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:
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:
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’?