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by Steve McKinlay, 13th June 2004


“Sunday supplement” on National Radio
10.46am Sunday 13th June 2004


The economic Holy Grail for western nations including New Zealand is growth. Our lifestyles and living conditions, education and health-care all supposedly improve when growth is positive. What fuels growth literally is energy. Without energy there would simply be no growth, apart from human input, energy is both entirely sufficient and necessary for economic growth.

Accounting for almost half of all New Zealand’s energy use is oil. However there is an emerging realisation that the growth in demand for oil is almost at the point where the supply cannot keep up. The age of fossil fuels is about to peak after which production will slide into irrecoverable decline. I’m not talking about oil running out any day soon, what I’m saying is that the exploding global demand for oil is about to outpace supply with dire consequences.

The Peak Oil problem as it is termed is well supported by scientists, geologists and a few brave politicians. US Vice President Dick Cheney some time ago confirmed a two to three percent annual growth in demand contrasted conservatively with a three percent decline in production from existing reserves. John Anderson, Australia’s deputy Prime Minister only last week claimed on national radio, it is likely that in the next few short years global oil production will peak. Dr Colin Campbell founder of the Association for the Study of Peak Oil and Gas suggests that conventional oil production will peak about 2005, followed by all oil about five years later.

If Dick Cheney’s figures are correct and there is plenty of evidence to suggest they are, by 2010 the world will require somewhere in the region of 50 million more barrels per day. Unfortunately there is currently no 50 million barrels extra and it is unlikely that we will find the shortfall.

There simply have been no significant oil finds since discovery of the large Middle Eastern fields in the 60s. In fact we are globally consuming oil at a rate of almost five barrels for every one discovered. So what can New Zealand expect as this scenario unfolds? Any economist will tell you the result of demand exceeding supply is simple, the price will increase. With an expectation of growth in our economy we can expect to wear a one to five percent shortfall in oil before we begin experiencing a recession. A five to ten percent shortfall will see New Zealand descend into economic depression. At current rates of global demand within 10 years we conservatively might see shortfall of about twenty to twenty five percent assuming a peak around 2005.

Of course the social and economic impacts of this event occurring are profound. The age of industry fuelled by cheap energy it seems will begin to recede into history and life is likely to become, to borrow a phrase from Thomas Hobbes, “poor, nasty, brutish and short.”

One might wonder - why aren’t our politicians discussing this, why isn’t something being done? The reality of facing peak oil and its impacts involve a significant rearrangement of our belief systems. It is likely that politicians find it just to difficult to face, they are simply ignoring it hoping it will go away. Aldous Huxley reminds us however “Facts do not cease to be facts simply because they are ignored.” Or perhaps as one politician said to me and I quote

“The point is not that the events will not occur, but that the kinds preparations and precautions that a democratic government can take before the risk becomes so imminent that everyone recognises it, are so limited as to be a waste of time or worse.”

Being an eternal optimist I disagree. Iceland’s people and their Government have made the commitment to become independent of oil within a couple of decades, any preparations we make now will pay off in the future. New Zealand could be well placed to weather such a storm but only if we first acknowledge the problem. Preparations from there on in will involve re-arranging our society such that it is not dependent on oil. The last thing we should be doing of course is committing billions of dollars to roading systems that in all likely-hood will empty of drivers around about the time they are completed. Of course discussing the issue and raising public awareness will allow a debate to begin, the sooner the better. Whatever we do, we certainly ought to heed Dr Campbell’s solemn warning, “deal with reality, or reality will deal with you”.

c. Steve McKinlay, 2004


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