Why the Petrol Tax is Good Thing

Friday, 4 March 2005, 11:19 am
Press Release: Powerless New Zealand
3 March 2005, Wellington

Our Government still believe that oil will return to US$20 to 25 dollars a barrel according the Ministry of Economic Development’s website. This blind faith in the face of Adnan Shihab-Eldin, OPEC secretary-general’s claim yesterday “I can’t rule out the rise of a barrel of oil to US$80 in the coming two years” is laughable. Akin to closing your eyes at a busy intersection and pulling out hoping for the best the Government is playing dice with New Zealand’s future in maintaining such absurd beliefs. Oil will never return to 20 dollars a barrel. Cheap oil is over!
The question on the average SUV driving punters lips is why? Why should we have to pay such high prices for petrol when oil companies are making record profits? The answer to this is obvious to any first year micro-economics student. Supply and Demand.

The ugly fact that is becoming more evident as each price spike passes is that supply is increasingly unable to keep up with demand. Or, that demand for oil is about to surpass the available supply. Globally we are (almost) consuming more oil than we can produce. Growth in non-OECD countries grew at an astounding rate between 1995 and 2004, developing countries such as India, China and the South American nations are trying to catch up with the western world. Over the last 10 years the world has grown it’s oil consumption by an astonishing 10 million barrels of oil per day. Is this growth sustainable? Quite possible, at least in Non-OECD countries such as China. Demand is likely to grow just as fast in 2005. Will the supply keep up? Highly unlikely.

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