Over the years the Automobile Association (AA) has often been a fairly strong advocate of spending more and more money on roads – while being blind to bigger changes in the world like rising oil prices, and blind to local issues like the impact of new and widened motorways on their surrounding communities. But, it would seem, they’re starting to wake up to reality when it comes to oil prices. An interesting article in today’s Herald:
Motorists face more increases in the price of petrol, which is likely to reach a new high, the Automobile Association is warning.
Motorists are being urged to redouble fuel conservation efforts as no early end seems in sight to the price rises.
Even after two increases last week – in which petrol rose 8c a litre and diesel by between 6c and 10c – the AA says the oil companies have still not passed on the full brunt of a global cost spiral.
“So we shouldn’t be surprised if there’s pressure to raise prices in the coming week,” senior AA analyst Mark Stockdale said last night.
When petrol prices start with a “2”, everyone seems to start taking notice of them. There’s also the issue of what happens if we have an extreme spike in prices that’s caused by further political instability in the Middle East:
British International Development Minister Alan Duncan, a former oil trader, is warning that a barrel of crude oil could almost double to US$200 – well above a record high of US$147 – if unrest in Libya and elsewhere in the Arab world gets worse.
“All I’m predicting is danger,” he told the Times newspaper.
“If crude oil doubles you’re going to have a very serious spike – trying living without it for a week.”
What kind of response plan does NZ have to a short sharp rise in oil prices I wonder? I guess the question in many people’s minds is whether the current price increase is a short-term issue – related to the political instability in Libya – or whether there are longer term trends behind the high prices. AA Spokesman Mark Stockdale has a refreshingly enlightened viewpoint on the matter:
“We have to get used to the idea that as global demand increases and supply doesn’t, we are going to be facing these kinds of price fluctuations, and whenever any little crisis comes along it’s going to lead to price spikes,” he said.
“The only way we can manage that is by reducing our consumption.”
Although Libya is not among the largest oil producers, Mr Stockdale said the relatively small cut in production amid political upheaval in that country showed an international buffer of supply over demand was dwindling.
“This is a global issue – worldwide we need to look at supplementing consumption with renewable fuels or alternative transport.”
Alternative transport – like public transport, walking and cycling I guess. Heck, even our car lobby is now promoting a more balanced transport policy – will the government listen?
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“Mr Joyce says the rebuild (Christchurch’s road network) won’t come at the cost of other region’s projects – like the Puhoi to Wellsford highway.”
Phew, that’s a relief. The case for highway projects like the Holiday Highway is so strong that nothing can stand in their way. Not massive government borrowing, not catastrophic natural disasters, not slim-to-no business case, not sensible cheaper alternatives, and certainly not pesky oil prices.
I’m not sure our particular group of governmental ostriches are prepared to take their collective heads out of the sand just yet.
Can someone confirm that Steven Joyce did actually say “the rebuild (Christchurch’s road network) won’t come at the cost of other region’s projects – like the Puhoi to Wellsford highway.” I would love to see it in print and add it to the “joycespeak” dossier I am compiling. Maybe even worth GH asking a question in Parliament?
Here’s where I got the quote from. Not actually a quote direct from Joyce, just from a reporters interpretation of his comments – so maybe not appropriate for the dossier.
http://www.3news.co.nz/Quake-road-bill-wont-cause-dramatic-issues—Joyce/tabid/423/articleID/200822/Default.aspx
I think our bus services need to be more flexible in their response to changing demand. Anecdotal evidence suggests many peak serivces are especially packed at the moment. However what is anyone doing to increase frequency, and run another couple of peak time trips, esp on Dom Road and NEX? I know it may take a few months to get buses, drivers etc but still the system seems very slow to respond to demand.
Maybe time to get hold of the ex-London bendy buses to run the NEX?
Time to take a look at how efficiently we’re using our current resources too. Do we really need so many buses operating routes that effectively duplicate the rail system? Could we switch a few of those 135 or 224 buses onto Dominion Road or the Northern Busway?
