As the last stop on the global supply chain for oil and diesel, New Zealand should be the first country taking pre-emptive steps to conserve energy use. Arguably, we could also be test-flying a bartering process – our food for your oil and diesel – with countries blessed with better reserves and/or more secure lines of supply.
Instead, the public is being left with a mounting sense of dread and rising fuel prices on one hand, and a “so far so good” series of smiley face messages from the government on the other. This morning on RNZ for instance, PM Christopher Luxon was still painting this crisis as being mainly a distribution problem (i.e how to get all that fuel around the country to where it is most needed) rather than as a looming existential problem of supply. Meanwhile, the likes of J.P Morgan have been telling us on the weekend that oil supplies to Australia and New Zealand might cease as soon as April 20.
This isn’t a revelation. Two weeks ago, this column was estimating that mid-April would be the likely crunch date for our supplies of oil and diesel. Either the Luxon government is (a) incapable of grasping the severity of the situation and/or (b) is unwilling to inform the public of the challenges that the country is about to face. Either way it has been a failure of leadership. In the process, the coalition government is making Labour’s early, decisive response to the Covid crisis look very, very good by comparison.
So far, the only concrete measure that National has taken – the up to $50 a week subsidy, restricted to a select group of “squeezed” middle income working families, has looked more like an election bribe in the National Party’s self-interest, than an adequate response taken in the nation’s best interests.
For week now, other countries have been talking pre-emptive steps to reduce energy use. In Australia, the state of Victoria has (for the month of April at least) made public transport free in order to reduce petrol consumption. Several countries – Spain, Sweden, Portugal, Brazil, India and Vietnam have cue petrol taxes to minimise the impact of rising petrol prices on household incomes.
South Korea, leading by example
Reportedly, South Korea supplies 48% of New Zealand’s refined oil and diesel. On the weekend, it stopped the exports of naptha – among a range of other uses – that is essential to the production of plastics and high octane petroleum. Worse may come. South Korea has long been on good terms with Iran – reportedly, there is a “Tehran Street” in Seoul and a “Seoul Street” in Iran’s capital. Since the war began, Iran has gone out of its way to declare South Korea to be a “non-hostile country.”
Keep in mind though, that South Korea has (for weeks) been taking a whole range of emergency steps even though – by recent estimates – the country had 208 days of crude oil reserves already stored onshore. At the most, we have roughly 40-50 days of reserves of petrol and diesel.
Even so, for the past month South Korea has been steadily putting in place a range of pre-emptive measures. Early on, it announced plans to subsidise the cost of oil tankers using longer routes around the Cape of Good Hope, in order to avoid the Red Sea/Strait of Hormuz conflict zones. As long ago as March 9, the South Korean government announced a price cap on the domestic price of fuel, to ease the cost of living crisis. It also implemented a 100 trillion won ($67 billion) market stabilization program to cushion the impact of the crisis on South Korea’s economy.
By mid-March, the Seoul government had publicly announced the creation of five ministerial “emergency entities” to address particular aspects of the looming crisis:
They will be dedicated to stabilizing consumer prices, addressing the potential crude supply crunch, curbing financial market volatility, supporting marginalized groups and navigating external uncertainties through diplomatic coordination.
The contingency measures South Korea has taken to mitigate the worst-case scenarios include:
..The [South Korean] government has mandated a five-day vehicle rotation system for public institutions, restricting use by license plate numbers. The system will remain voluntary for the private sector, while promoting 12 energy-saving measures for the public, including greater use of public transportation and appropriate indoor temperature settings. If conditions worsen, the government plans to consider extending the mandate to the private sector
In addition, and in recognition of the fact that the war’s impact is likely to spread, the government in Seoul has also been actively seeking to co-ordinate its own measures with those in the broader corporate sector :
The government has asked 50 major petroleum-consuming companies to draw up energy-saving plans. It will also recalibrate the energy mix to curb liquefied natural gas consumption, including easing constraints on coal-fired generation and restarting some nuclear reactors now in maintenance.
Meanwhile, at home… zzzzzz
Now, it may be that our own government is working behind the scenes to similar ends. If so, it certainly isn’t sharing these efforts with the New Zealand public. As a result, if the worst case scenario does hit around the end of next month, it will be an unnecessarily steep adjustment curve for everyone.
Even if we move to step two of our four point response plan, our government will then only “encourage” homes, businesses and the public sector to “consider” ways to conserve fuel. Lobbyists like Simon Bridges of the Auckland Chamber of Commerce are urging the government not to encourage working from home. What might come beyond stage two is anyone’s guess. New Zealand appears to be sleep walking into a crisis, led by a government unwilling (or unable) to inform the public what the likely outcomes will be and how it would manage the worst case scenarios, should those come to pass. As recently as three days ago, we were still fumbling for how all that might work:
The higher phases are still under consultation. Phase 3 would see fuel prioritised for life-preserving services and phase 4 would see stricter intervention in fuel distribution.
Footnote: The best analysis I’ve seen of the government’s failure to manage and lead an informed response to the fuel crisis is this thorough – and thoroughly disturbing – article by Nathan Surendran. It is essential reading.
Sounds of Silence
Gia Margaret’s music is so deliberately un-assertive, it is easy to overlook, for louder, brighter options. Yet IMO she manages the difficult feat of making quiet music compelling. While the lyrics are simple and direct, they also cut to the bone, but not in a sad sack way. A solid reserve, and self-deprecating humour are never all that far away. Here for instance, is a lovely single from her new album, about trying to find time to be a good person, when a friend makes demands:
I first came across her music around the Covid lockdown. Since then, she lost her voice entirely for a few years in the wake of a tour, put out an instrumental album, and has finally found that her voice is coming back. Here’s an early single. It is the gentlest break up song imaginable. Later in the lyrics, comes the realisation that they would no longer be sharing the rituals of togetherness…like birthdays. Or caring for an animal. It may sound twee, but in her hands, it isn’t.