Fitzsimons Jeanette: Questions for Oral Answer — Questions to Ministers 
Fitzsimons Jeanette: Questions for Oral Answer — Questions to Ministers 
[Volume:618;Page:13717] 
7.  
JEANETTE FITZSIMONS (Co-Leader—Green) 
 to the  
Minister of Finance 
: Why did the Budget Economic and Fiscal Update assume the price of oil would ease back to US$19 a barrel and is that assumption now being revised? 
Hon Dr MICHAEL CULLEN (Minister of Finance) 
: 
 That is a very good question. The Treasury forecast in the Budget assumed a long-term equilibrium price of US$19 a barrel based on historic trends and consistent with average oil prices in the 1990s. The short-term price assumption was based on a consensus forecast in futures market pricing and that was for a short-term price path just above $30 a barrel; the assumption about the long-term equilibrium price is being revised for the next forecast round given recent price trends and geopolitical events. 
Jeanette Fitzsimons 
: Does the Minister agree that it would be prudent to ensure Government investment shifts New Zealand away from oil dependence rather than reinforcing it given his statement that oil prices will never be back at 1990 levels? 
Hon Dr MICHAEL CULLEN 
: I did not say that. Indeed levels around 1991 were actually quite high at one point. What I was indicating was my own personal view that over the long term we would have to expect a higher track for oil prices than we saw in the 1990s. The Government is already taking action. In this year’s Budget there is an increase of over 25 percent in the funding going to passenger transport community services. 
John Key 
: Does the Minister agree with BP’s chief economist that there is “no global resource or reserve shortage” and that the price of oil which in real terms is a fraction of what it reached in the 1980s is in a large part rising because of demand issues that over time can be addressed with increased supply? 
Hon Dr MICHAEL CULLEN 
: No I do not agree with that entirely. Certainly I agree with the member that one of the factors here is increased demand particularly from China—and no doubt increasing also from India—as China’s own supplies start to run down. However I do not think that at this stage there is a clear indication that world supply in terms of reserves is increasing as rapidly as demand is likely to over the next 10 to 20 years. 
Marc Alexander 
: Does the Minister agree that one reason oil prices have not eased to the degree predicted in the Budget Economic and Fiscal Update is an unpredictable rise in consumption by 4-litre gas-guzzling vehicles such as the one left running outside the press gallery last month by the Green MP Keith Locke? 
Hon Dr MICHAEL CULLEN 
: I certainly think that it is advisable that people look at their own vehicle usage and the nature of some of the vehicles one sees around this place does not contribute. I do recollect the Green Party having a somewhat strange machine travelling around the country once spewing out pollutants. But then that was no different from the ACT bus that was spewing out both verbal and other forms of pollutants. 
Jeanette Fitzsimons 
: Does the Minister agree that a massive road-building programme without associated investment in public transport such as being advocated by National would leave New Zealand exposed to massive economic risk in the face of high oil prices? 
Hon Dr MICHAEL CULLEN 
: Yes. I think the most extraordinary thing about National’s statement on Auckland transport was to reject the notion that public transport had any key role to play. On the other hand those who would argue that we should not build roads at all are merely encouraging cars to sit there idling away producing pollutants and going nowhere. 
Jeanette Fitzsimons 
: What steps is the Minister taking in the light of increasing oil prices to ensure that transport investment by the Government supports energy-efficient rail freight and passenger transport? 
Hon Dr MICHAEL CULLEN 
: We have already improved the level of funding for passenger transport. As I said it is going up more than 25 percent in the coming year. We have today announced major changes that should assist in getting a coherent national land transport strategy we have been very supportive of the Auckland rail strategy and I notice from statements in the media in the last 24 hours that there is now strong expectation of a satisfactory deal around the acquisition of the rail network by the Government. 
Rod Donald 
: Has Treasury undertaken any modelling to determine whether a more proactive approach to import substitution could help blunt the adverse effects of rising oil prices; if not when will it? 
Hon Dr MICHAEL CULLEN 
: No. I am not clear how engaging in import substitution of imported goods and services would necessarily reduce oil consumption in the world at large. It is also fair to say that in terms of international oil prices New Zealand’s demand is not a large factor. 
John Key 
: I seek leave to table a copy of this morning’s  
Dominion Post 
 press article that shows that BP’s chief economist believes there are three times the levels of reserves that there were in the 1980s and plenty of untapped supply. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is. 
John Key 
: I seek leave to table Don Brash’s outstanding speech on Auckland’s roading crisis and the solution that National would have. He does not claim for one moment that there is no demand for public transport; he argues a priority. 
Mr SPEAKER 
: Leave is sought to table that document. Is there any objection? There is.