would be in the Cullen fund if they had followed me … again not that it matters.
        Another I told them so moment?

      • Colonial Viper 6.4.2
        14 October 2010 at 11:41 am

        After all, it’s just scraps of paper (or plastic) and metal.

        Its worse than that, most of that money is just electronic ledger entries on electronic financial records, recorded on little magnetic atoms. The shit (almost) literally does not exist.

    • Draco T Bastard 6.5
      14 October 2010 at 9:19 am

      Those who scaremonger about oil prices going sky high are rarely seen buying oil futures and gambling on their own beliefs with their own money. Funny that, as if one truly believed it then one would also belief that it would be an ideal pension plan.

      Two things:
      1.) Doing so is immoral
      2.) No it’s not. Once resources are gone then it’s not going to matter how much money you have. Money itself, will probably be replaced (I’m expecting barter).

      More seriously though, the internal combustion engine is getting ever more efficient and the car will not be replaced by other modes simply because the price of oil goes up.

      The internal combustion engine is constrained by temperature differences. The greater the difference between the actual engine and the outside air the more efficient it is. Due to physical restraints this pretty much equates to 80/20 which gives a maximum of ~25% to ~30% efficiency (they’re pretty much there already). There are no other fuels with the EROEI of oil and electric vehicles will require electric power and we already use almost all that we generate so where is all the extra energy going to come from?

      The most flexible and economically efficient piece of land transport infrastructure for most freight and passenger movements is the road, simply because it is ubiquitous and not a closed network.

      For short haul or routes that are used rarely, sure, but not for long haul or trips that are made daily (ie, going to work) then trains are far better.

      …all due to the rising efficiencies and lowering costs of road transport.

      That should read: All due to the oil companies wanting more oil to be used so that they could make more profit. They (the oil companies) went through the US buying up the trains and tramways and ripped them up forcing people to use cars. Why would they do that if cars were more efficient (use less to do the same job)?

  7. AndrewK 7
    14 October 2010 at 7:15 am

    The trouble with this particular fantasy is the global financial economy is predicated on oil always being available. Because the US$ is the de facto world currency (to buy oil you need US$) and the global financial system is dependant on US consumption, the sudden restriction on the availability of oil would have drastic consequences for the global financial system.

    I imagine to enforce your ‘right’ to the return expected on your oil futures you would need something like an aircraft carrier battle group.

    The down hill side of peak oil is considerably steeper than the slow climb to the top. Consumption does not slow once the oil reserves start drying up, if anything the remaining oil reserves will be gobbled up quickly by the largest super powers to fuel their respective security operations.

    Still, good luck with the pension plan.

  8. mickysavage 8
    14 October 2010 at 7:19 am

    Sobering article.

    A good choice for this Government is whether it funds the Queen Street rail tunnel or the Puhoi to Wellsford motorway extension.

    One will double Auckland’s rail carrying capacity, the other will cause people to drive more. Both cost similar amounts.

    Guess which one Joyce and co are supportint?

    • Marty G 8.1
      14 October 2010 at 7:24 am

      I was listening to QT yesterday and Joyce’s response is ‘you can’t know the relative benefit/cost ratios of the holiday highway vs the CBD rail loop, or transmission gully vs light rail because there hasn’t been a costing done of the rail projects’

      There’s an information gap that leads to a pro-roading government building more roads. because proper costings are expensive they only get done for projects that are essentially definitely going to happen. We have official BCRs for the motorway projects but nothing official for the rail projects so they are regarded as less serious, while the motorways are ‘real’ projects that go through, no matter how bad the BCR.

      • Bored 8.1.1
        14 October 2010 at 7:47 am

        Great that we got a Mayoress in Wellington who has a reasonable idea of what is possible for the future. I can only hope Len succeeds too.

        • Colonial Viper 8.1.1.1
          14 October 2010 at 8:53 am

          Great that we got a Mayoress in Wellington who has a reasonable idea of what is possible for the future. I can only hope Len succeeds too.

          Don’t let the momentum die. A mass movement needs to be built and mass education on key issues needs to continue. Both Brown and Wade-Brown need to keep their supporter bases energised and informed.

