'The pathological optimism of the media'

Only the Good oil news

Denis Tegg

Oil Shock Horror,

8 February, 2012

Radio New Zealand has broadcast a news item which typifies the pathological optimism of our media when reporting New Zealand's oil supply.

The story trumpeted how New Zealand could become a net oil exporter by 2030 if new oil fields are developed. The story was based on just one line in a Ministerial briefing paper to new Energy and Resources Minister Phil Heatley.

Never mind that those “oilfields” have not even been discovered yet, or that the predictions  are 20 years into the future, and are based on guesses based in turn on other guesses.

The real story which went unreported was in the very next paragraph of the briefing paper. -- New Zealand faces a steep DECLINE in domestic oil production for the term of this government and beyond.

“Note, however, that we are forecasting domestic production to decline over the next few years as existing fields such as Tui and Maari peak in their production, and before any new developments - which have a significant lead time - come on stream”

The MED officials also massaged this to a more optimistic message by describing a many-year-long decline as "short-term"?

There is even a graph confirming the decline, so the stark implications for New Zealand, for the term of this government and beyond, was staring the media in the face. 

In the same section officials tell the Minister more bad news which also goes unreported –

 “In 2010, mineral fuels (including crude oil) made up over 16 percent (by value) of total New Zealand imports. Between 2002 and 2010, the value of mineral fuels imports increased by 133 percent - despite the volume imported only increasing by 7 percent (this being driven by increasing global prices).”

The implications for our terms of trade are already huge. It costs NZ $8 billion annually to import oil. If oil imports rose another 133% in the next eight years (a very conservative estimate) our oil import bill will be nearly $19 billion by 2018. My earlier estimates here which came up with similarly big numbers.

We are quickly heading the same way as -

Greece which now spends over 5% of its GDP on imported oil and where petrol prices have doubled in just three years, leaving that much less to pay of its voluminous debt.

Or Italy where oil imports have risen from $12 billion-$55 billion in 12 years which is close to its current annual trade deficit, and a large contributor to Italy's parlous financial state.

It’s best that our media and politicians don't talk about such things though. We cannot have anything interrupting the good oil news.