Top Scoops

Book Reviews | Gordon Campbell | Scoop News | Wellington Scoop | Community Scoop | Search


Gordon Campbell on the EQC’s funding woes, and peak oil

Gordon Campbell on the EQC’s funding woes, and a peak oil update

So, it seems, the Greens were right all along – a special levy to fund the costs involved with the Christchurch earthquake still makes good sense, if only (this time around) to replenish the funds available to the Earthquake Commission. Yesterday, it became apparent that the likely cost of the Christchurch rebuild had risen by a massive $4 billion.

This blowout means the EQC couldn’t cope with an additional major disaster (ie anything costing over $2.5 billion) and the government would have to pick up the tab, directly. There are three options on the table : (a) a special levy on all taxpayers (b) a further additional charge attached to insurance premiums already expected to rise significantly, or (c) a rise in income taxes.

One would have thought some evaluation would be being carried out on how much each method might reasonably raise, and how long they would take to do it. (One would hope that the government would also be alert to possible price gouging by insurance companies and re-insurers, but lets not dream the impossible dream.)

The recoupment time is crucial. After all, it took decades to amass the funds that the EQC is now spending in Christchurch, and a fresh catastrophe could arrive tomorrow. Superficially, an insurance premium surcharge does have a nice, user-pays ring to it – but in the real world, the reluctance of insurance companies and re-insurers to extend insurance cover to new buildings is already stalling the rebuilding of the city.

Currently, people in Christchurch in particular would struggle to afford a hefty surcharge on top of their expected rise in premiums – which would throw the burden onto the relative few able to pay, in a situation where there is now a big question mark over the willingness of the insurance companies to meet their side of their bargain within any realistic timeframe, if push ever came to shove in a fresh disaster. Given how the insurance companies ( and their re-insurers) continue to behave in Christchurch, there is going to be stiff public resistance to any purely insurance-based solution to EQC’s future problems.

That leaves the other two options: a special earthquake levy on all New Zealanders, to replenish the EQC’s coffers, or a hike in income taxes to do likewise. One advantage of doing it via income taxes is that this could be done progressively – and would enable some clawback of the recent, plainly unaffordable round of tax cuts whose benefits were disproportionately enjoyed by the already wealthy, and which created the revenue shortfall now serving as a pretext for cutting public services and jobs. Yet just like their counterparts within the US Republican Party, the Key government is as averse to tax hikes (for the wealthy) as a vampire is to garlic – so rational evaluation of that option is never going to happen.

Which means the special levy should be the only realistic option. Having trashed the Greens suggestion of this option before, it would be interesting to see how the government may differentiate it in future. Time is a-wasting, though. This time, the government shouldn’t be test- marketing the likely political fallout from each options on the table, before coming to a decision. For once, it needs to govern for the interests of the country, and not in terms of which option may do the least harm to its own political interests.

Peak Oil update Here’s a useful Forbes magazine article on the prospects facing the oil industry. Profits are up, big time – as the article says, you’d expect that when the price is up at $120 a barrel for Brent crude – but the oil production outlook, especially for non-OPEC production (which accounts for 31 billion of the 86 billion barrels per day being extracted) is not quite so rosy.

Production for non-OPEC suppliers is down by 4%, while OPEC production is up by 2%. So does that balance out? Not for long, if at all. Not when the average yield from some of the big fields, as Forbes says, is declining by 5% annually.

Here’s the gist of the story:

So what’s going on? Is Peak Oil here, at least in the non-OPEC part of the world? Maybe so. “In identifying mega-themes, we have argued that the shift from the 20th to 21st century represents the end of the oil age and the beginning of the global electricity age,” writes [Deutsche Bank analyst] Paul Sankey. “The concentration of remaining (abundant) oil reserves into OPEC hands derives an obvious corollary: the end of growth from non-OPEC supply.”

The supermajors are finding it harder and harder to pry away the remaining megaprojects from state-run oil companies. Of the biggest OPEC members like Saudi Arabia, Iran, Venezuela and Iraq, only the latter is eager to bring in the majors to help develop reserves. Add in the fact that natural decline rates on big fields average 5% a year, and it will become ever harder for Big Oil to stay big. Christophe de Margerie, the pragmatic chief executive of French giant Total, believes that global peak oil will hit within five years….

Not that you’d know it, from the way transport planning here is still being based around the perceived needs of the private motorist.


© Scoop Media

Top Scoops Headlines


Gordon Campbell: On The Lockdown, Masks And Aerosol Transmission

Ironically, our relative success in suppressing the exponential spread of Covid-19 is only increasing the pressure to ease back from those measures, on a regional basis at least. We seem set on course to start tentatively emerging from lockdown in about ... More>>

Gordon Campbell: On Wage Cuts, And The Listener’s Demise

Various levels of across the board wage cuts – 10%? 15% ?- are being mooted for workers in some of our larger firms, in order to help the likes of Fletchers, Mediaworks etc survive the Covid-19 crisis. It is extraordinary that unions should be having ... More>>

Gordon Campbell: On The Use Of Existing Drugs To Reduce The Effects Of Coronavirus

So now, we’re all getting up to speed with the travel bans, the rigorous handwashing and drying, the social distancing, and the avoidance of public transport wherever possible. Right. At a wider level…so far, the public health system has ... More>>

Gordon Campbell: On Oil Market And Regulation Crusades

Safe to say, Vladimir Putin did not expect the response he has received amidships from the Crown Prince of Saudi Arabia. Earlier, Russia chose to walk away from the OPEC talks in Vienna that were aimed at reaching an agreement on how to reduce world oil production (and protect oil prices) in the light of the fall in demand being caused by the coronavirus. More>>

Binoy Kampmark: Strong Man Legacies: Burying Mubarak

Reviled strongmen of one era are often the celebrated ones of others. Citizens otherwise tormented find that replacements are poor, in some cases even crueller, than the original artefact. Such strongmen also serve as ideal alibis for rehabilitation ... More>>

Caitlin Johnstone: Humanity Is Making A Very Important Choice When It Comes To Assange

The propagandists have all gone dead silent on the WikiLeaks founder they previously were smearing with relentless viciousness, because they no longer have an argument. The facts are all in, and yes, it turns out the US government is certainly and undeniably working to exploit legal loopholes to imprison a journalist for exposing its war crimes. That is happening, and there is no justifying it... More>>

Gail Duncan: Reframing Welfare Report

Michael Joseph Savage, the architect of the 1938 Social Security Act, wouldn’t recognise today’s Social Security Act as having anything to do with the kind, cooperative, caring society he envisioned 80 years ago. Instead society in 2020 has been reduced ... More>>

Gordon Campbell: On 22 Short Takes About Super Tuesday

With obvious apologies to the Simpsons….Here’s my 22 short takes on the 14 Super Tuesday primaries that combined yesterday to produce a common narrative –Bernie Sanders NOT running away with the nomination, Joe Biden coming back from the dead, and the really, really rich guy proving to be really, really bad at politics... More>>


  • PublicAddress
  • Pundit
  • Kiwiblog