          Its a total mistake to pin our hopes on two individuals we must ensure that more and more people apply pressure on their respective Councils to do the right thing.

      • mickysavage 8.1.2
        14 October 2010 at 8:32 am

        The interesting thing about the BCR calculation for the holiday highway is that it presumes a constant fuel price and the calculated benefits are primarily time savings on the trip for the estimated number of users.

        Peak oil will cause the number of users to dwindle thereby making the calculation unrealistic.

        The Queen Street tunnell on the other hand may be the only way of moving masses of people around in 30 or 40 years time. I would be surprised if there was not some rudimentary costings at this stage.

        • Marty G 8.1.2.1
          14 October 2010 at 8:50 am

          yeah, there are but Joyce will dismiss is unless it comes from NZTA or ARTA or the like, and they won’t invest in a full BCR without the government indicating they are keen on the project.

          Catch 22.

    • comedy 8.2
      14 October 2010 at 8:00 am

      Where is the Queen St tunnel supposed to run from/to ?

        • comedy 8.2.1.1
          14 October 2010 at 9:10 am

          Are people too lazy to walk a kilometre or get on their bike ?

          Seems a lotta effort for a kilometre or two of track – aren’t there better bits of rail to roll out before this ?

          • Bright Red 8.2.1.1.1
            14 October 2010 at 11:21 am

            It’s the connections it makes to existing rail that are important, and it will increase britomart’s effiency dramatically because it will no longer be the end of the line. that allows more trains on existing lines.

            • comedy 8.2.1.1.1.1
              14 October 2010 at 11:33 am

              Sorry I can’t see how it’s going to increase Britomart’s efficiency all that much

              http://www.arta.co.nz/assets/images/general/CBD%20loop%20proposed%20route%20march%202010.jpg

              Unless these stations are going to serve as interchanges to other tracks do you know if that’s the case ?

              • lolwut …
                14 October 2010 at 6:04 pm

                With the Onehunga branch, the Manukau branch opened and trains running every 10 minutes during peak times on the Eastern, Western and Southern lines Britomart will be at maximum capacity. No more trains could get in/out of the station. Once electrification is done (hopefully by 2013), and all trains are running as 6 carriage electric multiple units then then the rail network will be at its limits. It would not be possible to expand the rail network to go more places or run trains more often because there would not be the capacity at Britomart to handle them. Britomart was originally built far too small with only 5 platforms and all trains travel on only 2 tracks to access the station. (In comparison Wellington has 9 platforms, 4 tracks to access the station from the mainlines + tracks to railyards nearby so trains coming from storage yards to start don’t block trains entering/leaving the station on the mainline). The main benefit of the CBD tunnel would mean that Britomart would no longer be a dead end station, doubling the capacity which is neccessay before any other line is built, or trains are running more often.

  9. M 9
    14 October 2010 at 8:01 am

    Peak Oil =

    *Self-contained economy for NZ – bye-bye tourists
    *Massive reduction in private motor vehicle ownership with the concomitant rise in bicycle ownership
    *No retirement fund or retirement for anyone for that matter – you will work until you drop
    *If you have cancer, hypertension, diabetes or any other serious illness it’s Darwin Award time for you
    *There will be virtually no biofuel as the land will be in much demand for crops or livestock
    *Massively reduced consumption of meat as the cost of producing it will become too high
    *Medical and dentistry treatments will become very expensive and people will need to reduce the sugar in their diets a lot to preserve their teeth – after all, dentistry and antibiotics are modern man’s reason for longevity
    *a return to civility in most cases and getting to know and respect your neighbours because you never know when you might need them
    *Home gardening and bartering will ramp up massively
    * The growth of the grey economy will explode
    * People will live locally in the extreme, entertainments will be simple and people will stay home A LOT
    *All the home arts will surge in popularity – sewing, knitting, and carpentry
    *Insularity will increase as communities will be suspicious of strangers

    I read on a PO site a message at a homestead in America:

    If you’re not family, friend, known or expected leave now – there is a rifle trained on you.

