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Budget Fails To Prepare For The End Of Cheap Oil

24 August 2004
Budget fails to prepare NZ for the end of cheap oil

In today's Appropriations debate, Green Co-Leader Jeanette Fitzsimons has told Parliament that the Government's Budget is a "house of cards" that will be blown down by the relentless rise of oil prices.

While there has been some media debate around Treasury's forecasting errors, the Greens are seemingly alone in Parliament in warning that oil will never be cheap again and that serious policy changes are needed to protect New Zealand's society and economy.

"Even though Michael Cullen has acknowledged that oil will never be cheap again, his Budget is built on the assumption that the oil price is going to return to US$19 a barrel for the foreseeable future," says Ms Fitzsimons, the Green Party's Energy and Transport Spokesperson.

"When he delivered the Budget in May, oil prices were nearly US$40 and have ballooned since to over US$46, so today's Budget debate is working off out-of-date information.

"I implore New Zealand's media to tell people the truth. The recent rise in the price of oil is not being caused by the threat to Middle Eastern supplies, its being caused by the rapid increase in demand in virtually every country, including a 40 per cent increase in one year in China, the second largest oil importer.

"That rising demand is against a background of gradual depletion. US oilfields passed their peak and have declined since 1970; NZ oilfields passed their peak around 1986 and have declined steeply since; world oil supply is expected to peak in the next decade if it hasn't already done so. Only hindsight will tell us exactly when. We are living in the last days of cheap oil and yet every area of this Budget assumes business as usual.

"As ever-higher oil prices push up the cost of international shipping and air freight, will people be able to afford food from the far side of the world? Is the Minister of Tourism planning to spend $60 million to promote NZ as a destination in the knowledge that air travel will be less affordable in the future? Will the infrastructure for energy-efficient public transport and rail, which more people will need as cars and trucks become less affordable, be built before the price of oil makes its construction prohibitively expensive? Where is the Budget funding for research into organic production, so that NZ farming still has a competitive advantage when the rising cost of oil-based fertilisers and pesticides makes them uneconomic?

"The solutions the Greens are putting forward to these challenges are common sense when the overall picture is properly taken into account. We are the only economic realists in Parliament.

"New Zealand is actually better placed to survive Peak Oil than many countries, but only if the full implications of increasing oil prices are widely understood and the relevant decisions are made in good time. This year's Budget is another missed opportunity to change course, lets hope its not the last."


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