We really need new articulated buses to operate the NEX. Who was the idiot who chose the current stock?
Articulated buses are disproportionately more expensive than standard buses. Had another agonising 20 minute delay on the 005 tonight. I reckon if AT bothered doing stats that March is going to be the highest month ever for PT patronage.
have OIA/LGOIMA in with AT regarding patronage, and due date is today. So will be harassing them in the next day or 2 if I don’t hear anything.
Interestingly back in 2008 the AA did a survey of 1,057 members. 15% took public transport and 50% of AA members reduced weekday and weekend trips (50% each).
http://www.aa.co.nz/motoring/news/Pages/Fuel-prices-change-driving-habits.aspx
Someone should tell SJ that increasing fuel prices lead to less demand for roads and more demand for public transport.
I think that message will come through pretty loud and clear if petrol gets much more expensive. $2.50 a litre will be a real breaking point I reckon.
Petrol prices in the UK are around £1.40/litre at the moment and it hasn’t broken them. In inflation adjusted terms oil is only two thirds the price it was in 1979 and it didn’t break us either, even though average wages were much less than they are now.
The market is working as intended with changes in price causing modification of behaviour. But the market also shows us that spikes in price don’t last long and almost always precede a dramatic drop. Malthusians have been predicting serious commodity shortages since 1798. Every prediction they have made in 213 years has been wrong. Chances are they’re wrong now too. I wouldn’t gamble tens of billions of bucks on them being right for the first time.
Obi, one thing to consider is that per capita oil consumption in New Zealand is roughly double what it was is 1979. It may only be two-thirds the price of the carless days era, but we need to buy twice as much of it per person. So New Zealand is roughly twice as exposed to price shocks as it was in ’79. So people will pay for it with their disposable income or they will pay for it in a change in behaviour, either way prices of $2.50 a litre plus aren’t going to be fun.
Pop Quiz Time!
1. Which country has the largest new-car market?
2. After the US, which country consumes the most petroleum?
3. How much has worldwide crude oil + condensate production per day increased since 2005?
(awww, shoi’ll be roight, mate)
Obi, peak oil is not an abstact theory by dystopian dreamers but is empirically based, have a look at the the facts and arguments. You could start here: http://www.theoildrum.com/. The stuff increasingly ain’t there, especially the easy to retrieve stuff.
And yes it is likely that the oil price will be voiltile; it will probably fall now and then on its way up. Although the only plausible reason it could fall much or for long is deep world wide recession causing demand destruction. So be careful what you wish for. I wouldn’t be whistling past the graveyard if I were you, Malthus is not the boggy man here, it is the idiots who imagine it will be Business As Usual even in the short term, and are blithley failing to reduce our addiction to the stuff. In NZ those [in effect borrowed] Billions being spent on highways is criminally negligent policy by the very people who are paid to care for our future well being.
And transport is the big area that we change most.
The tax on fuel here, like Australia and especially the US is too low. We need to disincentivise its use, and cross subsidise the alternatives aggressively. Especially here where we need to make the capital investments in passenger and frieght rail and where we still have a rich resource in renewably generated electricity [although that network needs investment too]. The UK is in a different and nastier situation having pissed its own oil resource up the wall- all sold at what is now a clearly laughable price, and having a crumbling electricity generation sector, especially those old reactors….. don’t lose your NZ passport is my advice, those winters are getting colder.
Patrick… The problem with Malthusian theories is that they assume constant growth but no change in circumstances. The original theory was that population would continue to grow exponentially and the world would run out of food. In fact population growth stabilises as societies become richer and scientists keep inventing new ways to increase food production. So the world population is now many times what Malthus could have imagined but the only people starving are those that are being starved by their own governments for political reasons. Similarly Paul Erlich has spent his career warning about overpopulation and commodity shortages including oil shortages, has been wrong in all his predictions, but amazingly still has some credibility in the peak oil and climate change communities.
