Rates rise because oil prices rise
Oil price rises are the single biggest factor in a proposed rates increase discussed today by the Greater Wellington Regional Council.
The proposed rates increase for the 2008/09 financial year is 6.8%. Rising transport costs, in particular diesel to fuel the region’s buses, account for 40% of the proposed rates rise. However, ratepayers will not pay for the entire transport cost increase, and the Regional Council will also be consulting with the public on a proposal to raise fares by about 10% on 1 September this year. This would be an average increase across the Metlink network, and would impact differently on different fare zones.
[frog: I finally found the link to my quote here.]
If our government agencies were doing an even slightly better job of forecasting the price of oil, as there is voluminous data and research that says the price will only go up, the Wellington Regional Council might be able to plan for these increases and soften the blow to ratepayers. They might even be able to adjust the public transport and urban planning to accommodate an oil constrained future! Wouldn’t that be amazing?
Last year I reported that in the House, Jeanette confronted Treasury and the RBNZ here, and the MED here about their appalling forecasting. Today’s announcement is the fruit of their unwillingness to lift their heads from the sand and confront the realities of a finite resource.
February 25th, 2008 at 5:45 pm
I note that despite also running a large electric public transport network (trains and trolley buses), recent price rises in electricity must be relatively small compared to fuel rises and don’t rate a mention (sorry about the pun).
About time we got electric light rail from the railway station to the airport hey?
February 25th, 2008 at 7:43 pm
q said: About time we got electric light rail from the railway station to the airport hey?
And in Auckland too, except heavy rail probably more appropriate there. It is absolutely ridiculous that, as someone who lives about 30km from Auckland airport, it takes 1 1/2 to 2 hours to get there by public transport. So most people still drive there and park up (can do that in 35m except at peak hour) for 1 or 2 day trips, or, even worse, get someone to drop them off or pick them up by car, with the resultant wasted vehicle travel in the other direction.
Rail into the airport from Puhinui on the Auckland Southern line would be as cheap as chips. More expensive would be linking to the soon to be recommissioned Onehunga line, but to make it really effective it should also be extended from Onehunga to join the Western line at Avondale or New Lynn. That would negate the demand from (some) West Aucklanders for a second airport at Whenuapai.
Auckland needs two airports like a hole in the head - get some decent public transport into the one they’ve already got.
February 25th, 2008 at 8:30 pm
Before they recommision the Onehunga line (for all of 50 people who may use it as you would need a transfer in Penrose for points North and South. Plus access to the Sylvia Park shopping and entertainment centre would require a further transfer in Otahuhu or Britomart.
Why do the Onehunga line when the budget for double tracking the NAL to Waitakarei has not even been spent and is already some 2 years late.
The Onehunga line is 70 lb track and will need total replacement to 90 lb rail before you can run trainsets. Plus the Onehunga station is where? Nothing there but a timber yard. Nearest public land is 500 metres from the shopping centre.
Surely electrification is a higher prority, not to mention new trainsets, plus (and very importantly) better security on trains and stations for after dark use of public transport.
Know many people who will not get out of their cars after dark to use public transport. Pretty scary stuff.
The Onehunga line would only be viable if it looped around along the SH20 route to join the NAL line. Then extend that loop throught the Waterview Tunnel all the way back to Britomart. (underground and underwater).
Long term another rail tunnel should be extended from Britomrts under the harbour and onto the North Shore bus way. That way we can get rid of those diesel burning North Shore busses and used the roadway to run trains from Albany to Britomart and points south.
Auckland will never have a second airport as you need an operator to fly in and out.
Think Air New Zealand or Quantas will fly from two airports? Not in a million years. Expect a 737 to take off half full from Whenuapai and land in Mangere for the other half of the passenger load before taking off for Wellington? Not going to happen.
Might get Virgin Blue but they have already said, ratepayers need to build the infastructure and we “may” consider Whenuapai. So North Shore ratepayers, are you ready to stump up the dollars?
February 25th, 2008 at 10:57 pm
Yep, this just highlights the complete wrong-headedness of insufficient investment in electrification and public transport in general.
