Donald Rod: Appropriation (2004/05 Estimates) Bill — Third Reading Imprest Supply Debate 
Donald Rod: Appropriation (2004/05 Estimates) Bill — Third Reading Imprest Supply Debate 
[Volume:619;Page:14969] 
ROD DONALD (Co-Leader—Green) 
: 
 I thank my colleague from the Progressives; it is good to work together. 
It has often been said that a week is a long time in politics. If that is the case then the 13 weeks since Dr Cullen delivered his Budget are a political lifetime. They also mark the end of an era—the end of cheap oil. In my lifetime there have been three oil shocks: 1974 1979 and right now. The first two were supply-side driven. As my co-leader Jeanette Fitzsimons has said today’s shock is a combination of supply-side problems in the Middle East Venezuela and Russia and demand-side problems—with China’s demand in particular having grown 40 percent in the first 7 months of this year compared with the same period last year. 
However the big difference between now and then is that the current shock is unlikely to be short-lived and the need for major structural change rather than short-term management adjustments will be inevitable. Highly respected economists such as Lester Brown the author of  
Plan B: Rescuing a Planet Under Stress and a Civilisation in Trouble 
 have been predicting for years that world oil production will soon peak then steadily decline as accessible reserves of that finite fuel are depleted and that that depletion will inevitably lead to rising prices as competition increases for a shrinking resource. 
It therefore came as a shock to me that the two Treasury economists who briefed Jeanette Fitzsimons and me about how Treasury calculates its oil price forecasts had never heard of peak oil and did not seem to understand that unlike canola or cotton oil is a finite non-renewable resource. Instead the economists said that they based their price assumptions on historical events and on what the futures market predicts the price will be. They admitted that to futures traders “long term” is a mere 2 to 5 years. That will explain why in the one page Dr Cullen devoted to oil prices in his Budget on 27 May he predicted that spot prices would remain at US$32 per barrel over the middle of this year before easing back to “our assumed ‘equilibrium’ level” of US$19 per barrel. The briefing note did admit that since the central forecast was finalised the spot price had increased to US$37 per barrel—some 16 percent above Treasury’s assumption—and that that was due to supply concerns in the Middle East and low inventory levels in the USA. There was no mention of demand growth in China let alone an acknowledgment that world demand is close to exceeding world supply as Jeanette Fitzsimons outlined in her speech. 
Today the world price stands at $US46 per barrel. What will Treasury’s new equilibrium be? Will it be $30 per barrel? Dr Cullen’s answers to questions in question time today displayed a woeful lack of understanding of the oil predicament we face. Clearly he had not read Vernon Small’s article in the  
Dominion Post  
last week. I acknowledge that he did admit in response to my questions in the Finance and Expenditure Committee on 17 June that petrol will never be cheap again but today he did not seem to understand the ramifications of the end of cheap oil for our economy our society and our environment. There seems to be an ostrich-like mentality that somehow some way we will discover new reserves or new technology that will enable us to continue along the present unsustainable path. One would think that the impending demise of Maui Gas would be enough of a wake-up call but no the Government’s response is a “drill and hope” strategy. Yes the Government is doing good things by issuing carbon credits to foster new wind energy projects and yes it has bought back the rail network in recognition that it is vital strategic infrastructure but it is also underwriting its own State-owned enterprise Genesis Power to squander our precious gas reserves—if we find any—on electricity generation. 
New Zealand has a once-in-a-lifetime opportunity to face up to the reality of peak oil to radically rethink how we run our economy and to use the window of opportunity we have to achieve sustainability and self-reliance. The Green Party urges the Government to take this issue seriously and to work with us to ensure that our kids have a future that is worth living. It is ironic that Dr Cullen has put in place a superannuation fund based on 50-year projections of an ageing population when at the same time his officials have yet to wake up to the even larger threat that oil depletion poses to our immediate future. Now is the time to do a whole range of things: to install solar water heaters in every State house and Government building; to offer solar and insulation mortgages to private homeowners and landlords; to ensure that every motorway investment is reassessed in the light of permanently rising oil prices and to allocate the money to public transport; to adopt an import substitution approach to trade rather than increase dependence on fossil-fuelled export growth; and in relation to tourism to encourage more Kiwis to see New Zealand first and to invite the increasing number of visitors to stay longer and fully appreciate not just our clean green image but the self-reliant and sustainable country we have the capacity to become.