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LETTER TO RT HON DAVID PARKER

by Dr John K Monro, 12 July 2006

 

Rt Hon David Parker,
Minister of Energy,
Parliament Buildings,
Wellington.

 

Dear Mr Parker,

I have communicated with you in the past on energy matters, and what I consider are the manifold and continued policy failures of your government in regard to energy issues, including global warming and oil depletion.

I have remained entirely unconvinced in the last few years by protestations from Pete Hodgson in reply to my criticisms about your department’s predictions in regard to oil price, and his claim that the likely peaking of oil would not be until 2030 or later. I found it highly amusing for instance that Pete Hodgson was telling me two years ago that oil would be priced about $20 per barrel until 2030, when we, and presumably he, were already pumping petrol into our cars with oil at $45 per barrel. Later he had the grace to admit that oil prices would indeed increase, to $35 per barrel, when the price was over $60!! The absurdity of this unreality in regard to your department’s oil price predictions still has to percolate through your collective consciousness.

I am reminded of this background to my concerns when I read a copy of your letter to Peter Lloyd of the 14th June, as later published in the oilcrash internet site [see David Parker - no different than the other Ministers of Energy]. It is obvious from your reply that you and your department are still basing your energy policies on our unrestricted access to oil to 2030, or even later according the USGS. Even Saudi Arabian oil ministers state the USGS estimates are “dangerously optimistic”. The USGS statistical method of oil production predictions has been thoroughly debunked by Colin Campbell. It is no wonder in this case that your energy policies are so bereft of vision, for instance that your government thinks that vast new spending on roads is going to solve our transport issues.

What I cannot understand is, knowing how completely and utterly wrong your department’s prognostications in regard to oil pricing has been over the last few years, that this hasn’t at least caused some pause for reflection as to why this might be. As I write this, oil is now $73 a barrel, and every time I have written over the last few years, the price has been substantially higher than it was the previous time I wrote. Is there absolutely no-one in your department who might harbour the slightest doubt about the prognostications of “peak oil” after 2030? How can you even begin to suggest that a product that was selling for about $10 per barrel just five years ago, now costing nearly $75, is the result of “fluctuations in price”? Some fluctuation, some price. Of course there are “fluctuations”, no-one who is concerned about our proximity to peak oil is suggesting there won’t be fluctuations, in fact wild swings of prices are precisely what Colin Campbell expects at the time approaching peak oil, but the simple fact is that the steady and relentless increase in oil prices continues, and this is the basic and underlying problem, not the fluctuations, which are short lived and unimportant. It seems that your department has yet to recognise this. I find this fact truly alarming.

Mr Parker, have you actually taken some time out to examine the question of “peak oil” and oil depletion yourself? Check out Colin Campbell’s site < http://www.peakoil.net/ >. Colin Campbell has been a whistle-blower to the oil industry and has been warning about the peaking of oil for many years, long before I took an interest in it. Just like I judge the value of a patient’s treatment by its proven efficacy, I judge Colin Campbell’s predictions by their accuracy and they have been accurate. Surely, Mr Parker, if he’d been out in his predictions by the thirty or so years that you and your department suggest, how could this be? The proof of Colin Campbell’s “predictions” is that many of them are now history and have been found to be true. Another well known expert opinion has been Matt Simmons, investment banker and energy analyst, who wrote the important book “Twilight in the Desert”, and who is especially critical of oil figures supplied by Saudi Arabia. These just don’t add up, according to Mr. Simmons. And who should we trust, an oil analyst of vast experience, who has made his millions out of the industry, or some Saudi Arabian prince, one of the 15,000 princes all dependent on the mirage of Saudi Arabia’s inexhaustible reserves, and who face revolution if the truth really came out? Kenneth Deffeyes, oil geologist and professor at Princeton University, has suggested we may already have passed peak oil production.

Just today, former National Iranian Oil Company executive, Dr Ali akhtari, has been reported as saying that the limit of global production has been reached. And, as he astutely points out, the economics of oil do not follow classical price vs. demand scenarios, the price of oil in the last four years has tripled, yet demand continues to increase, which in turn means that our future access to oil will be based on availability, not demand or price, in other words, rationing. There literally won’t be enough oil for everyone and, in the context of New Zealand, a pimple on the arse of the world, we might well be last in line.