    • Draco T Bastard 9.1
      14 October 2010 at 9:47 am

      *If you have cancer, hypertension, diabetes or any other serious illness it’s Darwin Award time for you

      This is something that people seem to steer away from. A lot of people that are kept alive today due to available energy are going to find themselves with shortened life spans. Children with serious defects are likely to be aborted simply because we won’t be able to do the reconstruction.

      *There will be virtually no biofuel as the land will be in much demand for crops or livestock

      Actually, there’ll be plenty of land available in NZ as a large amount of what is presently farmed won’t be after peak as it’s just too marginal. But this doesn’t mean that it’s going to used for bio-fuels as it’s still just too damn marginal. Livestock will be reduced – it costs far more to raise and distribute, energy wise, than crops.

      Medical and dentistry treatments will become very expensive and people will need to reduce the sugar in their diets a lot to preserve their teeth – after all, dentistry and antibiotics are modern man’s reason for longevity

      There’s going to be less sugar available. We don’t grow it here 🙂

      Generally speaking, I actually think people will be healthier after peak oil as all of the junk food will be gone.

      *Insularity will increase as communities will be suspicious of strangers

      Nope. It’s more likely to go the other way as peoples incomes equalise and the need for community increases trust will become necessary reducing insularity.

      • lprent 9.1.1
        14 October 2010 at 9:58 am

        There’s going to be less sugar available. We don’t grow it here

        Not cane sugar. However there are other sources of sugar, beets for instance.

        • comedy 9.1.1.1
          14 October 2010 at 10:36 am

          Isn’t Australia one of the largest producers of sugar – from memory that’s where Chelsea imports all of theirs from.

          Or is everyone in maximum luddite mode today ?

      • Robert Atack 9.1.2
        14 October 2010 at 9:59 am

        The govt doesn’t even know how much insulin we have in stock, with 100,000 diabetics (not all type 1) you would think they would have a plan B?
        And when the Prozac runs out, stand back we are going to see 1,000 of people go into massive withdrawal, this stuff takes years to get off, stock pile ya drugs if ya need them.
        I think The Road was the best depiction of our collective futures http://www.imdb.com/title/tt0898367/ and Blind Spot explains why http://www.youtube.com/watch?v=pByCxG2dIWY
        I am happy to supply a copy of BS
        place DVD BS in subject line
        robert@oilcrash.com

      • M 9.1.3
        14 October 2010 at 10:00 am

        DTB

        Sugar can be gleaned from sugar beets, but still it would be wise to decrease consumption.

        I still hold to the insularity thing at least in the initial stages of the step down as I think people in general even in these oil soaked times still identify to some degree with their ‘tribe’ be it petrol heads, bogans, high brows, greenies, social democrats, RWNJs etc. I think if you can have a band if people within a few streets of each other they will form quasi lookouts to prevent theft from gardens and provide protection for people and property in general because there will be people who go ape for a while when their world disintegrates. Getting through the bottleneck will be gut wrenching and only those mentally prepared or with a predisposition for mental toughness will get through with some success, ditto for physical fitness. Time for the fatties to drag out their exercise DVDs because the shock of walking or cycling long distances let alone hard out gardening will leave many of them pole axed.

        We may not entirely agree but well-worded debate 🙂

        • Robert Atack 9.1.3.1
          14 October 2010 at 10:08 am

          According to Nick the Dick, peak oil is a load of crap, and if it wasn’t ‘we’ could use sugar beets to beat the problem ) http://www.youtube.com/watch?v=KIMiKUxCY4U

        • Draco T Bastard 9.1.3.2
          14 October 2010 at 12:38 pm

          And beets are a better source than cane sugar. Still, don’t think that we’ll be able to maintain as high a supply as we do now. As I said, the marginal land, presently only possible to farm because of oil, will be dropped out of farming and the rest will be used for other foods (crops, meat) and possibly some for bio-fuels.

          I still hold to the insularity thing at least in the initial stages of the step down…

          Possibly in the beginning of the step down period but over time we should see more trust than we do now. We, quite simply, cannot survive without community around us and unless we want to be in perpetual war with the next tribe over then we’re going to have to work together.

