The last days of cheap oil?

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Arno Gasteiger

A year ago, there was great concern that New Zealand might be entering yet another energy crisis. And by the beginning of February 2004, what looked set to be another long dry summer suggested more problems lay in store this year. In fact, an unu­sually wet autumn and early winter have pretty much filled South Island hydro lakes to capacity. Nonetheless, energy crises seem to be becoming an annual worry, made all the more likely by the abandonment of the Project Aqua generation scheme on the Lower Waitaki, together with the unlikelihood of conservation sites being sacrificed to hydroelectric­ity dams on either the Buller or the West Coast.

Not only do we face a hydro generation shortfall that is now regularly anticipated, we need to prepare for a larger crisis we seem blissfully unaware of. This larger crisis, over which we have virtu­ally no control, is based on global oil production peaking, either this year or very soon—the Hubberd Peak that has been forecast for some decades now. Every year the world now burns something like four times as much oil as it finds, and the easy finds have all gone along with the readily accessible reserves. There will, of course, be oil for a good while yet, but as it becomes scarcer and more expensive to extract, so its price will rise. Long before oil runs out, this country, along with many other small nations, must face the twin problems of how to afford an ever-more expensive product and how, more importantly, to secure supplies at any price as the big play­ers compete for an ever-scarcer and more costly resource. Worse yet, as the supplies begin to wind down, newly industrialising countries such as China and India will add to an al­ready unsustainable global demand. Worse even than that, the very large and accessible reserves are in the powder keg nations of, Iraq, Saudi Arabia, Iran and their smaller, vulner­able neighbours such as Kuwait. It would be a brave prophet indeed who predicted long-term security of supply from anywhere in the Middle East, and, as recent events in Iraq have shown, even an occupying power cannot guarantee the integrity of pipelines and other facilities.

The New Zealand economy relies heavily on two energy depend­ent industries, primary production and tourism. Modern agriculture is fuel-hungry, as is forestry; and our agricultural products rely on cheap international transport over long dis­tances. As transport costs rise, even the most effcient remote producers lose out to local suppliers.

Other areas of primary production, aluminium smelting, for example, are fantastically consumptive of energy, with Tiwai Point alone taking a city’s worth of hydro generation. In the same way, tourism only really took off when cheap air transport, using wide-bodied jets, emerged in the late 1970s. As recently as 1975, New Zealand had only 250,000 interna­tional visitors a year, compared with more than two million today. There is no alternative form of travel that is as fast or as cheap as the jet aircraft. For an island nation, remote from its main markets, nothing else can begin to compete. Not only that, but when overall household costs rise as the price of fuel rises, long-haul holidays will cease to be affordable. Tourism is a huge economic success story for New Zealand, but it could decline even faster than it has grown.

I am not an energy supply special­ist and perhaps I am missing some­thing obvious, but it does seem to me that we are facing a major prob­lem, perhaps not in terms of total en­ergy supply, but certainly in the area of liquid fuels. And we seem not to be doing a great deal about it. There are certainly alternative sources of electrical generation available within New Zealand—indeed, we may be one of the better-off countries in the longer run. Wind power schemes are already being developed and there is room for many more. Solar col­lection is also an option, especially within the clear and sunny environ­ments of the central South Island or even just on house roofs.

We have substantial hydro capac­ity in operation and the opportunity to develop more if people are willing to compromise on environmental values. We have extensive coal reserves although there are attend­ant global warming and pollution problems, even with modern tech­nology. On the other hand, natural gas seems likely to be exhausted relatively quickly even if replace­ments for Maui are found. Even the unthinkable—nuclear generation—is an option; France and Britain, for example, have had accident-free nuclear generation for decades now and there is no reason why Auck­land’s power supply should not be derived from nuclear power, at least in part. Geothermal energy is an­other option, again at some consid­erable cost. All in all, even in crisis conditions, it looks unlikely that we will run out of electricity and es­sential power could be maintained, albeit at a considerably higher price than now. In this regard, life in New Zealand would not change. Sensible conservation measures could also help and there is a great deal more that we could do. Some parts of the country were able to make signiÞ­cant savings during the last serious power crisis and there is no doubt that these could be made permanent if circumstances demanded.

Personal transportation seems to be the area that will inevitably become dramatically different. If im­ported petrol supplies wound down, it would be possible to maintain a degree of communication by creat­ing a network of electric railways between the main centres. Electric trams and trolley buses could oper­ate in the cities, as they have in the past. There is no doubt that fuel cells will permit some motor vehicle travel and major car manufacturers are exploring such technology right now; cars will run, but possibly at a much greater cost. In the same way, hydro­gen fuel can be developed and in many ways, hydrogen is safer to use than petroleum and certainly much cleaner burning, but substantial amounts of electricity are needed for its production—and electricity sup­plies are already under pressure.

Liquid fuels can be developed from a number of other sources, but they, too have their constraints. Biomass, in the form of rape oil or sugar beet can yield liquid fuel, but to service current vehicular demand would require a vast area of agri­cultural land. No doubt the Think Big plans for Southland and Central Otago lignite Þelds could be revived, but they, too, require high fuel prices to be economic and so it goes on. Of course, there are alternatives, but they will all cost a great deal more and none seem able easily to meet existing demand. Liquid fuel will almost inevitably become expensive and scarce.

We have become dependent on cheap fuel and inexpensive personal transportation. Our cities are built for the car and our cities, in this now highly-urbanised nation, dictate our patterns of life. Today’s suburbs are simply built at too low a density for effective public transport to operate except at much higher prices.

Modern trends, such as the huge demand for lifestyle blocks and the growth of seaside commuter settle­ments, could not be sustained if fuel was expensive. The whole phe­nomenon of de-urbanisation, where people live away from the city, could become untenable. Long-distance driving to work could become hugely costly. Modern proclivities, such as routinely driving the children to school, or children having cars and driving themselves to school once they are of age, would have to change. Patterns of shopping might have to revert to those of the 1950s. Big supermarkets and large malls have replaced the corner shop, but they depend upon easy and cheap car access, something that cannot last. In the rural sector, the destruc­tion of the service base of small rural towns has meant that country people are wholly reliant on the car to ac­cess even the most basic facilities.

Today, this country is debating big issues—genetic engineering, global warming and the status of the foreshore among them, but poten­tially, the coming energy crisis is the biggest of them all. Imminent oil scarcity has the capacity to devas­tate our economy and to physically isolate us from the rest of the world in ways not seen since before WWII. We could return to a level of mobil­ity similar to that experienced by our grandparents. There is no doubt that there will need to be dramatic and expensive changes to our cities and to our ways of life. They will need to be planned for and much of the necessary infrastructure will need to be built and paid for. Clearly, this is best done while there is time and the economy can stand the cost. Once the problems become obvious, it may be too late or too expensive to respond.

Strangely, while there is national discussion of sorts, it is uncoor­dinated and usually low key and understated, and even energy policy is discussed in terms of transmitted power rather than automotive fuel. If this is the year in which oil starts to become scarce, surely it is already past the time when this should be a major national concern.

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