The Maori people of New Zealand have a very apt proverb, “Mata a muri kei te aro ke!”Loosely translated it means, “ To find the way forward we must first look back into the past.”So it was from this viewpoint that this article was compiled.

NZ Herald’s editorial of 20th May “We’re Stuck with Kiwi Rail,like it or Not” twice makes the statement, “Rail has not paid its way for generations,if ever.”  Historically, there is evidence this is incorrect.  Transport archives reveal that from 1965 to 1970 NZ Govt. Railways actually ran profits totaling $16 million, had a surplus again in the early 1980s then made a record profit of $23.9 million in 1984. So,whilst a state run operation in a regulated environment where road & rail were co-ordinated, rail was profitable.  However, despite warnings to the contrary, the Bolger Government continued to implement the Transport (1983 ) Amendment Act, further progressing the Douglas-era “freemarket” deregulation model. Thus evolved the present transport shambles we have today. Eventually by 1990 in the cut-throat, free-for- all transport market which evolved, rail was $1.3 million in debt. (The Bolger Govt trunk electrification cost $300m of this.) So in October 1990 Govt. wrote off the debt from the Railways Corporation & injected new capital to form a separate entity NZ Rail Ltd. This company made a profit of $36.2m in 1992 and $18.0m in 1993.

In 1993 NZ Rail Ltd was sold by the Bolger Govt (far too cheaply) to a consortium, of Wisconsin Central Railroad/Berkshire/Fay Richwhite.  Privatised and renamed Tranz Rail in 1995. It listed on NZ sharemarket in1996. The new owners began massive “rationalisation”, which meant sacking thousands of staff, closing stations & depots, cutting passenger services & some branch lines. The “human presence” of railways vanished as the workforce necessary to market, manage, load & operate the system were laid off. Soon less staff meant less business & less profit. This neglect of customer’s needs was quickly catered for by hungry truckers who soon captured the freight market from smaller business in the provinces. Over the 10 years of Tranz Rail privatization, services were further cut, freight volumes dropped as the business suffered & only recorded profits(publicly available) were in 1999 of $70.2m & again in 2000 of $47.0m.  Soon the company started selling land, buildings, redundant machinery & other assets in order to remain solvent. Significant asset sales were: in 2001 the sale of 50%of TranzScenic; and in 2002TranzRail sold the Auckland suburban Rail network to Govt.for $81.0m. During this period of “asset-stripping”, many of rail’s former core businesses such as timber, cement, fertlizer& lime, motor vehicles & machinery, & even some dairy & meatworks companies (traditionally rail users) switched to road mode.

The most significant factors which accelerated the decline of NZ railways over this decade of neglect, were on analysis; 

1. Deregulation of the road mode
2. Privatization of Rail
3. Inconsistent Rail Service.

Plus there was huge neglect of rail infrastructure with much of it becoming unsafe,so the network was sold back to the crown.

In 2003, Australian company Toll Freight bought exclusive operator rights over the track network. Then in 2004 the Clark Govt. formed Ontrack to own & maintain the network with Toll Rail providing the services. Toll initially marketed hard to reclaim the dairy trade through Waikato, Taranaki & Hawkes Bay and established a joint venture with Port of Tauranga through an inland container terminal (Metroport at Penrose). But after only 4y ears operation, Toll had some success during 2005 with a stated $41.5m profit (unclear if track fees had been deducted) and managed to increase rail freight volumes to surpass those of the 1980s. However, with continuing arguments over track-access charges & a wish to divest itself of passenger services, Toll readily sold rail back to the N.Z. Govt.for $655m in 2008.

Thus after nearly 14 years of mostly unprofitable privatization & rail’s share of the freight market down to 15%, the Government formed Kiwi Rail Holdings Ltd.  So now, with Kiwi Rail & Ontrack back in Government control (plus workshop maintenance United Group 2009), let’s hope Govt & Kiwi Rail’s management take heed of the past and not repeat the mistakes and negativity of the private operators of past years in their search for quick profit.

Given time and capital to rectify 15 years of neglect, modernize its sales methods, up-date it’s ailing fleet and track network,and through utilizing positive strategies, not negative closures and retrenchment, Kiwi Rail could eventually return its many services to profit!.

Personally I’m drawn to the idea of fare caps, which is how I understand it works in London. In this scenario, punters are charged when they get on their first trip, but as they get on subsequent trips during the day they aren’t charged over a certain fare cap amount ($5 for example).