    • Treetop 9.2
      15 October 2010 at 3:48 pm

      M sounds like in 2040 we will be living like in 1940.

  10. Marty G 10
    14 October 2010 at 8:48 am

    just listened to the RNZ piece on the report http://podcast.radionz.co.nz/mnr/mnr-20101014-0746-Parliamentary_report_predicts_oil_price_spike_by_2012-048.mp3 . Remarkable the groups that agree with the problems identified but have been keeping quiet.

    Ken Shirley from the Road Transport Forum agrees with it. He says that the next spike may be pushed out by the weakness of the current recovery (a point made in the report too) but agrees with the oil crunch/recession/recovery/crunch cycle prediction.

    Unfortunately, he solution is just to pray for a tech solution.

    The oil exploration association agrees with the report too. they say that high prices will encourage drilling for more costly reserves but that doesn’t solve the issue that production takes a long time to come online, so the next oil shock is already locked in, nor the issue that high prices will send to world into recession and oil price slumps, leading to cuts in oil investment.

    • M 10.1
      14 October 2010 at 9:12 am

      The crunch/recession tag team will follow the Elliot Wave theory: crash, recovery but never to the same giddy heights, a further step down, recovery but never to the same level – rinse, repeat, rinse, repeat…

    • Lanthanide 10.2
      14 October 2010 at 10:29 am

      There was a guy on National radio a few days ago that off-handedly said oil prices would be looking at $140-200US/barrel after 2015. He just threw it out there as if it was common knowledge. I can’t remember what topic they were talking about, but it wasn’t directly about oil.

  11. erentz 11
    14 October 2010 at 9:10 am

    “Gerry Brownlee chants ‘drill, baby, drill’”, it’s more like Steven Joyce saying, Pave, Baby, Pave! Guy is a nutter for cars.

    You might think when it comes to spending billions of dollars on transport you’d look to get your best return on your investment. You might think that a party of business like National would especially agree with this concept. But they don’t. RoNS are not about economic benefits, they’re not about best bang for buck, they’re purely political decisions. National has decided to build a road in a certain spot, the only question ever has been what shape and form it will take, which is left to NZTA. That fact has been admitted by Steven Joyce.

  12. Robert Atack 12
    14 October 2010 at 9:17 am

    “what analysts are calling a ‘corrugated plateau’ or ‘undulating plateau’ could take place:”

    We have been on this plateau since March 2005 http://www.youtube.com/watch?v=q4Czw3Y_ARE
    As the Hirsch report states ‘we’ need 10 – 25 years prep BEFORE peak if ‘we’ are going to carry on the happy motoring lifestyles, you know things like supermarkets, and the ‘trivia’ M mentioned.
    The scary thing is this report refers to the Hirsch report several times, it is the first reference.
    I’ve had it on my site for about 4 years http://oilcrash.com/articles/hirsch.htm
    This is the statement I delivered to the govt in about 2002, I’ve even had it translated into 7 other languages
    Sorry if this post is to long.
    This statement was written by C.J. Campbell .. next to Hubbard Colin is #1

    STATEMENT

    http://oilcrash.com/articles/statemnt.htm

    We, the members of the educational and scientific communities involved in the study of the worldwide peak of oil production, offer the following statement on the problem and its implications for our future:

    Oil is a finite resource.
    A growing majority of the world’s leading petroleum geologists now agree that more than 95 percent of the world’s recoverable oil has been discovered. We therefore know, to a reasonable degree of certainty, the total amount of oil that was endowed at the beginning of the oil age. As of this statement, mankind has consumed approximately half of the original endowment. We continue to consume this finite resource at a rate of about 75 million barrels per day – more than four times the rate at which we are finding new reserves. This is not a new situation: every year since 1981 we have found less oil than we use, and the difference between what is being discovered and what is being consumed is growing. The situation is now becoming critical and acute.

    Oil is our most important energy source.
    Oil is the fuel that enabled the growth of modern civilization, and all industrialized countries now rely on oil to an extraordinary extent. It provides 40 percent of our primary energy, and oil’s physical and chemical versatility and its energy density are such that no other known energy source can serve as a full or even adequate substitute. Oil is critical to our transportation infrastructure, and it is the essence of industrial agriculture. It is equally integral to the chemical & pharmaceutical industries, much of the clothing industry, and a vast array of others. In short, oil is the oxygen of the industrial world.

