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24th August 2004


Jeanette Fitzsimons (Co-Leader-Green) to the Minister of Finance:
«Has Treasury revised its assumption that crude oil prices will ease back to an “equilibrium” price of US$19 per barrel; if so, what are the Government’s current assumptions for oil price trends between now and 2020?»

Hon Dr Michael Cullen (Minister of Finance):
«Treasury is yet to begin its revised forecasting round for the December Economic and Fiscal Update. When that happens it will specifically identify the need to revisit the assumption for oil price trends.»

Jeanette Fitzsimons:
«What planning, if any, is the Government doing to reduce the dependence of the New Zealand economy on oil, in light of the fact that the price of light crude today is nearly US$48 a barrel?»

Hon Dr Michael Cullen:
«My colleague the Minister of Energy is working hard on sustainable energy options. It would be helpful if some of those options, such as hydropower and wind power, were more enthusiastically supported by the Green Party.»

Rodney Hide:
«Given the concern over high petrol prices, has the Minister sought the advice and guidance of Mr Jim Anderton, the self-styled “Minister for Lower Prices” — as he told this House on 30 March, 2000 — or is Mr Anderton missing in action on this one, as well?»

Hon Dr Michael Cullen:
«Mr Anderton has certainly expressed concerns to me about the impacts of rising oil prices. Perhaps we could all hope that the various elements in this House will use their best endeavours to ensure, for example, that the Middle Eastern situation settles down.»

Jeanette Fitzsimons:
«What does the Minister understand by the term “peak oil”, and when does he expect it to occur?»

Hon Dr Michael Cullen:
«I have to confess that, for once, the member has floored me; I do not understand what is meant by the term “peak oil”.»

Jeanette Fitzsimons:
«Does the Minister agree, then, that the price of any commodity is likely to rise over time, when demand is increasing exponentially while supplies are being restricted by physical limits; and does he agree that oil is a commodity that has just such characteristics?»

Hon Dr Michael Cullen:
«In theoretical terms, yes; in practical terms, no. We have yet to reach the point where it is at all clear that new discoveries in oil — and I now think I understand what the member was getting at before — fall below the level of the projected demand for oil. At the present time, the production of oil is actually outrunning demand, and stockpiling is occurring. Prices are high because of, primarily, the uncertainty in the Middle East, plus the growing demand from China, plus the somewhat confused situation — to put it kindly — surrounding oil and gas companies in Russia.»

Jeanette Fitzsimons:
«Has the Minister been advised that the current oil demand is 81 million barrels a day and the total capacity of the world’s oilfields to produce oil is 82.5 million barrels a day; and does he think that that provides sufficient headroom for demand to continue to increase — for example, with China’s 40 percent increase in demand in the last year?»

Hon Dr Michael Cullen:
«Clearly, therefore, the member has confirmed what I have just said: supply is actually exceeding demand at the present time. And, as prices rise, that will encourage both new exploration and also new exploitation of known reserves that were previously uneconomic to exploit — for example, the extremely large Canadian oil shale reserves.»

Jeanette Fitzsimons:
«Has the Minister been advised that for some time now oil discoveries have been running at the rate of one barrel for every four that are burned, and how long does he think that that can continue; further, has he been advised that Canadian shale and tar sands oil will be extremely expensive compared with current supplies, as well as a lot dirtier?»

Hon Dr Michael Cullen:
«Certainly on the last point, given the nature of the area there are severe environmental issues, and exploitation would certainly be more expensive. But it does seem to me rather odd that a Green Party member would bemoan a rise in price for a limited product.»



Minister of Energy — December 20th, 2002


Associate Minister of Energy New Zealand Labour Govt 2001-2004