You seem to be very keen to put your trust in the “experts” from the USGS and the IEA. But I am not so sure. For instance, you would think that at least a large oil company would be able to assess, very accurately, its own oil reserves, but you will know that just two years ago that Shell had to admit that it had overestimated its total reserves by 22%. BP’s reserves are hardly any more trustworthy, including as they do presently unextractable oil sands and shales. In regard to the IEA, in whom you place so much trust, you will know for instance that in late 2003 they were forecasting oil demand for 2004 at 79.6 million barrels per day, with a price of $24.25 p.b., the actual figures were 82.45 million barrels at an average price of $43.48. Additionally by the IEA’s own recent admission, they have now put forward a possible peak of production at 2013, fully twenty or more years ahead of figures that they were so resolutely defending just last year the outstanding significance of this volte face seems to have escaped you. I put my trust in my own examination of the issue, not in your figures, or your department’s figures, or some oil prince, or some foreign politician with his oily hands in the till. The figures are, for the most part, eminently accessible. Why should I trust the USGS or IEA when, by your own admission, they use data only accessible to these agencies. Don’t you think for something so important, that these agencies should be able to share their calculations with the rest of us, and especially people like you, responsible for the energy policies that will affect four million citizens? I think that you should do the same exercise; quite simply, your advisors are wrong, very wrong, have been proven to be wrong in regard to oil prices for several successive years, and that within a very short space of time they will be proven to be wrong about “peak oil”. Don’t expect that to save your neck as energy minister when the brown sticky stuff, and I don’t mean oil, hits the fan.

Do you truly believe that a near seven-fold increase in oil prices over the last few years is due to “limits in refining capacity and geopolitical issues”? Think about it, is it even remotely likely that if the oil companies actually considered that we could increase oil production capacity to the 120 million barrels per day that we are projected to need by 2020 that they would not be investing in new refinery capacity to accommodate this? The reason they are not is that they know that such projections are meaningless, and that to be building new refineries would be an exercise in futility. There is no sense in any claim that lack of refinery capacity is causing the oil price to increase, in fact, if this were true, the oil price would fall as all exporting nations could not find markets for their oil, oil tankers would be piling up in ports, pipelines would be being taken out of service. In fact none of these things are happening, oil is being pumped out of the ground as fast as it can be, everywhere, and being refined. The most cursory consideration of this fact would make this lie of the “lack of refining capacity” obvious. And as for “geopolitical issues”, it absurd, quite absurd, to state this as a cause of increasing oil prices. They are a cause of some fluctuations of prices, yes, but that’s all. How can it be “geopolitical issues”? In what way, shape or form are they any different from all the other “geopolitical issues” that the world has always had?

The last part of your letter concerns the things that your government intends doing over the next few years. All worthy, all needed. But, may I point out that I have heard about all these plans, almost ad nauseam, over the last few years, from your energy minister predecessors. Your government has been in office for nearly seven years, and these policies, that should have been implemented years ago, including by the previous National administration, have yet to see full light of day or practical application. It is long past time that you should be trying to assuage our urgent concerns by appeals to your “strategies”, when are we going to see your actions? It is all too little, too late. In regard to oil depletion, as in global warming, your policies have been entirely inadequate the recent budget gives the lie to your professed concerns, with its lack of investment in public transport as compared with the huge amount of money going on roads, the very antithesis of what is urgently required. It should now be patently obvious to anyone with a real understanding for what is happening in the world, and possessing a real vision for this country’s future for the next fifty to one hundred years, that your government’s response to “peak oil” and the related issue of global warming tinkering around with the “business as usual” model, including the continued economic imperative of “growth at any cost”, high immigration and intensive energy usage is now utterly useless as model for future progress. It will lead us down an energy and economic cul-de-sac from which, the further we progress down it, the harder it will be for us to reverse out of.

As James Howard Kunstler has said, what is particularly disappointing about our modern age, facing the problems we do oil depletion, global warming, overpopulation, ecological damage is the lack of quality of thinking in our leadership, business and the media, the very people who’s role it should be in society to provide that thinking.

The other day I was enjoying a glass of Montana wine, and I got to do some thinking myself (one’s thinking often does improve over a glass of New Zealand wine). In the last 20 or more years, the New Zealand wine industry has grown, from practically nothing, to a valuable trade for this country, providing some of the world’s best wines to the world’s most discriminating customers. Our wine exports of almost $500 million per year represents the collective endeavours and investments of thousands of individuals, working long hours, in all weathers, rising at the crack of dawn, and working to the last glimmer of day. Years of trial and error, failures and successes, hard work and painfully gained knowledge, are the underlying foundation and building blocks of this industry, in which this country rightly takes so much pride.

In the year to May 2006 our annual oil import bill rose $1.2 billion. In just five months we have blown every dollar that this country has earned from its wine exports, all that labour every pruned vine, every picked grape, every corked bottle gone to meet our reckless, incontinent and profligate use of oil. If I were a wine grower, thinking about this would want to make me spit the pips.

There is an urgency about oil depletion that is overwhelming, and your letter to Peter Lloyd makes it abundantly clear, that you, your energy advisors and the government, have yet to understand this. James Kunstler is right, you are not thinking. You are all guilty of a collective and willful naïvety of unprecedented proportions.

 

Yours sincerely,

Dr John K Monro