Oil policy 'leading us down a dead-end street'

Petrol prices are spiking at the pump again. They last spiked in 2008, allegedly due to surging Asian demand. This time around highs have been mitigated by a strong Kiwi dollar.

Simon Hartley (ODT, 5.4.11) reports prices are expected to rise yet further. Demand for oil is linked to expectations of ongoing economic growth in China, India, the Middle East and Latin America. Supply-side issues including revolution in oil-producing Libya have an effect, too.

Cheap oil is a thing of the past.

This shouldn't surprise us. Simple economics: the stuff that was most cost-effective to get out of the ground and into a tank was used first. There is plenty of fossil-fuel left on our planet, but the environmental and economic equations mean we'd be daft to plan a future on it.

We all have some choices in how we respond to the end of cheap oil. We can buy more fuel-efficient cars. Public transport use is on the rise, and people are thinking twice about taking a job further from home. Some of us are choosing to ride bicycles, others to walk. But we're also limited in the choices we can make. Individuals can only adapt if they have the chance to.

A person can't use a bus service that doesn't exist, can't buy a plug-in hybrid car that isn't yet on the market, and can't choose to use biopetrol or biodiesel if those products are not for sale.

Enter governments. Governments determine the public transport infrastructure of the city or the nation. Governments decide on the regulatory environment, the economic development needs of new biofuel industries, the role of electricity in the future, and on it goes.

Instead of mapping out our future infrastructure, this Government risks leading us down a dead-end street. If infrastructure is built on a wrong-headed assumption of endless cheap oil, we taxpayers carry the costs.

But governments have to be careful, too. If governments strongly back a particular future, and get it wrong, the result is expensive. It happens all the time, including in our own history with "Think Big".

So caution is merited.

Yet our Government is doing next to nothing. There are no strategies, no targets, no goals and no discussion. This is not acceptable. When Pete Hodgson was minister of transport he ring-fenced a small amount of money to build urban cycle ways.

The ring-fence has since been removed and the money has oozed back into the general roading funds. Similarly, he legislated for a "biofuels sales obligation".

The law said that oil companies had to make a small part of their product from biofuels. The reason was simple. Biofuels can already be made in useful, but not huge, quantities at competitive prices in New Zealand. But no-one will invest in such production unless the oil companies are compelled to include biofuels in their products.

The law was quickly repealed by the new Government in 2009 and a multimillion-dollar subsidy was offered instead. No biofuels investor has taken up that subsidy because they know that oil companies prefer the simpler option of selling mineral products only.

The first large biodiesel plant in New Zealand was due to open about now, probably in Tauranga, using recovered cooking oil, tallow and so on. It won't. That investor fled two years ago.

The reasons for breaking dependency on imported oil are legion. Not least among them: environmental and balance of trade implications.

When I spent time in Wellington working with then energy minister David Parker, he signed off an energy strategy that anticipated the growing demand for electric cars, and the development of our plentiful renewable energy resources.

By contrast this Government has ditched an alternative energy future, and is sticking its head in the (tar-) sand; it seems set on waiting for a market that will deliver results too late. New Zealand risks become a dumping ground for out of date technologies.

Oil will be replaced by a mixture of fuels. Electricity will provide an increasing amount of automotive power for cars and rail, but not for heavy vehicles, not for sea or air travel. We will need to produce biofuels, and do so in a way that does not compete with food production.

Our Government needs to steer a careful path through the transition from cheap oil to a sustainable future. Instead, it seems to be asleep at the wheel.

Dr David Clark is the Labour candidate for Dunedin North.

 

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