Anyhow, the post got a really great response from loose_shunter, “a fares policy person” over at the Victorian Department of Transport. It’s well thought out and informative, so I’ve posted it here as an article.  ARTA, employ that person!

The first principles decision to make is whether you have a distance or zone-based fare structure? Next, do you choose a time-based or journey-based ticketing product?

In what I’m about to say, I have assumed a zone-based fares structure and a time-based ticketing product (like Melbourne or Perth) because that’s a system I can talk about with some knowledge.

In my mind, the key elements to a possible fares structure for Auckland are as follows:

No financial penalty for multi-modal travel – Customers must not be penalised for transfers between mode. The good Dr Mees is quoted on somebody’s sig about this and it should be a self-evident principle.

Steep price differential between ‘cash’ and ‘stored value’ fares – You’ll never be able to totally get rid of a cash ticket as there will always be tourists (who don’t want to invest in a smartcard or don’t know the system), the ignorant, tinfoil hat wearers (smartcards are a de facto tracking system for the New World Order) or others that don’t want to switch to stored value.

However, to set a premium for the ease and convenience (to both operator and customer) of stored value, cash tickets should show a strong (>20%) price differential above stored value fares. SE Queensland have decided to further raise the difference between cash and stored value while offering incentives to switch to stored value.

2 hour/Daily fare capping – the 2 hour (or 3 hour or whatever time period is chosen) cap should allow a customer to make at the very least a single journey across town for a long distance and a return journey over a short distance. The second time a 2 hour fare is validated, the cap should then roll over to a Daily cap. This is what Melbourne’s fare system does already with the 10×2 hour ticket (the 2nd validation ‘converts’ it to a Daily) and will transfer across to myki. The Daily fare cap should be the equivalent of a return journey for the combination of zone or zones travelled.

Simplify the existing fares structure – This is really important to try and modify customer behaviour before implementing a new ticketing system. Look through the ticketing data, find the tickets which have low sales and get rid of them. Simplify the number of products and develop a standard product range to help reduce confusion and promote a ‘multi-operator/multi-modal’ mindset among customers. This means all the products used by individual operators must go to be standardised on a basic range used across all modes. Melbourne fought this battle in 2003-4 when the plethora of non-standard products used by Connex, M>Train, M>Tram and Yarra and National Bus were gradually washed out of the system over the following 3 years. Once you’ve got a standardised fares structure, lots of other things will flow from it – off-peak weekday pricing, weekend discounts, free travel offers and all the rest can happen once there’s a unified fares system.

The other fundamental questions come down to whether you want to abolish periodical tickets or keep them. You need good ticketing sales data to know how big a segment periodical ticket holders to keep them as part of your new fares structure or the political will to abolish periodicals (as they did in Perth many years ago). If you want to keep periodicals, they need to be created as a separate, stored value ‘pass’ product kept different to stored value. Perth translated the discounts for periodicals to the multi-trip tickets in their old ticketing system and then translated it again to the reload mode on Smartrider (the deepest discount went to ‘autoload’ customers, while stored value customers got the basic discount).

Take the proposed Waterview motorway extension, for example. Treasury and Ministry of Transport officials have worked out that for every dollar spent on the $2.8bn motorway connection between Mt Roskill and Waterview, the economy will receive $1.15 worth of benefits.

In the business case document now being considered by Cabinet, officials point out that “full tunnel” option means that the benefits are only a little in excess of their costs. Some above ground options might save up to $200m from the construction cost, but these have higher social and environmental costs, and also involve the loss of park land and a significant number of houses.

Considering the billions of dollars at stake, one would hope that the economic benefits and costs of the various options are as accurate and as realistic as possible. So are they? Well, no, actually.

Since the 1960s it has been standard practice for the majority of roading economic benefits to be derived from travel time savings that road users can expect to enjoy. For the Waterview extension, maximum travel time savings of 15 minutes are expected. By placing a dollar value on each road user’s time, this equates to $2.6bn worth of claimed benefits.

The reality, however, is quite different. In the long run, an individual’s travel time savings are replaced by longer trips as travel patterns change. Commuters utilise the increased roading capacity by travelling further distances to work and leisure destinations. Eventually, the average amount of time individuals spend in traffic remains unchanged.

This is backed up by recent research from the UK based Centre for Transport Studies. By analysing the outcomes of nationwide travel surveys, their study found that average travel times in the UK have held constant at around an hour a day since the 1970s, despite expenditure of £100bn on roads over the last 20 years in the UK.