I want to hear the Nats argue against electrification or increased public transport. Surely they should be all about opening up options to give people a choice to save money? Or are they going to try and say if they privatise more stuff it’ll get electrified, just like the rail tracks did?
February 25th, 2008 at 11:10 pm
Gerrit & Ari - I agree with you both.
My reference to the Onehunga line was because my understanding is that it is to be recomissioned - not because I think it should be without the other infrastructure you suggest that hasn’t been decided on.
Although I’m not yet convinced re the Waterview tunnel, and very far from convinced if it is road only without a rail link.
And sorry, don’t know enough about the practicality of conversion of the Northern Busway to rail to comment, other than it would necesitate another extraordinarily expensive tunnel - which we might be able to afford if the lions share of transport funding didn’t go to roading.
February 26th, 2008 at 1:30 am
Toad, The lion’s share of transport funding goes to roading because the lion’s share transport revenue comes from roads. Actually 100%. Which raises the question of where the funds will come from if we can’t compete with the USA and China for a share of post peak oil oil.
There is one other thing about roading revenue that is highly relevant to the original topic of rate increases. The petrol tax and mileage tax for deisel vehicles were introduced to relieve the burden placed on ratepayers by through traffic. In 1924 this provided a one-third subsidy on 5,000 miles of designated Main Highways. Ten years later it payed 100% of the costs on what were now known as State Highways and half the costs on an additional 5000 miles of Main Highways. In 1954 the 50% subsidy was extended to all roads. And that’s how things have remained since then with the exception of the transfer of the Crown responsibility for funding traffic policing and public transport subsidies in 1989.
It not only the rising cost of deisel that is hurting ratepayers. The construction price index has increased by over 40% in the last ten years. Public transport subsidies have increased 500% in the same period. While the petol tax and RUC’s have been increased by 75% to cover Land Transport Fund’s share of these costs the fact that the rate of subsidy has been frozen at 50% for 50 years means rates have had to be increased by $600 million to match the increase from road users. This government has been derelict in it’s duties by not modernising the funding arrangements put in place by the 2nd Labour Government 50 years ago.
We can’t afford to spend less on roads but we can afford to charge road users more to relieve the burden on ratepayers. The reason why we can’t afford to spend less can be seen on the KiwiRAP maps for Waikato. It is the reason that the 1st Labour government introduced legislation to allow motorways and expressways. The Rt Hon Bob Semple wanted to build motorways to save lives, not to save time.
While I think that roading revenue should be spent on roads I should point out that I don’t see any reason for including congestion relief in this spending. After all, two-thirds of Auckland’s billion dollar congestion cost is actually the social cost of the time Aucklander’s spend away from friends and family. That is not a cost to the rest of the country. And Auckland’s congestion is measured relative to the average legal speed limit which, of course, is much higher than in almost every other town or city because they don’t have 100 kmh motorways. When Auckland’s congestion is measured relative to the average speed limits that everybody else has to make do with it turns out that rather than a congestion cost the motorways have created a decongestion benefit of a couple of hundred million dollars a year. So whatever solution you want to spend money on just make sure it is your money not ours.
Example: You say it takes 35 mins to travel 30km, an average speed of almost 55kmh. This is slightly less than the 57kmh interpeak average in Transit’s Travel time Indicator Report - March 2006. The average speed limite on the surveyed routes was 64kmh. It is a lot less than Wellington’s interpeak average of 64kmh (average speed limit 79kmh), the same as Tauranga’s 57 (78), and a stunning 40% faster than Chrictchurch’s interpeak average of a paltry 42kmh even though the average speed limit is only 5% faster than Christchurch’s 61kmh. At least that does make the bus competitive with cars and taxis in Christchurch.
At the Stop the Tunnels meeting Sue Kedgley began her comments with the observation that ultimately you can’t build your way out of congestion because congestion is caused by too many people wanting to go to the same places at the same time. Mainly because so many offices insist on their staff working 9 to 5. You could try legislating to make employers stop this environmentally destructive practice. Or you could introduce congestion pricing which would give employers the financial incentive to change their wicked ways. Oddly, although Sue started with a good problem identification she ended her remarks by endorsing a solution that violates the principal that you can’t build your way out of congestion. She endorsed the light rail proposal. That “solution” has been proven to be no more effective than adding more traffic lanes, and for exactly the same reasons related to the time cost of travel. When capacity is increased the initial decrease in congestion attracts back those travellers who were avoiding the congested times and/or routes because they now have a time cost saving that negates the value of the avoidance strategies that those travellers had been using up till that point. Congestion pricing is the only approach that potentially avoids this problem because it creates a financial cost to offset the time saving, and vice versa for those who avoid peak periods - a financial saving to offset the time cost.
