Fitzsimons Jeanette: Appropriation (2004/05 Estimates) Bill — Third Reading Imprest Supply Debate 
Fitzsimons Jeanette: Appropriation (2004/05 Estimates) Bill — Third Reading Imprest Supply Debate 
[Volume:619;Page:14951] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 The 2004 Budget on which we are voting today is a house of cards. It has some very nice features that we would like to support but a strong wind is blowing and the cards are flapping. Without an unprecedented effort to strengthen the foundations we will be without shelter in the future. 
I said those words in mid-June when we first debated the Budget and since then the wind has only become stronger. In the last week the price of crude oil has passed US$46 a barrel. That is more than twice the Ministry of Economic Development prediction 10 months ago of US$20 a barrel in 2004. It is more than twice the assumptions about price on which the whole Budget forecast and planning was based and it is a substantial increase even since the first reading of this bill. Some analysts give the price a fifty-fifty chance of reaching US$50 within weeks. 
By and large the media do not understand what is going on so most New Zealanders do not either. The Christchurch 
 Press  
stated that the price of oil is driven by the situation in the Middle-East. Actually it is not. The war in Iraq is driven by the shortage of oil and not the other way round. Serious supply disruptions that knocked out a major supplier would be likely to take the price to US$100 or more according to Deutsche Bank. 
No recent price rises are about demand. There has been an increase in demand in virtually every country—including a 40 percent year-on-year increase in China the second largest oil importer—and that rising demand is against a background of gradual depletion. US oil fields have passed their peak and have declined since 1970. New Zealand oil fields passed their peak around 1986 and have declined steeply since then. World oil supply is expected to peak in the next decade if it has not already done so and only hindsight will tell us exactly when. Our concern was greatly heightened just this afternoon when Dr Cullen told us that he has never heard of the concept of peak oil and that he does not accept we are dealing with the depletion of a finite resource. 
But more important even than the date of peak oil is the date on which demand will rise above the rate at which remaining fields can supply. That date is very close. Oil prices will fluctuate a bit with markets and weather but there can be no downward trend from there. 
Rather than use this debate to admire the fine features of the house of cards and to criticise the ones that disappoint us I want to examine the strength of that wind and the steps we need to take right away to reinforce the cards so we have some shelter left after the storm. The best estimate of the strength of the wind is that current oil production is 81 million barrels a day but total productive capacity is only 82.5 million barrels a day. As fields pass their peak the rate at which oil will flow will also reduce. 
Let me make it really clear to Dr Cullen: we cannot pump oil out any faster than 82.5 million barrels a day and 1.5 million barrels a day is a very small margin to cope with supply disruptions let alone more growth in demand—but both are likely. The single most important thing we must do to secure our economic future is to reduce our dependence on oil. If any members in this House do not believe that then I invite them to show where the stuff will come from at anything like the prices we have had in the past to meet the record rates of demand that show no signs of easing. Canadian shale will not do it. It takes so much energy to get the oil out that the more oil prices rise the more the cost of shale oil will rise ahead of them. 
The National Bank stated that the extra $300 million to $400 million that oil prices are costing us will knock 0.4 percent off our GDP this year. The Reserve Bank is worried about inflationary effects as the price of oil affects the price of everything else. However that is minor compared with what is coming. 
The point is that when we pass a Budget we commit money to building for the future and we need to think about what we are building. New motorways are planned based on predictions of traffic growth. How much of that growth will occur if fuel prices double? The Freightways Group has imposed a fuel surcharge and is looking at whether it will increase it. Petrol demand is very inelastic when prices first rise because people have few other options but over time behaviour does adjust. Our transport future will depend much more on low-energy options like rail and public transport systems and if we do not build them now while oil is still cheap it will be much harder to build them later. 
Yesterday I was at the Britomart transport centre for the launching of the new Connex commuter rail services. The upgrade in Auckland commuter rail since I lived there and used it 12 years ago is stunning but it still has a long way to go to meet Auckland’s needs. It needs a link to the airport which means building new track and it needs a tunnel extending the line west of Britomart and linking the southern and western lines. These will be energy intensive to build and low energy to run. We have a brief window to build now while oil is cheap and we will reap the benefits when it is expensive. 
Airlines have imposed fuel surcharges too and are considering raising them. Airlines are perhaps the most vulnerable of all forms of transport as price cutting has raised demand for air travel and boosted growth. Is the Minister of Tourism planning to spend the $60 million we are voting him to promote New Zealand as a destination in the knowledge that air travel will be less affordable in the future? Are we investing to encourage longer-stay tourism that is less energy intensive? Is the Minister of Tourism thinking at all about the long-term price of oil? 
It is of course a fundamental of the Government to expand trade of all kinds. How much is the fuel price factored into that? As the rest of the world reels from yet higher oil prices will countries continue to buy dairy products in the way they do now? Worse if we allow basic industries to collapse by removing tariffs and allowing competition from sweatshops and child labour will we ever get those industries back when the economics change and fuel-intensive imports of things we can quite well make ourselves do not seem like such a good idea. 
Nothing is as important to social wellbeing as housing. Has the Minister of Housing thought about how to heat the houses the State is building? When will we have state-of-the-art solar design for at least all new State houses? When will the building code be upgraded to require more energy efficiency to keep energy bills down? 
We have a fisheries bill before the House at present which provides for highly migratory species caught outside New Zealand’s economic zone. Deep-sea distant fishing is the most energy intensive food production system in the world even worse than grain-fed beef production. There is unlikely to be a market for fish caught hundreds and thousands of miles from shore at the prices that oil depletion will dictate in a few years time. 
I go on to the forestry industry. Of all our productive sectors this one has the best chance to prosper because it is capable of producing all its own processing fuel. Waste wood and eventually purpose-grown wood are particularly promising energy sources for New Zealand in a post-oil world but they must be planned for. Where is the planning in the wood-processing strategy to use the wood waste coming on stream now and to ensure we grow enough wood for the future? I do not see it; what I see is an assumption that the forestry industry can continue to demand more and more electricity gas and diesel rather than become self-sufficient. 
Farming must change too. Fertilisers and pesticides are largely oil-based. Our competitive advantage will be in turning to organic production methods that do not require them. We have the science to do it but the Minister is lukewarm at best and there has been little budget applied to developing the science further or to helping people change. 
We do have options. New Zealand can survive high oil prices better than most countries but successive Governments have chosen to ignore all the signs of oil depletion and the opportunities to build a more secure future. I was encouraged a few weeks ago by Michael Cullen’s acknowledgment that oil will never be cheap again and that Treasury projections should be reviewed. Today he tells us that the review of Treasury projections has not yet begun. This afternoon we learnt that the situation is much worse than we thought: this Government does not believe we have a problem at all. 
What we are looking for is a radical review of the fundamentals of economic management now that the short-term underpinning of our rapid economic growth has been pulled away. We do not have to continue blindly until we crash and burn. The Greens are dedicated to developing the sustainable options that will see us through.