The next oil shock? – Parliament research paper
New Zealand is highly vulnerable to oil price shocks that are nearly certain to occur in the next few years according to a research report published by Parliament last week.
The report states that another supply crunch is likely to occur soon after 2012, and high oil prices will be sustained in the future because low-cost reserves are near exhaustion. It warns that the world economy could suffer recurrent recessions as the price fluctuates.
“This report makes it clear that the Government’s decision to spend over $11 billion on horrendously expensive new expressways is short-sighted and irresponsible,” said Green Party Co-leader Russel Norman.
“Continuing to spend the vast majority of the transport budget on roads will only make us more dependent on oil, and more vulnerable to high prices.”
New Zealand’s economy is extremely vulnerable to high oil prices because our transport sector is so reliant on imported oil. Oil and vehicles make up 30 percent of our total imports.
The world’s oil production capacity may not be sufficient to match growing demand in coming years. The potential for short-falls arises from geological, infrastructure, and political/economic constraints limiting the ability of world oil production capacity to grow while demand continues to rise. If oil supply cannot meet demand a price spike may be triggered, with major detrimental effects on economies, especially those heavily dependent on oil imports like New Zealand.