Of course it could be argued that had it not been for this massive investment, then average travel times would be much higher than they are currently. However, the study points out that there were marked swings in expenditure over the 20 year period, and hence new capacity becoming available. Throughout all of this, average travel times remained steady.

Here in New Zealand there are no comparable studies, but similar results have been documented in the Netherlands and the United States.

It would seem that promised travel time savings never eventuate in the long term, yet the myth of travel time savings also permeates into other areas. For Waterview, $690m of benefits are attributed to “reductions in frustration due to traffic congestion over and above the benefits gained from travel time savings.” How mental health benefits like this are quantified is not fully explained.

Vehicle operating cost savings of $40m are also claimed, the logic being that faster cars consume less petrol per kilometre. However, there is no evidence at all that households are spending any less on transport as a result of the completion of roading projects in recent years. The most recent Household Economic Survey in 2007 suggests transport constitutes 14% of expenditure for the average household, but no data is available to cover the subsequent period of high petrol prices.

It would seem that the long term benefits of increased road capacity come not from travel time savings, but rather from the increased choice of destinations for road users. Businesses also benefit from a greater catchment area of potential employees. For the Waterview extension, these “agglomeration” benefits could be as much as $607m, but this is still well short of the almost $3bn cost of the project.

An alternative method of estimating economic benefits is based on the user-pays principle. Transport officials have calculated that if the Waterview motorway extension was tolled at $2, then just 50% of motorists, or about 75,000 vehicles a day would consider it economically worthwhile to use the route instead of the existing alternative local roading network. It also follows that if Waterview were to operate as a private toll road, hapless investors would stand to lose about a billion dollars over a 30 year time frame.

A substantial economic risk also exists due to volatile oil prices. Petrol and diesel prices could well return to the record levels seen last year, yet the probability of this occurring does not feature in any economic assessment for Waterview or any other roading project currently on the drawing board.

Right now Cabinet Ministers must decide which one of twelve different options for the Waterview motorway extension makes economic sense. The only honest answer is that none of them do.

Thanks to a most excellent book that I own, called “Asphalt Nation: how the automobile took over America and how we can take it back“, by Jane Holtz Kay, we can see the argument for cars over public transport start to unravel. Not only in terms of the environmental and social impact of cars – but in their economic inefficiency, striking at the very heart of those who promote roads-centric policies. It’s a book that Steven Joyce, Minister of Transport, should definitely read. It is written from an American perspective, but pretty much everything can be applied to New Zealand as we’re definitely one of the most auto-oriented countries in the world, particularly in the case of Auckland. An interesting quote on page 128 looks at the overall cost to individuals of transportation:

While the Japanese walk, bike and pay three times our gas tax, we pull mere pennies from our pockets at the pump and then subsidise the car. The Japanese pay 9 percent of their gross national product for transport; the United States pays 15 to 19 percent. Europe does better too. By paying a truthful $5 a gallon, plus three to five times what the United States pays in visible car-based fees, the Japanese and Europeans have an awareness of costs. The consciousness makes them decrease their driving and curbs cars in cities. It encourages a more compact land use policy and hence promotes four to eight times as much public transport. The reverse obviously holds: Americans pay less for gas and little for tolls and user fees – and this freewheeling policy encourages them to use almost five times as much gas per capita as residents of European cities and ten times as much as those in typical Asian ones; to drive infinitely more, undercut mass transit, build more roads, buy more costly cars, pay more in personal and social fees, and spend more for maintenance.

Substitute America for Auckland and just about the exact same thing could be said. It is true that we pay higher petrol taxes in New Zealand than Americans do, so our cars do pay their own way much more. However, it’s still fascinating to see that Americans spend twice as much of their GDP on transport as Europeans and Asians. Not particularly efficient if you ask me.

David Aschauer, an economist from Bates College, has some interesting facts when one looks as the economic productivity of public transport versus roads building. This is particularly significant at the moment, where investment in transport (read: roads) is being highlighted by the government as one of the ways in which they hope to minimise the recession through economic stimulus.
Spending on public transportation has twice the capacity to improve productivity as does highway spending. A nickel spent on mass transit carries at least twice the impact of a nickel spent on roads. A billion dollars invested in mass transit produces seven thousand more US jobs than does the same amount spent on road construction. A ten years $100 billion increase in such transit investment would enhance worker output five times as much as if made in roads.

