13 July 2007

Global oil experts put kibosh on Cullen's roading empire

This week's medium term oil report by the International Energy Agency should be the kiss of death for Michael Cullen's $1.5 billion spend up on roading, Green Party Co-Leader Jeanette Fitzsimons says.

"The IEA is the conservative agency that the Government has put most store upon when it comes to statements about peak oil, and for forecasts of oil supply and demand. The IEA is now telling us in this report that the world is headed for an oil supply crunch within the next five years that will send oil prices soaring even higher, " Ms Fitzsimons says.

"The Government's priorities need to reflect this reality. Rather than huge injections of funds into roading, the focus should be on better public transport, upgrading rail, and on facilities for cycling and walking.

"The IEA has taken a hard look at world economic growth, the related demand for oil and the likely growth in oil and gas supplies and decided that it doesn't add up. It estimates that oil demand will hit 95.8 million barrels per day by 2012, up from 81.6 million bpd this year. At the same time as demand is rising, OPEC production is expected to fall 2 million barrels a day by 2009, and by 800,000 barrels per day from producers beyond OPEC.

"The mature fields are in decline. As the report says : ' The forecast suggests the industry needs to generate 3 million barrels a day of new supply [ie, new discoveries] just to offset the annual declines.' Declines are happening as oil demand in the forecast period from China and India is forecast to rise sharply.
"The world's relatively untapped oil reserves to meet this rising demand are located in parts of the world where geographic extremes ( hurricanes in the Gulf of Mexico ) or civil unrest ( war in Iraq, oil nationalization in Russia/Venezuela) will boost the cost of extraction and send oil prices beyond their current levels. This will put further pressure on inflation and interest rates.

"The Government is ignoring the implications and doing no visible forward planning for the coming oil crunch. Michael Cullen has just embarked on the biggest road building spree in the nation's history. On television last night, Climate Change Minister David Parker spoke only of a need to reduce the growth of climate change emissions - and not the rate of emissions themselves or the behaviours that generate them.

"New Zealand is too far from its global markets to keep on ignoring the impact of declining global oil supply and chronic sky high oil prices on our lifestyles and economic wellbeing.

The IEA has sounded the alarm, and the Government needs to start listening. It cannot continue to rely on a previous IEA forecast that oil supplies will peak in 2037. Nor can the Government rely on biofuels to fill the gap. The cost of biofuels, the IEA notes, is rising as they compete for productive land with food products." For more information:

ENDS

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