The peak oil theory was invented in 1919 when David White of the USGS predicted a peak in 1928. In the 1970s the Club of Rome predicted that with no growth in oil use it would all be used up in 30 years, and with constant growth it would all be gone in 20 years. But I filled up at the weekend and while it was a little more expensive than last time it was still well less than an hour of my salary. That isn’t scarce or expensive. If proponents of peak oil want to be taken seriously then they need to explain why they’re right this time after being wrong every other time, and then explain why they think oil will be the first commodity in human history to run out or to become unaffordable after inexpensive for a long period.
Alternately, peak oil fans don’t have to explain anything. They could put their savings together, buy as much oil as they can afford, and make a killing selling it later. There are predictions bouncing around the NZ blogs of petrol prices ranging from $2.50-$5.00/litre this year, so they wouldn’t have to wait long to enjoy their profits. That way they’d be able to quit their jobs and live a life of luxury and leisure and they could mock those of us that didn’t listen to them.
Oil is a finite, non renewable resource. As long as we keep consuming it we will reach peak production and sooner or later it will run out.It is simply illogical to deny that peak oil will occur at some point, it has to because there will never be any more that what is in the ground at the moment.
The question is whether it happened two years ago, will happen soon, or if we still have a couple of hundred years left.
Nick… All resources are non renewable. But what happens is that technological advances come along that make that limitation an irrelevance. Bronze is non renewable but we never had a peak bronze issue because the iron age came along. Now bronze is cheap, we still have lots of it, and no one worries about bronze scarcity or production levels.
At some stage someone will invent a cheap alternative to petrol. Some electric car technology perhaps? Or hydrogen? Or widespread telecommuting using the internet? Or all-pervasive commuter rail? Or something that no one has thought of yet. At that point the demand for oil will almost completely drop off, the price of oil will reduce significantly, there will still be billions of barrels of oil in the ground, and it’ll sit there forever because it’ll be essentially worthless. This is what has happened with every other commodity in human history. Oil won’t be the first to break with tens of thousands of years of world economic history.
Like I said, the problem with Malthusian theories is that they assume no change in technology or behaviour affecting demand. That’s your “as long as we keep consuming it” qualifier. We won’t keep consuming it. At some point we will stop, and that point will be well before it is scarce or prohibitively expensive.
Obi, you are putting the cart before the horse. We won’t have widescale affordable replacement technologies and fuels until oil fuel has become prohibitively expensive. We will continue consuming it as the global economy is based on a foundation of oil consumption. Was the bronze age economy dependent on the consumption of bronze? Of course not. Is the modern economy dependent on the consumption of oil, of course it is! Perhaps a better analogy is the wood based economy of Rapa Nui, they hit peak wood on their formerly forested island, couldn’t come up with a replacement for timber fuels fast enough and their economy collapsed and the population died off to about 10% of what it was previously.
The full scale development and deployment of such technologies will not come while the economy can keep pulling oil out of the ground. Why would it? Would people pay triple for their energy when they could still pay one third? It is only once the price of oil is well above that of the alternatives that investment into shifting off oil will occur. It is a huge investment to realign the global economy and it’s not going to happen until it absolutely has to.
Peak oil is the point where consumption grossly outstrips supply capacity and prices go mental. This will be the trigger for the shift to non-oil technologies, it won’t happen as long as there are relatively cheap prices of oil. We will see these new technologies for sure, but only after the final oil crisis.
There was also news today that the road toll in Jan & Feb was considerably lower than the same months last year 47 vs 73. With petrol increasing in price people are cutting back on unnecessary driving (also the last time petrol was above $2 we also saw a big reduction in the road toll)
The ONLY way huh?
Funnily enough, today’s BrisbaneTimes online newspaper did one of those petrol price PAIN stories- you know the whole “aren’t you outraged at Petrol prices”, the kind of story that brings out all the people who think the government should pay to fill up their fuel tank and so on. So I wrote:
ACCC in Australia is like the prices & trade rorts watchdog.
Petrol prices in Brisbane are around $Au1.40/litre at the moment… so about $NZ1.80 with Australians earning significantly more than Kiwis. Why the difference? Tax? Are your fuel taxes supporting road construction and maintenance, public transport, and general government spending like ours are?