February 26th, 2008 at 8:15 am
Kevyn: We progressively tax the stuffing out of petrol until people stop using it so much, (ie. we set a target for public transport investment and raise the tax to meet the target as demand on petrol tapers off) essentially, and use it to pay all the big bills as we switch over to mostly using public transport in cities and for high-traffic long hauls.
In the long-term? Well, once we’ve put the cash in to finance the project and got a really good infrastructure up and running, we can either raise the fees, or keep it subsidised and eat the taxes/rates that this causes. As you rightly point out, once you’ve got the majority of people on public transport, you can actually raise faires for congestion to try and discourage people who have the option from travelling in at 9-5.
February 26th, 2008 at 9:14 pm
“Surely electrification is a higher prority, not to mention new trainsets, plus (and very importantly) better security on trains and stations for after dark use of public transport.”
Yeah and ticket machines at the station for later when the ticket office is closed.
I got the train from Britomart to the Warriors play off game last season - the pre game publicity encouraging people to take the train was good enough and there were plenty of departures. But there was nowhere to buy tickets at Britomart and the train was so packed that the staff couldn’t get around to take the money so it was free (it should have been free anyway!)
Honestly is there another major city station in the world that doesn’t have ticket machines or a ticket office that stays open until the last train. Foreign tourists must laugh at us.
February 26th, 2008 at 9:30 pm
Yep, Stuey - I went to the Twenty-20 cricket at Eden Park a couple of weeks ago. Last train west was at 10.10pm.
Although the result was inevitable by 10pm, which would have (just) left enough time to get to last train, the game didn’t actually finish in time for people to catch the last train, so I and my friends had to leave early or cop a $40 cab fare.
If it had been a tight game running right down to the wire, I would have been really pissed off.
February 27th, 2008 at 2:40 am
ari, Curiously back in Transit’s made a submission to the Roading Advisory Group recommending that Transitwe a target for roading investment and raise the tax to meet the target. Then they discovered that RAG had been hijacked by privateers and they made the mistake of putting their disagreement with that development in writing. Lo and behold Transit suddenly lost it’s funding responsibilities to a new agency Transfund.
So your basic idea has merit and I would say the power to do it should be vested with LTNZ rather than being at the mercy of politicians.
The only other point that needs to be considered is the urban/rural balance. For convenience I’ll stick with the old simple definition of urban as being a city, borough or town and rural as being a county or town district.
A bit of background info is needed to set the scene since this is a major consideration when looking at peak oil impacting fully within the next 20 years.
In the 1960s rural traffic has provided half the road fund’s money. In the 60’s rural roads received half the road fund spending. During the Muldoon/Lange eras that increased to two-thirds. Only because improvement funding was slashed whereas maintenance funding kept up with inflation, on the basis that deferred maintenance cost a lot more than in-time maintenance. By the end of the 90s we were getting back to the balanced situation of the 60s. The imbalance led to Auckland, Waikato and Canterbury regions each losing approx 1.5 billion dollars by 1999. Since then the balance has tilted in favour of three urban areas - Auckland, Wellington and Tauranga. Auckland is on target to get all of it’s 1.5 billion back by the end of the decade, Canterbury is on target to lose another billion. The result is that while rural roads continue to provide half the land transport funds they now only receive one-third of the land transport spending.
Traffic has very little influence on maintenance intervals for local roads. Normally that would be a problem if funding is reduced. If peak oil does fully impact within 20 years it is a short enough time frame that reconstruction of bridges and pavements can be delayed without too much political problem because with reduced traffic there should be reduced demand for well maintained roads.