Aschauer concludes that “public transportation spending carries more potential to stimulate long-run economic growth than does highway spending.” The reasons for this are obvious, that public transport creates many long-term jobs for bus and train drivers, for those maintaining stations and so forth. Roads construction is very capital intensive, but not actually that labour intensive, so therefore not a particularly efficient way to provide jobs and real economic stimulus.

If one looks at the economic costs of private transportation at a more personal level, its inefficiency becomes even more super obvious. Page 130 of “Asphalt Nation” looks into that further:
In terms of personal use, as well as GDP, the American family spends around 20 percent of its annual income on transportation, plus hidden costs. The Japanese spend only 9 percent, despite having more expensive cars, while Europeans spend a scant 7 percent. While Americans take only 5 percent of their trips on foot, Europeans and Japanese take 20 to 50 percent of their trips on foot and garage their pricey cars. In land costs our highways often steal almost half the space in our cities, Japanese roads one-quarter. In the fifteen most congested US cities alone, our car-bound transportation system adds about $7.6 billion to the price of goods.

I think the main point to take here is that the true costs of an auto-dependent society remain somewhat hidden, or are accepted because we all pay for them individually (rather than paying taxes to subsidise public transport). Contrary to what Libertarians would love you to believe, just because something it paid for through taxation rather than user-pays does not make it more efficient or cheaper. Ironically, if you look at all the hidden subisides the car receives, it actually appears as though auto-dependent societies pay more individually for transport and also pay more through their taxes for transport, when compared with countries that have a more balanced transport infrastructure like Japan.

The provision of parking in a particularly interesting one, especially if we look at who really pays for “free” parking. I will devote a whole post in the future to parking, but Asphalt Nation has some interesting stats which are worth mentioning.
Parking, 95 percent seemingly free to the driver, is, in fact, a drain, adding more than $600 to a home and $1200 to an apartment. For the 85 million employees given apparently free parking spaces, worth $1000 apiece, it amounts to an $85 billion lure.
This is the kind of stuff the roads lobby just doesn’t tell you.

Transport planners Julie Anne Genter, Stuart Donovan and Professor of Economics Tim Hazledine explain why there is no such thing as a free lunch, and there is no such thing as free parking.

Providing parking requires land, and land requires revenue to pay for its rent. Basic economic theory would have developers providing parking up to the point where revenue raised by last the car park equals the value of the next best land use alternative.

Minimum Parking Requirements (MPRs), by definition, force developers to provide parking above this economically efficient level, which raises development costs, subsidizes private automobile transport over other modes such as walking, cycling and public transport, and provides incentives to develop at low densities, encouraging sprawl.

MPRs distort economic decisionmaking because they do not allow consumers or producers of parking to avoid the costs of parking by providing or consuming less. MPRs inhibit free and informed choice, and they exacerbate social/cultural inequities by redistributing wealth across transport demographics.

MPRs are included in most district plans in New Zealand, with the exceptions of Auckland and Wellington CBDs.

Last year Julie presented a paper on this topic to the NZ Society for Sustainability Engineering and Science.

Oil prices continue to maintain their record high levels, and consequently the New Zealand economy is likely to move into a recession, accompanied by high inflation. In particular, the petro-chemical, airline and fishing industries are coming under increased pressure as a direct result of increasing oil prices.

Saudi All Liquids Production

An international summit between oil consuming and producing nations was hosted in Jeddah, Saudi Arabia on the weekend of the 21st June. Oil consuming nations sought to convince Saudi Arabia to increase its oil supply. No offers were forthcoming from oil consuming nations to reduce their demand. The summit produced no practical outcomes as the proposed increase in output from Saudi Arabia had already been signalled previously. We examine the Saudi Arabian oil supply situation in detail in this month’s edition of the Oil Production Briefing Paper. We also examine claims that speculators are adding a premium to the price of oil.

The Campaign for Better Transport went public last week with a call for the development of a central Government contingency plan in the event that oil prices proceed to climb through the $US150 a barrel mark. Reaction from the Government was that the status quo of heavy investment in increasing the capacity of fossil fuel based transport infrastructure would continue, an example of this being confirmation that the $1bn Transmission Gully motorway project would proceed to the next stage. However, Government commitment to the buyback of Toll’s rail operations and expenditure on Auckland’s rail network was highlighted in Question Time in Parliament last week.

Fishing industry representatives in New Zealand last week warned that high diesel costs were “crippling the industry”. Westfleet Fisheries principal Craig Boote said that fuel costs now constituted 80% of his business costs, and that “we had no idea this was going to happen – who could have predicted it? We can’t possibly put the price of fish up enough to compensate.”

