Hudson Brett: Energy (Fuels Levies and References) Amendment Bill — Third ReadingText is incorporated into the Bound VolumeHudson Brett: Energy (Fuels Levies and References) Amendment Bill — Third Reading[Sitting date: 17 February 2015. Volume:703;Page:1650. Text is incorporated into the Bound Volume.]BRETT HUDSON (National): First I am absolutely delighted at this opportunity to speak on the Energy (Fuels Levies and References) Amendment Bill. But before moving on to the substance of the bill let me please join the chorus of sincere condolences on the passing of Celia Lashlie. I think that as an incredibly strong woman she challenged perceived wisdom around how to deal with the challenges of raising children specifically young boys. I think no one could ever accuse Celia of being soft in her approach. If anything she was very very clear and tough in her expectations. Her passing is a sad loss for New Zealand and for her family and I would like to pass my best wishes on to her family.But tonight the matter at hand is indeed the Energy (Fuels Levies and References) Amendment Bill. This is a very important bill. It is very important to honour our obligations and that is what this bill is all about. Our international energy programme obligations are that we have a stockpile of approximately 90 days of fuels to deal with shocks. This Government considers our obligations to be extraordinarily important and we look to honour those so a 90-day stockpile it is.Unlike some news that we received today—some allegations—there are some people perhaps aspiring Labour leaders who do not have quite the same honouring of obligations and 120 days to pay a bill means nothing to them. But we will honour our obligations around our 90-day stockpiling because it is indeed a very very serious business. It will provide some protection from oil shocks.Let me say that those of us who are of advanced enough years can still remember the times in the 1970s when it seemed that the Organization of Petroleum Exporting Countries controlled the world and its choice about production and pricing sent shocks through every developed nation.Chris Bishop: When was that?BRETT HUDSON: That was in the 1970s. Do you remember that? Do you remember the economic conditions of those times Mr Bishop?Chris Bishop: No I don’t.BRETT HUDSON: Well let me touch upon those. It was also a time of Keynesian economics and stagflation.Chris Bishop: Tell us more Dr Hudson.BRETT HUDSON: Well let me tell you it was a time when growth was backwards and inflation was upwards. I do believe it was a Kirk and Rowling Government at the time.One of the implications of those oil shocks of course and one of the weird cases of regulation in the New Zealand economy and society was when we introduced carless days as a means to try to deal with oil supply shocks and price shocks.Chris Bishop: Winston remembers it.BRETT HUDSON: I am sure he does. But what a rort I have to say. You would be struggling to find a single New Zealander who was not able to find a way to get around it but none the less we felt that you could control the world turn time backwards and manage people’s daily lives. We certainly do not want to go back there. We do not want to go back to those economic conditions. We do not want to go back to areas where we have no protection and no buffer against oil shocks.This stockholding will give us some protection. It is just a buffer. It is not going to be a long-term solution but arguably it permits New Zealand to deal with those unexpected and definitely unwanted shocks. Globally the stockpiling is enormous. According to the US energy administration approximately 4.1 billion barrels of oil are held in strategic reserves. That equates to approximately 650 million cubic metres. I tried to find a reference on that wonderful tool Googleas to what 650 million cubic metres would amount to and I could not find anything of any sanity. I found something like 18 times a certain water capacity for a dam but that did not mean a whole lot either. What I think we can say is that it is an extraordinarily large amount of oil to stockpile and it does in fact reinforce just how serious this is across the globe.What we could look at if we are not complying with our obligations is what that would mean for us. For New Zealand a small country that is wholly reliant on trading with other nations I think we can all agree that it would almost certainly damage our international reputation. It has been well established that oil security is a key driver of the foreign and security policies of many OECD countries. In fact another example this one from the 1990s showed a very clear correlation between oil security and oil shock particularly oil pricing shock. I can remember—because in those days I was briefly employed as a petroleum transference engineer occasionally known as a pump jockey or a forecourt attendant—that around that time in the early 1990s we saw petrol rise from just a bit under 90c a litre to well over $1. Kiwis were finding that really really tough.What