AUD $1.40 is $1.92 at today’s rates, not $1.80.
The main difference is higher GST in New Zealand (15% vs. 10%) plus an ACC ‘car crash’ levy of about ten cents a litre in NZ. Conversely Australians pay their Transport Accident Commission levies when they register their vehicle instead of at the pump. To put that into perspective a regular car rego in Victoria is AUD$624.10 a year ($379 of that is TAC) while the same in New Zealand is only AUD$313.
So yes it is mostly just tax swings and roundabouts. Arguably it is more fair to pay for ACC/TAC with fuel because it is a close analogue to the distance travelled and therefore the level of exposure to crash risk. The Australian one-off fee charges the same to people regardless of how much they drive. For example my brother and I share a car that averages about 120km a month, and we pay the same as some long distance commuter who might do that every day.
I might be wrong, but doesn’t Queensland have a state government petrol subsidy, especially in rural areas?
No, that has been abolished as I understand it. But not without much kicking and screaming.
I remember seeing an interview with an AA representative about the CBD tunnel and their opinion was that it needed to four tracks instead of two. Don’t know how you would fit them in there but it’s a nice thought.
That’s a little defeatist, with the right design the proposed CBD tunnel could shift a train a minute across two tracks. That will do nicely for a good while yet.
For four tracks you’d have to either double stack them like in Melbourne (two up, two below), or have multiple tunnels on different routes like Sydney. I think the only realistic option is to build the first tunnel then look at a second one when needed, perhaps as part of a harbour crossing. That’s basically what Sydney did.
Nothing an extra billion or two wouldn’t fix eh!
And petrol has just gone up another 5c to $2.16 so is now only 3c off its peak in 2008. Surely AT should put out a press release/advertising saying something of the effect of “Give PT a go”. Unfortunately we know they won’t because they are to scared to the system can’t handle it.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10710847
“will the government listen”
Of course not – they are being paid by the RTF and big business NOT to listen.
“Mr Joyce says the rebuild (Christchurch’s road network) won’t come at the cost of other region’s projects – like the Puhoi to Wellsford highway.” I assume he is only reffering to roading projects here.
Joyce will not change tack here and the price of petrol will not chnage his thinking in the slightest. He’s on record as saying the price of petrol does not effect how often people drive (not sure if that’s true, knowing Joyce it’s probably a “fact” that’s heavily skewed) He’s also extremly arrogant, his attitude seems to be that he didn’t get where he is today by listening to other people and that those who question him should just be quiet and let him get on with it because he knows better. He dosn’t even put any effort into his arguments when challenged.
It will be business as usual.
Obi if you would just take pause from your impressive grasp of Georgian population theory and look at the facts of hydrocarbon use now you will see that you can not brush off the problem of our [western civilisation’s] dependence on oil so easily. In fact two things are happening at once; we have used and are using the stuff at such a rate that the cheap and easy oil has all but gone AND now many other parts of the world are joining the party and burning it up at ever greater rates as well. Add to that the fact that we have never found anything quite as useful as oil in terms of the return of energy on the energy invested as oil, especially Light Sweet Crude. It just isn’t that easy to replace it with other stuff. Given that the first likely outcome of the squeeze in oil supply is not the disappearance of oil but the rise in the market value of the stuff and that this was always likely to provoke and finacial crisis as we find we are unable to just not buy it so have to not buy other things in order to keep going. DUH, because it underpins our entire world peak oil is really peak everything, especially it is peak money.
I agree with you that we will have to find replacements for much of the work currently being done by oil, but I share none of your blithe confidence that that will be easy and simple, and I especially don’t see how scanning a wikipedia page on Malthus heplps you come to that view.
Even a brief scan of the supply and demand charts for oil proves that we ought to be working on this now as matter of urgency with existing technologies, of which, in NZ, electricity is clearly the best. And once you see that it is also clear that the priority given to motorway building and the managed decline of our existing railway network is at best insane if not completely criminal.