    Worldwide oil production is peaking.
    After more than fifty years of research and analysis on the subject, it is now clear that the rate at which world oil producers can extract oil has reached, or is extremely close to reaching, the maximum level possible. This is what is meant by ‘oil peak’. With great effort and expenditure, the current level of oil production can possibly be maintained for a few more years, but beyond that oil production must begin an irrevocable decline. This decline is a certainty, guaranteed by the natural laws that govern our physical world, and nothing in science, technology or engineering can prevent it. The consumption of a finite resource is simply a finite endeavor. Attempts to delay the onset of this decline only ensure a steeper, more uncontrollable decline.

    Oil peak is a powerful force of global destabilization.
    The destabilizing effects of oil peak reach deep into our economic systems, our environment, and our geopolitics. The inexorable tightening of supply has already destabilized oil markets, creating extreme price responses to the smallest of disturbances. Higher oil prices create economic hardship by increasing the cost of consumer goods while reducing spendable income. Efforts to shore up weakened economies through relaxed environmental regulations, increased drilling in sensitive wildlife areas, or shifts to coal and nuclear technologies, pose serious threats to our environment and our climate. In the past, countries of the Middle East have increased production to relieve tight markets, but with more than 50 oil-producing countries now in decline and the Middle East nearing its own peak, any relief at this point will be limited and temporary. The current military action in Iraq could result in the cancellation of contracts for Iraqi oilfield development now held by Russia, China, and France, posing serious economic threats to these countries. War damage to Iraq, its people and its oil fields – and lands beyond – has the potential to unleash incalculable pent-up forces. The geopolitical stakes have never been higher.

    There are no easy solutions.
    Any discussion of solutions must adhere to scientific principles. Serious proposals for successor technologies must be grounded first in thermodynamics and physics, rather than business and economics. Many proposed substitutes for oil have serious technical limitations. Natural gas is a finite resource, and is already in decline in North America. Hydrogen is a commonly cited panacea, but rather than being a primary energy source, hydrogen is only an energy carrier and an energy loser. Thus it provides no relief. Solar, wind, and nuclear are not transport fuels, and have other limitations that may hinder large-scale deployment. Technologies still in the laboratory, either proven or as yet unproven, will by definition not be ready for use in the timeframe and magnitude dictated by this problem. The key point is that the problem of oil peak is here, and all known alternatives are either unready, unsuitable, problematic, or limited in potential.

    We call on all governments of the world to recognize the gravity of the oil peak problem.
    Oil peak is an inevitability. The first warnings were made public nearly half a century ago, and were largely ignored. Increasingly since that time, the oil geology community has expressed concerns about global oil supplies. Since 1995, a group of veteran geologists has been issuing highly specific warnings based on exhaustive analysis. It is well past the time to hear their call.

    Oil peak is the most pivotal challenge ever to face human civilization. To address it, we must join together in acknowledgement of our collective vulnerability, and work together on changes to the structure of our culture and civilization never attempted before. We do not underestimate the magnitude of the task, nor the low likelihood of its being achieved without far reaching consequences. The consequences of a failure to act, however, are beyond comprehension.

    Please join us by adopting this statement and becoming part of the community working to develop responses at every level.

    http://www.copad.org/index.php?doc=oilpeak-war.doc&expandMessage=3

    And the anti spam word for this post .. ignored .. poignant ?

    • insider 12.1
      14 October 2010 at 12:19 pm

      So for years you’ve been definitively telling us it’s peak oil now it’s ‘plateau oil’ – the former is much catchier.

  13. ianmac 13
    14 October 2010 at 9:53 am

    Luckily (?) John Key is into the Tourism Industry. His vision will help bind our economy into this as an essential industry. More hotels/workers/rental cars/advertising.
    Oil shock drastically damaging the industry? “No way,” says John! “Scaremongers!”