was driving that was uncertainty around the security of oil supply out of the Persian Gulf at the time. What it established for New Zealand and has become the rule of thumb in fact for all of the intervening years is thatsecurity of oil supply is a huge driver of price and economic performance particularly in our country but also of supply. So we need to make sure that not only do we have our own stockpile to deal with some shocks as might come around but that we do not damage our international reputation to the extent that we might find it a struggle to do business on the same terms that we have been over recent decades.Damaging our international reputation around our oil stockpiling obligation would also have flow-on impacts on our economy without question. As is the case in every developed country oil and oil products are extraordinarily important to what we produce and how we transport it—how we get it to the markets that we want to sell it to. In fact today what we are seeing and we are seeing it in recent times as other members have highlighted is that in actual fact at the moment we are going through a wonderful time where instead of oil prices going up as we have become accustomed to in recent years they have actually gone down markedly.New Zealanders are feeling that in their back pocket in a very very positive way. In fact it is helping in effect to give us record low inflation—some might say even a period of minor deflation but not a bad one. It is not a bad one that will lead to a spiral of unemployment and price decreases but one that is helping.Chris Bishop: Like a tax break.BRETT HUDSON: It is a bit like a tax break Mr Bishop—that is a wonderful way of putting it—and it is a tax break that impacts positively on almost every New Zealander. In fact even New Zealanders who for instance do not own and drive their own cars are probably using public transport and having some consequential benefit there.So it is an extremely good story there. But we cannot take it for granted. We have to do our bit to be a good global citizen. We have to do our bit to meet obviously our obligations. We are too small on our own to mitigate our oil supply disruption potentials. The way we deal with this and it is a very clever way of dealing with it is that we do not put thousands of barrels on a wharf somewhere in New Zealand. No we buy ticket contracts so that we can in fact get an oil supply in the case of a crisis. In fact in 2013 New Zealand successfully tendered for 150000 tonnes of crude oil tickets. In doing so we established two new Government to Government agreements with Denmark and Sweden which help to provide some risk mitigation across the potential suppliers of our oil. That is a very sensible thing to do.I will just go on to the levy. The levy is in fact the fairest way of funding our obligation. Historically we have dealt with this through general taxation. In some senses general taxation seems to make sense to people. We see it in our education system and in our health system. But what it actually meant was that some people who use little or no petroleum products were still being taxed to meet those obligations. What we are proposing now by putting a per litre levy on those fuels is that we actually impose the cost of our obligation on the consumers of the product and that is most certainly the fairest way to do it.Now we have as I have mentioned in the past to my parliamentary colleague in the Green Party Mr Hughes an actual situation where people who choose for instance to take public transport such as buses—and they may be diesel buses or electric transport such as Wellington’s fine electric trains—are not being hit in effect by a taxation if you will direct or indirect to pay for those obligations. That is a far more sensible way of both meeting our obligations and fairly discharging those obligations or charging for those across our society.There is even more good news though because we can potentially offset some of our obligations through domestic oil production. Our block offer position proposals and the amendments to the Crown minerals regime are going to continue to encourage exploration and harnessing of our oil potential. We cannot know today what those finds might bring exactly because like many things in New Zealand—our country our resources our people—we produce high-quality commodities and high-quality products not to mention our extremely high-quality people. An example of this is aluminium. When the smelter was going great guns as it was for many years it was producing some of the finest grade aluminium in the world. Our Invercargill smelter Tīwai Point was basically producing the aluminium hard-disk drives for the world. Our oil is very similar. Our oil is very high grade. What it means is that we can sell it on the global market for a higher price and that gives us another way of finding funds to meet our obligations. So this is a highly commendable bill. It is very sensible it is very pragmatic it is very practical and I commend it to the House.