The Campaign For Better Transport

Quite a good article in the Herald on Sunday today. I do hope central Government takes note of the headline – at the moment they seem to think building more roading capacity is the appropriate response:

Soaring petrol costs are forcing people on to public transport in record numbers.
Bus companies report a spike in patronage since 91 unleaded fuel hit $2 a litre in February and passengers have told of having standing room only on their daily commutes.

The increase has been particularly big in Auckland but repeated in other major North Island centres.

Ritchies bus company director Andrew Ritchie said there had been a 10 per cent growth in passengers over the past year, with the trend gathering pace in recent months.

“There’s no question that it’s on the increase. We’ve never been loading as heavy. We certainly noticed it once we got to March.”

He said the “psychological trigger” of petrol prices topping $2 a litre had driven people from their cars.

His company was in talks with Auckland Council to put more buses on the Northern Express route along the Northern Busway to meet demand.

“Our growth has exceeded our estimations so we’re playing catch-up at the moment…”

During Question Time in Parliament last week, it sounded like the Government accepted that it had a problem it should be dealing with.

Gareth Hughes: Does he expect—as many commentators expect—that the next decade will see continuing oil price spikes?

Hon BILL ENGLISH: It is possible. That is why, if we are to expect continued instability in oil prices, we need a resilient economy that is able to adapt quickly both in a straight economic sense and in terms of how people live their lives

But then, total logic failure! :

Gareth Hughes: Why does New Zealand not have a strategy to reduce our current vulnerability to higher oil prices, as many other countries do?

Hon BILL ENGLISH: People are pretty sensible. When they see prices going up, they start thinking about whether they want to continue with their energy-intensive business or lifestyle. As it happens, over the years New Zealand, as I understand it, has become less energy-intensive in its production, which is a trend that will probably continue if oil prices keep going up.

If “people are pretty sensible”, then why can’t the Government be “pretty sensible” in it’s spending? As oil prices become increasingly unstable and inevitably rise over the long term, would it not be “sensible” to have some kind of risk analysis done for the $10bn being spent on increasing the capacity of the state highway network?

Gareth Hughes: How is spending $10 billion on new motorways reducing our vulnerability to higher oil prices?

Hon BILL ENGLISH: Spending on the motorways creates a more efficient traffic system whereby commuters get better value out of what they invest in their cars, bus fares, and petrol. We are keen to make sure we finish the current roading infrastructure investment because, despite the earthquake, it is important for New Zealand’s long-term productivity and standard of living.

Taken to an extreme, by this logic then if petrol hits $10 a litre then increasing state highway capacity will have even more benefit. However, as the song goes, what good is a highway with no one on it?

Gareth Hughes: For Kiwis who are struggling at the pump at the moment, how will the $10 billion the Government is spending on motorways help Kiwis who start walking or cycling and who flock to the buses and trains, as large numbers did in 2008 during the last oil shock?

Hon BILL ENGLISH: It will help in two ways. It means that when they catch the bus it will actually spend more of its time travelling than sitting at the traffic lights. Buses are the most common form of public transport, and they need efficient roads to be effective. They cannot be run on railway tracks. It is the same with cars.

The backbone of our public transport network is rail. It has higher capacity, more attractive and forms the “rapid transit network” of Auckland.  Buses may be common, but on a passenger-kilometre basis rail represents almost half of transport trips in Auckland.  Given a choice between catching a train or catching a bus between any two points, most would choose the train every time.

Gareth Hughes: Will the Minister finally support an inquiry into how New Zealand can best protect its economy from high oil prices?

Hon BILL ENGLISH: Probably not. When we talk about strategies to deal with high oil prices, we see that the fact is that the best strategy is for people to see the price signals and change their behaviour accordingly. The Greens understand that strategy because it is the theory and practice behind the emissions trading system, which is precisely about sending a price signal to people, although in that case it is about carbon usage.

The ETS tax on petrol is 3 cents a litre.  How should people respond to this price signal?  For many there aren’t any alternatives. The Government is not responding to the price signal and is failing to invest in alternatives to roading, so what is the point of the ETS?

Back in October of this year, a Parliamentary Research Paper entitled “The Next Oil Shock?” was released.  If you are looking for an up-to-date primer on the oil supply situation, look no further.  The PDF version is here.  It’s a great summary that demands a coherent mitigation strategy as oil nudges towards $90 a barrel.  As such this has been ignored completely.  Here’s the summary:

• Oil is “the lifeblood of modern civilisation”. This paper provides an overview of the global oil market. In particular, it examines the outlook for oil supply and demand over the next five years, and the economic consequences.
• Low-cost reserves of oil are being rapidly exhausted, forcing oil companies to turn to more expensive sources of oil. This replacement of low-cost sources of oil with higher-costs sources is driving the price of oil higher.
• While the world will not run out of oil reserves for decades to come, it cannot indefinitely continue to produce oil at an increasing rate from the remaining reserves. Forecasts indicate that world oil production capacity will not grow or fall in the next five years while demand will continue to rise.
• If oil production capacity does not rise as fast as demand, the buffer of spare production capacity disappears. In such a ‘supply crunch’ the price of oil ‘spikes’ to high levels. High oil prices can induce global recessions.
• Organisations including the International Energy Agency and the US military have warned that another supply crunch is likely to occur soon after 2012 due to rising demand and insufficient production capacity
• There is a risk that the world economy may be at the start of a cycle of supply crunches leading to price spikes and recessions, followed by recoveries leading to supply crunches.
• New Zealand is heavily dependent on oil imports and will remain so for the foreseeable future. While there is potential to substantially increase domestic production, domestic oil production cannot insulate New Zealand from global oil price shocks because New Zealand pays the world price for goods like oil.
• Key export-generating industries in the New Zealand economy including tourism and timber, dairy, and meat exports are very vulnerable to oil shocks because of their reliance on affordable international transport.