    • Robert Atack 13.1
      14 October 2010 at 10:02 am

      Tourism, wasn’t that the green partys answer to stopping logging on the west coast?
      We asked the fools back then how the tourists were going to get there?
      Rest uneasy Rod couldn’t work it out.

  14. Lanthanide 14
    14 October 2010 at 10:34 am

    I don’t think this report, or indeed many government/official reports, even take the Export Land Model into account.

    Basically the oil market works like this: exporting countries (OPEC mainly, also Russia, Mexico and formerly the UK) consume oil internally and export the rest, and importing countries may produce their own internal sources but also import a lot. As the economies of the exporting countries grow, they start to consume more internally and therefore have less for export. So even without production decreasing over time, the amount available for export drops.

    Add production decline rates on top of ELM, and throw in any measure of protectionism and bi-lateral deals moving oil off the open market, and things can easily be a lot worse than what is predicted in the report.

  15. alloverrover 15
    14 October 2010 at 10:48 am

    Actually the report does take into account the concept of peak exports… which is crucial for NZ as a net importer…

    at p.7 “Demand is rising particularly fast, outstripping increases in production, in many oil exporting countries. As a result, former exporters like China, Indonesia, and the United Kingdom are now net importers of oil, and exports from other producer nations are falling. Between 2000 and 2009,Middle East oil production rose by 0.9 mb/d while its oil consumption rose by 2.3 mb/d.

    The supply of oil available to satisfy demand from countries that are dependent on oil imports is eing squeezed by domestic demand in oil producing nations. Between 2007 and 2009,oil
    exports fell 4.8 percent while world consumption fell only 1.8 percent.”

    • Lanthanide 15.1
      14 October 2010 at 10:53 am

      Right, so it does. I have to admit I only skimmed it last night, as much of this is very old news to me.

      • insider 15.1.1
        14 October 2010 at 12:17 pm

        Yep been hearing the same things since 1860.

        • Lanthanide 15.1.1.1
          14 October 2010 at 1:00 pm

          You’ve been hearing since 1860 that the oil supply was likely to peak between 2005-2015? Very impressive.

        • Bright Red 15.1.1.2
          15 October 2010 at 12:33 pm

          wow. amazing how weak the Right has been on this.

          Looks like they’ve basically conceded the argument.

          Now, hows about we do something before it’s too late?

  16. Bored 16
    14 October 2010 at 12:07 pm

    Just occured to me that nothing shows more clearly the short term nature of market signals more clearly than the oil crisis. Future planning is nowhere in evidence from markets, only the faint faith that a combo of market signals and technical innovation will see us right.

    So we view the high priests (economists and editors) muse onward about how this will all be sorted by the market, no need for government intervention or central planning, anathaema still. And it does not show in the polls so the political class ignore as well.

    To all of them we should repeat Cromwells words in dismissing the Long Parliament, “Begone! You have sat too long”.

  17. Brokenback 17
    14 October 2010 at 6:00 pm

    As one other commenter posted-Great Debate .

    Libertyscott:
    “The most flexible and economically efficient piece of land transport infrastructure for most freight and passenger movements is the road, simply because it is ubiquitous and not a closed network. Railways only compete for long distance bulk and high volume freight, or seriously high volumes of people over short to medium distances. New Zealand doesn’t have much of the former and precious little demand for the latter.”
    —–sorry , sunset economics.
    The shear cost of trucking, as an example, potatoes from manawatu to the Auckland factory and then distributing the resulting crisps in 600hp B-trains will put an end to what can only be described as a massive economic distortion caused by the public sector subsidising the road transport industry.
    I agree wholeheartedly with Draco, we need to promote this debate vigorously in the MSM & community at large.
    Muppet NACT is heading down the gurgler and despite the considerable harm they are doing at all levels of our society it will soon be only the congenitally greedy & terminally stupid who support them .
    The bulk of our society is starved of information by the MSM , but is in a far more receptive state than after the dogwhistling blitz leading up to the last election.

