Why does NZ need renewable energy for transport?
Oil is a fantastic high energy and very portable fuel and currently it’s very cheap, in fact it has almost always been cheap and plentiful and we have built a good life with it. So what’s the problem?
Oil is a diminishing resource with volatile price and we rely on it almost completely for our vital transport and industrial requirements and it may not be with us forever. We have two problems with oil and one is price and the other is availability.
Volatility of price can cause huge fluctuations in economic performance for any economy so not having any alternatives poses a serious risk. Currently the price is low but an analysis of the cause can help predict the next rise.
Oil is a fantastic high energy and very portable fuel and currently it’s very cheap, in fact it has almost always been cheap and plentiful and we have built a good life with it. So what’s the problem?
Oil is a diminishing resource with volatile price and we rely on it almost completely for our vital transport and industrial requirements and it may not be with us forever. We have two problems with oil and one is price and the other is availability.
Volatility of price can cause huge fluctuations in economic performance for any economy so not having any alternatives poses a serious risk. Currently the price is low but an analysis of the cause can help predict the next rise.
The first point to understand is that there is almost no storage in the supply chain and so the system is very vulnerable to market forces. The world uses about 93 million barrels of oil a day and in volume this is 15 cubic kilometres or 450 cubic kilometres a month. This is a huge volume and there is just not that amount of storage in the world. For such a vital resource even a month’s supply is not much, so the system relies on a steady supply from oil wells to the vehicle in an uninterrupted stream.
The price of oil has recently slumped and we have to ask ourselves why such a valuable and scarce resource has suddenly become very cheap. In previous years there was a ‘swing producer’ who had an abundance of supply and if the price went too low could reduce output and the price would then stabilise upwards or, if the price went too high could increase output and it would then stabilise at a lower price level and help the world economy.
The price of oil has recently slumped and we have to ask ourselves why such a valuable and scarce resource has suddenly become very cheap. In previous years there was a ‘swing producer’ who had an abundance of supply and if the price went too low could reduce output and the price would then stabilise upwards or, if the price went too high could increase output and it would then stabilise at a lower price level and help the world economy.
In recent times the USA is the biggest consumer who needs a steady supply at a low price and Saudi Arabia is the main supplier and this symbiotic relationship has worked well. Saudi has umbrella military support and a ready supply of military weapons from the USA and the USA has oil.
The problem came when the USA developed fracking and was able to access huge amounts of oil and gas and increased its output enormously and this began to over supply the market. The swing produce, Saudi, was expected to reduce output to stabilise the price but naturally felt that their main customer, the USA, should continue to take supplies or cut production and therefore refused to cut output. Their rationale being that they had cheap oil and the USA had expensive fracking, short term oil. So these two big suppliers refused to cut production and the market has more oil it can use on a daily basis and this has caused a slump in prices. We might be enjoying it but how long will it last? Oil rigs and exploration are being cut to save money and they are not easily restarted.
Today’s temporary cheap oil is just a hiccup along the way with a diminishing resource, as we passed peak oil in 2008 and that was the end of cheap oil.
We are now squeezing the sponge to extract the last drops of more expensive oil.
So where does this leave New Zealand, which relies on cheap oil for its transport? The good news is that we have an abundant supply of renewable energy but the bad news is that we have no way of using it for transport. Our railways are in a bad state of repair and powered by oil and our trucks and cars are all powered by oil. So we are very vulnerable.
We are now squeezing the sponge to extract the last drops of more expensive oil.
So where does this leave New Zealand, which relies on cheap oil for its transport? The good news is that we have an abundant supply of renewable energy but the bad news is that we have no way of using it for transport. Our railways are in a bad state of repair and powered by oil and our trucks and cars are all powered by oil. So we are very vulnerable.
Despite the availability of electric transport and a vast supply of cheap domestic electric energy New Zealand has made no attempt to make use of it for transport and it takes up to thirty years to upgrade railways and introduce electric lorries, buses and cars.
We need to get started now.
We need to get started now.
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