Gearing-up for the end of cheap oil - Q&As
Go to 1.Why now?
Crude oil prices (measured in $US) have risen by around 100% since December 2003, around 50% since September 2004, and around 20% since June 2005. People deserve leadership and real choices.
2.What will it deliver?
Action now. In 10 years time we will have more efficient vehicles, more efficient alternatives to planes, cars and trucks, more renewable electricity to take over some uses of oil, some capacity to produce biofuels from wastes, more compact cities with shorter travel distances, production chains with less use of transport, and trade relationships that require less transport fuel.
3.How will the Fuel Saver Reward "feebate" system work?
Obviously this will benefit small car buyers, but even within size classes there are significant variations. For example : comparing medium size petrol-powered 5 seaters (registration fee of $200.10 and an average fuel consumption of around 10 litres per 100km) - a new Toyota Prius with a fuel consumption of under 5l / 100km may pay nothing or even get a cheque, while a Jeep Grand Cherokee Laredo which uses nearly 15l / 100km might pay a couple of hundred dollars extra each year.
Over 10 years these measures will see many more New Zealanders opting for fuel efficient cars, and because the feebate only applies to vehicles registered after the policy comes into force, it won't punish those who bought less fuel efficient cars when fuel was cheap.
4.How does a requirement to include renewables in fuel work?
In Australia, electricity companies have an obligation to ensure a certain proportion of the electricity they sell comes from renewables. The Greens proposal would work in exactly the same way for petrol and diesel — oil companies would have to have a certain percentage (probably 3 to 5% to begin with but that is a detail for further work) of sales from biofuels. How is over to them — but probably they would add an ethanol blend to the range of petrol sold and either blend biodiesel or sell it separately. Ethanol and biodiesel are well proven internationally and can be made locally from low value by-products — ethanol from dairy whey and biodiesel from tallow.
5.What is the Antipodes Cup all about?
New Zealand's trade faces twin threats — both from rising fuel prices and from rising awareness of the energy costs of shipping food long distances (so called "food miles"). The Greens propose a competition for New Zealand designed and built high-efficiency ships suitable for the Tasman and South Pacific trade routes. High efficiency options include the new high tech wind and solar assisted ships and ultra high-efficiency diesel. Developing these ideas will help us stay in touch with the world and the intellectual property developed could be of value to New Zealand, in much the same way as jet-boat technology was.
6.What about the Government's plans for carless days and rationing?
The Emergency Response Plan has nothing to do with preparing for the end of cheap oil. Being part of the International Energy Agency (IEA) requires the Government to have a plan for managing short-term disruptions to supply. We have had one since 1974 and the IEA recently required Governments to update their plans. Recent publicity has been about this — and its focus is on reserve of petrol plus a plan to share those reserves fairly.
The Green Party's proposal is about helping us come to terms with the global trend towards permanently higher petrol prices. It's about acting now, working with people and business, to cushion us against future shocks.
7.Are high petrol prices more than a short-term problem?
Some commentators say this is a short-term problem — it is worth recalling that people have consistently under-predicted oil price rises.
In June 2004 Treasury expected oil prices to have returned to $19/barrel. They revised this to $30 in December 2004, and then $45, and now say it is hard to know. In early February 2005 the US Department of Energy expected prices to stay "around $45 per barrel for most of this year" ". They are now around $66.
Demand is rising
The simple fact is we are getting close to the point where demand for petrol will exceed the supply from cheap accessible wells. China has gone from being an oil producer in 1995 to the world's second largest importer in 2003. Demand from India is growing at 15% per annum.
Supply is limited
Oil production, meanwhile, has its own physical characteristics. After a certain point, the rate at which oil can be extracted from a field drops away. This maximum production point is usually at the point when about half the oil has been extracted. We see exactly this pattern with our own Maui gas field.
There is considerable international debate about the exact time at which global reserves of cheap accessible oil will reach maximum production and begin to decline. (This is sometimes referred to as "peak oil".) It has already occurred in many fields and many countries. When we reach that point, oil prices could be expected to rise very rapidly.
What experts say
The International Energy Agency, which has always been the most optimistic about oil supplies, believes peak will occur between 2013 and 2037.
A number of very experienced petroleum geologists and energy investment bankers who have studied the evidence believe this point will be reached in less than 5 years, or that we may be there already
Why uncertainty exists
The uncertainty is because accurate information is hard to get.
Shell was prosecuted and heavily fined in March 2004 for grossly overstating its reserves in order to keep its share price up. They have since revised their reserves down by 20% and then a further 10%
New oilfield discoveries have declined since the 1960s. The world uses four barrels of oil each year for each new one it finds. Oil drilling is occurring in more and more difficult and expensive places — drilling depths are around 2 kilometres and far more energy has to be used to extract a barrel than in the past.
No amount of exploration will find oil that our planet does not contain.
These are all indications that rising oil prices may signal more than short-term disruptions.
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