Spotlight: Saudi Arabia Oil Production

Following the recent summit in Jeddah, Saudi Arabia announced its crude oil production would increase to 9.7m barrels a day from July 2008, an increase of 200,000 barrels.

It isn’t clear what grades of oil will make up the supply increase or even if Saudi Arabia is capable of achieving this increase. In any case this increase won’t even offset Saudi Arabia’s own internal consumption increase in the last three years. Saudi Arabia’s growing economy has meant that oil demand grew from 2m barrels a day in 2005 to an estimated 2.3m barrels a day in 2007.

The following chart is derived from data from the US Energy Information Administration:

Saudi Arabian production data, across all grades, for the 2005 – 2007 period shows net exports declined by over a million barrels a day:

An analysis of the global net export situation is contained in the Net Export Trends section of this report.

Spotlight: The Role of Speculators in the Oil Market

“The first myth is that high prices are caused by technical factors, such as speculation. While these factors may have an impact on the margins, the data clearly show that high prices are really caused by economic fundamentals.”
- Tony Hayward (CEO BP), Financial Times (11/06/08)

Speculators are singled out by many commentators as a reason for the sudden surge in oil prices. However, there appears to be a lack an understanding of how “paper” commodity markets such as the NYMEX and ICE exchanges work.

Trading takes place on the futures market when two participants bet on the price of oil at a future date in time, in the same way that one might bet on the outcome of a rugby match, for example. The placing of a bet in the oil futures market does not affect the future price that a physical barrel of oil changes hands between a “real” supplier and a consumer.

Oil futures market participants do not take delivery of oil, which would be necessary to affect the price. Instead one speculator wins the bet while the other speculator loses the bet. Hence when the price of oil spikes, there are as many losers in the oil futures market as there are winners.

Furthermore, a number of businesses use the oil futures market as insurance from oil price increases. Air New Zealand, for instance, has covered 83% of its current quarter consumption to a maximum of $83 a barrel, at a time when the spot price of Singapore jet fuel is about twice this amount. If it weren’t for the presence of the oil commodity market, Air New Zealand would be under financial distress and / or airfares would be a lot more expensive than they are now.

Also note that it is only recently that the futures market has formed the view that prices will be flat or rising for the foreseeable future. Three years ago, the futures market was predicting long term prices of $45 a barrel, at a time that the spot price of oil was $60 a barrel. Since then, oil prices have continued to rise upwards in spite of speculators betting the price would come down, so the theory that speculators have been affecting the market is not supported by recent history.

Oil Price Trends

Weighted Average

Denominated in either US dollars or Euros, the price of oil continues its upward trend of the last five years.

Weighted Average Oil Price

Aviation Fuel

Aviation fuel prices (Singapore Jet Fuel) have pulled back slightly from all time highs of almost $US175 a barrel in June, to currently sit around the $US160 a barrel mark.

Airlines that failed to hedge against record prices are the most vulnerable right now. British Airways is a good example, and has had to introduce increases of up to 26 per cent in fuel surcharges for its highest paying passengers, its second rise for premium flyers in just over a fortnight. Business class and first-class passengers on longer flights will pay a surcharge of up to £266 for a return ticket — up from £218. Passengers on shorter flights will pay £196, an increase from £155.

In the upcoming July quarter, Air New Zealand’s fuel hedge position moves to 65% coverage of fuel consumption to a ceiling of $US91 a barrel.

Oil Production Trends

Conventional Oil

Latest figures from the EIA show that crude oil production decreased by 134,000 bpd from February to March.

All Liquids

All liquids includes oil shale, biofuel, natural gas liquids as well as conventional oil.

Net Export Trends

The following table, showing oil production from all sources in thousands of barrels a day, demonstrates that output from net oil exporting countries is declining.

(source The Oil Drum )

Abstract

Traffic congestion tends to maintain equilibrium. Congestion reaches a point at which it constrains further growth in peak-period trips. If road capacity increases, the number of peak-period trips also increases until congestion again limits further traffic growth. The additional travel is called “generated traffic.” Generated traffic consists of diverted traffic (trips shifted in time, route and destination), and induced vehicle travel (shifts from other modes, longer trips and new vehicle trips). Research indicates that generated traffic often fills a significant portion of capacity added to congested urban road.

