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Fuel Prices Set To Treble By 2017 In New Oil Shock - Lobby

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Fuseworks Media
Fuseworks Media
Fuel Prices Set To Treble By 2017 In New Oil Shock - Lobby

The cycles of oil supply crunches leading to price spikes and recessions, followed by recoveries leading to further shortages outlined this week by a parliamentary researcher are inevitable, says a national sustainability think tank.

Auckland academic, Dr Wayne Cartwright, said Sustainable Aotearoa New Zealand (SANZ) agreed the risks outlined in The Next Oil Shock, a research paper by Parliamentary Library economics and industry research analyst Clint Smith "is sound and provides very valuable future insight".

But he warned that though known oil reserves will last another 25 to 32 years, the oil "supply crunch" starting as early as 2012 was not only likely as low-cost reserves were exhausted, but "inevitable"

"And ... the outcomes are likely to be more extreme than suggested in the paper," said Dr Cartwright.

"It is likely that the cost of oil-based fuels will increase between 300 percent and 500 percent over the next seven years," he said.

Such increases could have huge impacts such as transport using oil-based fuels would be much less attractive, and the case for investment in mass transit would strengthen. As costs of international travel and shipping rise sharply, the profitability and viability of whole industries and sectors will shift substantially, with some struggling to survive.

Shifts in oil prices also increase the costs of products such as fertilisers, most plastics, the bitumen for roading, and many other chemicals used by industry.

Dr Cartwight said the effects of rising oil prices would be intensified by the carbon charges of the emissions trading scheme, and globally, the overall effect will be to reduce economic activity and limit growth.

"Mainstream economic and political expectation of continual economic growth is seriously flawed and must be reviewed," he told NZPA.

The present economic systems did not have sufficient resilience to cope with continual major shocks.

Dr Cartwight said the kind of research outlined by Mr Smith needed to be extended to give the Government and industries a stronger perspective.

"Implications for industry sectors and infrastructural investment must be explored, especially to inform Government policy about growth prospects and its investment in roading, rail, energy, and science," he said.

Mr Smith said world oil production capacity will not grow or fall for the next five years, while demand will continue to rise, and New Zealand would remain heavily dependent on oil imports for the foreseeable future.

Conservation organisation WWF has criticised the Government's draft energy strategy, published in July, as a "do nothing" approach.

A WWF climate change campaigner, Peter Hardstaff, has said Government needs to take heed of the Parliamentary research in its energy strategy.

"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," he said.

NZPA 

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