    $2/litre when its $NZD =0.75 $USD is arithmetic 1.0

    • Carol 17.1
      14 October 2010 at 6:47 pm

      Good luck with the MSM – well I guess it will take time, but it will get the message eventually. TV3 just did an item on Celia Wade-Brown. It pretty much characterised her idea for light rail in Wellington as impractical, too costly and something that Wellington people didn’t want. This was reinforced by an uncritical statement by Joyce about the importance of the road sytem he’s prioritising, as being more affordable and necessary.

      But, in the end, people will realise that public transport needs to be provided and used more. This is shown by the the amount of people in Auckland communting by train has increased in recent years, because of the growing gridlock & difficulties in accessing parking.

    • KJT 17.2
      15 October 2010 at 12:52 pm

      The decline in rail has been a self fulfilling prophesy.
      Industry will not concentrate on rail spurs unless they have a reasonable certainty that the service will continue.
      Roads so far do not have a history of being torn up after construction.

  18. George.com 18
    14 October 2010 at 11:12 pm

    We have a government that does not seem prepared to look seriously at the matter. A government which whilst perhaps aware of the issue, chooses to look the other way. A group in Hamilton is looking to get a daily passenger rail service re-established between Hamilton and Auckland. LOcal councils are starting to get on board, local government MPs talk about 2020 and by then people will be driving their ‘clean green’ electric cars to Pukekohe to catch a train from there. They might be correct, but that is only a guess on their part.

    1. We have an oil problem
    2. hope that someone sorts it out
    3. everything will be ok

    I’d rather invest in some future proofing by getting the rail service up and running now. As we are continuing to tool up in Hamilton I note Len brown talking about a large extension of Auckland rail transport & Wade-Brown light rail in Wellington. Each city, each group, is facing opposition from the government. This will become an election issue next year. In Hamilton the local Labour MPs support the rail issue as do Green MPs. It will an election issue.

    • M 18.1
      15 October 2010 at 12:48 am

      George this is heartening news from your neck of the woods and I agree that this could be a real sticking point for next year’s election.

      Transtion towns and peakists can do much to really get this on the table with letter writing campaigns to MPs and local papers. I have written to our local rag and to Gerry Brownlee re future energy issues and of course received the usual platitudinous reply but think it’s a question of doggedness. The bumpy plateau will also aid the airing of the problem as there is a nine per cent year on year decline in oil production.

      It’s the old maxim that an ounce of prevention is worth a pound of cure.

      • George.com 18.1.1
        15 October 2010 at 12:03 pm

        We did postcards to Joyce and local MPs. Followed by an 11,500 signature petition from out of the Waikato presented to Parliament and local councils. Backed up by 500 postcards to local regional council and 500 each for local MPs. Followed by submissions to 3 local authorities at their annual plan submissions. Followed by a fairly intensive 2 months of local body election activity which included public meetings all the way up the line between Hamilton and Auckland, telephoning each local body candidate to gauge their support for the issue, leafletting each meet the candidates meeting and advertising in the newspapers and on radio. Next we will be targeting our government MPs next year. Its ‘kin hard graft. When all politicians want to do is smile and wave you sometimes have to work like buggery to get something worthwhile, the smilers and wavers don’t simply fall down and repent. We are seeing good results activity by activity. Wouldn’t it be great however if our smilers and wavers actually put 2 and 2 together and saw the value of a rail service.

    • SHG 18.2
      15 October 2010 at 3:58 pm

      So what exactly will these trains be using as fuel?

      • Bright Red 18.2.1
        15 October 2010 at 4:09 pm

        electricity from hydro and wind

        even diesel trains are about 3 times more efficient than road transport

        • insider 18.2.1.1
          15 October 2010 at 4:22 pm

          Really? How efficient are they at shifting a container load of product from say, central Lower Hutt to Wellington airport?

      • George.com 18.2.2
        15 October 2010 at 4:24 pm

        Currently diesel. How many litres of diesel do you think it takes per 100 people on a train than 100 people in a car?

        Also, electricity can be used to power rail. This is not an emerging technology, like electric cars, but a proven technology that we have running across long sections of our railway.

  19. Treetop 19
    15 October 2010 at 12:58 pm

    Looks like the next major recession will be caused due to the price and availability of oil. People will look at the old cycle sitting in the shed!

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