Generated traffic has three implications for transport planning. First, it reduces the congestion reduction benefits of road capacity expansion. Second, it increases many external costs. Third, it provides relatively small user benefits because it consists of vehicle travel that consumers are most willing to forego when their costs increase. It is important to account for these factors in analysis. This paper defines types of generated traffic, discusses generated traffic impacts, recommends ways to incorporate generated traffic into evaluation, and describes alternatives to roadway capacity expansion.

Under typical urban conditions, more than half of added capacity is filled within five years of project completion by additional vehicle trips that would not otherwise occur, with additional but slower growth in later years.

Read the full article here:

www.vtpi.org/gentraf.pdf

Two recent papers have described an ‘Americanisation’ of transport policy in Auckland, New Zealand, characterised by the successful advocacy of motorways at the expense of rail. Arrested development of rail transit in Auckland presents a striking contrast to Wellington, New Zealand, where suburban rail is as well developed relative to population as in Perth (WA). Wellington’s suburban rail was installed as part of a state-led development planning programme. By the late 1940s this template was intended for extension to Christchurch and to Auckland, then undergoing rapid growth. Following a change of government in 1949 development planning ceased and a state highway fund was established to fund urban motorways instead. The principal conclusion is that state support for development planning along transit corridors may be a prerequisite for successful urban transit development.

I do ask you to be careful of these planners … because if we are not careful they’ll have to plan another change. They’ll have to plan that the name of this fair city is changed from Auckland to Talkland. (J. Alsopp-Smith)

Some form of expanded rail service has been discussed, on and off, over the whole of [my life], and I’ve no doubt that a rapid rail transit system will become a reality in Auckland in my time. (R. D. Muldoon, 1921-1992)

— Comments recorded at the Auckland Rapid Rail Symposium, 1969

Introduction

Two recent papers have described the retardation of transit development in Auckland, New Zealand’s largest and fastest-growing city (Gunder, 2002; Mees and Dodson, 2002).1 As the gracenotes above suggest, an inability to extent public transport services beyond those of fifty years ago, in a city that has meanwhile grown from 370,000 to 1.2 million, is almost a by-word of local politics.

Download the full article in PDF format here: Slow Train Coming.

As the CBT is primarily focused on transport issues, we have chosen to concentrate our submission on this area.

We have arranged our submission into key headings. We have also included a commentary on some specific wording within the NZES document that we think should be reconsidered in the “Edit; Undo” section at the end of this document.

Finally we have answered selected questions from the “Have Your Say” sections of the strategy.

Peak Oil

Considering the time frame of the Energy Strategy is until 2050, it is surprising that Peak Oil is so readily dismissed in section 4.1.2 – “So while there will be peak ‘cheap’ oil from conventional sources, the world has plentiful sources of fossil-based fuel”.

Yes, but at what price? $1,000 per barrel? We think the assumption of $60 per barrel contained in the New Zealand Energy Outlook to 2030 is completely optimistic. As recently as three years ago the Government assumed oil would be $35 in the long term. Given that demand for oil is continuing to increase in developing countries while production remains flat or declining, we see no reason why oil prices should not be above $100 per barrel in the next few years.

The Strategy suggests that rising prices will spur exploration, new technology and make previously uneconomic reservoirs of oil viable to use. The “technology will save us argument” has been dismissed by a number of informed commentators, with decades of experience in the oil industry. We have included a summary of these myths in the Appendix. Specific mention of “oil-rich shales” is mentioned in the section under peak oil, so we have included an article entitled “Toxic Waste Left In Wake of Oil Sands Extraction” in the Appendix, which points out the huge amounts of energy expended in the extraction process, as well as the environmental and emissions damage.

Also in section 4.1.2 is the statement that “It is unclear whether conventional oil production will peak in the next decade, or a decade or two later.” As this is a strategy for 2050, this is irrelevant. Even the most conservative estimates have oil peaking some time in the next thirty years. The strategy must prepare New Zealand for the reality of declining fossil fuels.

A number of commentators are highlighting indications that a peak in oil production may have already occurred. Last year in 2006, Saudi Arabian oil production declined by 8% from the previous year. Most of the oil majors have not managed to increase production at all, despite record high oil prices. It is becoming increasingly clear that oil is moving towards the high oil price scenario described in the New Zealand Energy Outlook to 2030.

As Deffeyes puts it – “Oil & Gas Journal publishes annual production estimates in late December each year, subject to revision a year later. The O&GJ preliminary estimate for 2006 is 72,486,500 barrels per day, compared to 72,361,600 in 2005. That extra 124,900 barrels per day isn’t going to fuel all the new cars in Russia, China, and India.”

Download complete PDF version here.