Fitzsimons Jeanette: Budget Debate 
Fitzsimons Jeanette: Budget Debate 
[Volume:618;Page:13588] 
JEANETTE FITZSIMONS (Co-Leader—Green) 
: 
 I will refer to the Economic and Fiscal Update and its predictions for the state of the economy in the future because some very worrying assumptions underlie the economic forecasts that suggest the whole Budget edifice is seriously flawed. I wish that were not so. There are a number of things in this Budget that we support particularly the assistance to low-income families but these assumptions are enough to ensure that the whole economic and fiscal outlook becomes a house of cards. 
Last October the Ministry of Economic Development published its energy outlook. It said that the expected oil price for the year 2004 was US$20 a barrel rising to US$25 a barrel by 2020. Its high forecast—unlikely but at the high end—was for US$25 a barrel this year rising to US$30 a barrel by 2020. Within a month of that publication the actual oil price in US dollars was around US$30 a barrel. Page 44 of the Economic and Fiscal Update records that within a very short time that forecast was revised and the new assumption which underlies all the figures and predictions in this Budget was for US$32 a barrel until after the middle of this year. 
There are a few red faces I think behind page 44 of the Economic and Fiscal Update where it is recorded that by the time the Budget went to press world oil prices were US$37 a barrel. I note that the day it was presented in Parliament prices had reached US$40. The real doozy is still to come because page 44 also assumes that oil prices will fall in the latter part of this year to US$19 a barrel and that this is the long-run equilibrium price that this forecast assumes will underlie our economy for some years to come. I wonder how many people really believe that? 
There is a certain discussion of causes: the low United States inventory as that country goes into summer and supply concerns in the Middle East. The effects that they record are an increase perhaps in domestic inflation but there is no recognition at all that world oil production is getting close to its peak and that it will then start to decline and that US$19 a barrel for any length of time is simply not credible. 
There is still debate about when that peak will occur. Shell International puts it out after 2020 but that company has also been caught lying about its reserves to its shareholders. It had to take a big drop in its share price when the shareholders found out they had been lied to so I wonder whether we should really believe its predictions. We know that for some years now oil discoveries have been running at about one to two barrels discovered for every four burned in the same period of time. One does not need to be a mathematical genius to know what that does to the total size of the reserves. 
I wonder whether Treasury and the Ministry of Economic Development have ever looked at for example the work done by the Association for the Study of Peak Oil and Gas and Colin Campbell—a very reputable oil geologist and engineer who has spent a lifetime studying the way oilfields behave. He believes that the peak will be within the next 5 to 10 years and that the decline after that will be fairly steep. 
But even if Shell International the International Energy Agency and the US Government—which have strong vested interests in persuading everybody that there is nothing to worry about—are right there is still no time to waste. Where are the Budget measures to provide a smooth transition to a future based on renewables and where energy is used much more efficiently? Instead there is a silence almost a conspiracy of denial that this is even happening. Instead we have tax and royalty concessions for oil and gas exploration costing $100 million and we have a $15 million handout to provide free geotechnical information for oil and gas drillers. 
I have to say that it would be handy if we discovered a bit more gas around New Zealand particularly if it were onshore and therefore did not have to be used flat out in the way that the Maui gasfield was used to pay for the costs which drives up wasteful consumption. But Shell withdrew from exploration because for 2 years it had drilled nothing but dry holes. How long should the New Zealand taxpayer continue to subsidise dry holes in oil and gas drilling and could we spend that money rather better? We know that peak oil means that new oil and gas will be harder and more expensive to find and will be more costly in terms of energy to extract than they used to be. 
So those handouts—$100 million in forgone tax and royalties and $15 million in data production—far outstrip any assistance this Government has ever given to renewable energy which we know will not run out and which will be available in the long term. There has been some help through carbon credits and I applaud the Minister for that. It was a good move but it is tiny compared with what is being given to a dying industry that we know cannot be sustained in the long-term. 
What we did not see was any serious expenditure in the Budget to hasten the transition to clean secure energy. If people want to build wind farms they have to pay for the meteorological data they need about the wind conditions on the various sites they are considering. Nobody gives them a $15 million handout of information about wind conditions in New Zealand. There is quite a lot of information in the public domain but it is scattered all over the place amongst different institutions andis hard to access. One little thing that could so easily have been done would be to collect it all together in a single website to encourage those who want to build wind turbines for the future. But we have not seen that done. 
A lot more could be done about a similar collection of data on the arisings of wood waste from the forestry industry which are available as an energy source for co-generation in industry for example. A lot more could be done to research the best ways of using it and to try to put potential users together with the sources of that fuel. Professor Ralph Sims at Massey University whose whole field of study is biomass energy has calculated that the wall of wood coming towards us contains within it a waste-stream with an energy content equal to half a Maui gas field. Is that not worth capturing for energy and what is the Government doing about it? But we have seen no steps towards those alternatives and the amount of money they would take is absolutely tiny compared with what has just been done for the oil and gas industries. 
We would have liked to see a substantial beefing up of funding for the Energy Efficiency and Conservation Authority. After all if 20 to 30 percent of our electricity is still wasted because it would actually be cheaper to save it with better technology than to pay for it or build the power stations to generate it is that not a much more useful well to drill than the dry ones we are drilling out in the sea at the moment? We know that that energy is there to find we know what it costs and we just have to go after it. 
Would it not have been worth doing something to build capacity in the solar industry? More than 20000 new houses are built each year and hardly any of them are designed to make use of passive solar energy to heat themselves. It costs almost nothing unlike solar water heating that costs quite a bit. We just have to get it right when we design and build houses but we are doing almost nothing on that level either. 
We are still building houses that will be there in 80 years’ time which will cost an enormous amount to heat because they do not have windows on the north and do not have adequate insulation or adequate thermal mass. They are simply not built to solar principles at all. We could have been building capacity in the solar water heating industry by letting Government contracts in order to build up the scale of production and insulation and train the necessary people. The cost of the units would then come down and the private sector would install them as well. 
There are a whole lot of things we could be doing right now to plan for the end of the oil age—which will gradually happen over the next few decades—for us to be ready for it for us to have an economy that will work. Instead we just assume “$19 a barrel”.