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Energy – The Outlook For 2005

FOR IMMEDIATE RELEASE
9 February 2005

Energy – The Outlook For 2005

The Government and industry have long under-invested in the energy sector and are now faced with an expensive catch up.

Chris Stone, an energy expert writing in Outlook: 2005, says that since 1985 the ‘corporatised, privatised market economy’ has coasted on a buffer of earlier infrastructure investment.

Outlook: 2005 is an overview of the year ahead published by the Trans Tasman political newsletter.

“With the buffer now worn thin, we are facing an expensive catch-up phase. Market forces now guide the energy markets (and indeed the economy), matching supply with demand principally through price – excess demand (or inadequate supply) will drive prices up, and vice versa. Yet, while energy prices (oil, gas and electricity) have recently soared, this has yet to stimulate adequate investment in new supply,” Stone writes.

He calls on government to set a clear policy framework, and address the roadblocks to investment (not least of all the risk arising from its interference in the markets).

Under-investment in electricity generation has a parallel in gas supply. Stone says the past 30 years have been marked by under-investment in oil and gas exploration, and consequently inadequate gas reserves to meet current demand (let alone growth).

He says the lack of gas has stalled downstream capital investment by industry, with clear consequences for economic growth and employment.

“Our economic growth has depended on greater oil-powered mobility and flexibility – planes, trains, trucks and cars. We import 75% of our needs (and rising) and simply pay the price set on tightening global markets.

“Weaning ourselves off oil will come at a personal and economic cost. Meanwhile, coal offers New Zealand huge potential for low cost, enduring energy supply, yet despite the promise new technologies will address greenhouse gas concerns, Government policy remains opposed to its use.”

Meanwhile, Outlook believes it is unlikely that 2005 will herald any supply crisis, as long as hydro lakes remain charged.

But it will be a year of the economy adjusting to higher energy prices – at the petrol pumps, and in monthly electricity and gas bills.

“For business and industry, greater investment in energy efficiency may become justified. But conservation comes at a price, and may adversely impact economic activity,” Outlook says.

Trans Tasman Publishing Group is headed by Christchurch businessman Max Bowden. In its specialised information services stable are The Main Report, Trans Tasman, Executive Health & Wealth; and New Zealand Energy & Environment Business Week. The publishing group has been operating since 1968 and has subscribers worldwide, with particularly strong readership in Australia, the UK and U.S.

* Chris Stone is an executive director with Wellington-based investment and sharebroking firm McDouall Stuart. He has 20 years background in the energy sector.

ENDS

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