With reduced funding for rural road maintenance and increased funding for public transport in cities and major towns we could see rural roads providing 90% of land transport funding but only receiving 10% of the spending. At the same time rural communities would experience a drastic reduction in mobility while urban communities would maintain close to their current mobility thanks to the investment in public transport. It isn’t inconceivable that district councils could secede from the Crown and join the Tuhoe nation in reaction to that injustice. If that happened early enough in the process it would leave urban areas in the same boat as rural areas. Even without that extreme reaction I think there is too much of an equity issue arising from your proposal.
However, until peak oil becomes a reality to the majority of voters I think there is a compromise that will work. Use the LTSA’s analysis of the success of the 1990s road safety strategy
http://www.landtransport.govt.nz/publications/docs/2010-strategy.pdf
and the failure of the current strategy
http://www.transport.govt.nz/assets/Downloads/2010-Breen-report.pdf
to get public support to shift the highway funding priority back to saving lives instead of saving time. Let LTNZ determine how much we will spend on safer roads and better public transport. Let LTNZ set the petrol tax and RUCs. Make sure there are two excellent reasons for increasing fuel taxes and you will get public support for big increases (the LTSA’s recommendation was an extra 12cents a litre for safety engineering).
I would be very reluctant to advocate investment in the main trunk railways as a solution for freight. I think coastal shipping and river barging (at least in the Waikato) would be a cheaper and more sustainable option.
February 27th, 2008 at 9:03 am
Kevyn wrote:
“I would be very reluctant to advocate investment in the main trunk railways as a solution for freight. I think coastal shipping and river barging (at least in the Waikato) would be a cheaper and more sustainable option.”
You can run a train on electricity generated from a variety of renewable resources. Most shipping requires fuel oil. I don’t think there is much steam-powered shipping around, so biomass for shipping may be a bit difficult to get going. That makes the railways the more sustainable option IMHO.
Trevor.
February 27th, 2008 at 3:14 pm
Speaking of which, we should totally put wind turbines by the tracks to save on transmission loss
February 27th, 2008 at 7:55 pm
Ari’s comment “I think the We progressively tax the stuffing out of petrol until people stop using it so much” about sums up the punitive mentality behind most liberal/left thinking. i.e. if the left doesn’t agree with where the bulk of political sentiment currently lies then punish those that dont agree with them.
February 28th, 2008 at 1:23 am
Trevor29, I mist have been getting a bit tired to add such an ill considered ending to my comments. But now that I have given the subject some serious consideration I would definitely agree that electrification is rails trump card.
The biggest imponderable regarding peak oil is to what extent society copes by transport mode switching or transport reduction.
It is tempting to say that we should take a wait and see approach rather than risk throwing huge amounts of money at a the wrong solution. But history provides two good salutory lessons. In the 1860s and early 1900s our governments took a wait and see approach to the question of whether to invest in roads and/or rail. Within five years of those decisions finally being made the world went into severe depressions bringing construction to a standstill for more than a decade. On those occasions a depression couldn’t be predicted but this time the odds of peak oil triggering a global depression are very high. On that basis we should probably take a calculated bet on what the transport impact will be.
However to make sure the bet is truly calculated and mere wishful thinking we should evaluate all the options and be realistic about costs, timeframes and capacity of each option.
The starting point needs to be a calculation of the actual energy consumption per tonne/km for each mode. The Us Dept of Energy’s figures give us a ballpark starting point. Water and rail transport are almost equal, combination trucks are 4 times less efficient, rigid trucks are 12 times less efficient. That latter can’t be replaced by any other mode but would show the greatest benefit from using hybrid or electric drive systems.
The popularity of trucks for long distance freight is due mostly just in time delivery. Taking away the fuel for those trucks also takes away the entire JIT system because it essentially uses trucks as mobile warehousing. When retailers have to pay urban land prices for warehouse space they will have to charge higher prices and one could expect a significant drop in retail trade as a result. That would lead to a reduction in freight volumes.
If peak oil impacts faster than rail can be upgraded then coastal shipping is a really good option to buy time. You can move huge volumes of freight with one or two ships using existing port facilities. Some of the fuel saved by switching long distance freight can then be used to keep local trucking on the road.
I see one exciting possibility which makes me reluctant to advocate spending more on railways than the cost of electrification. Peak oil is going to kill air travel, coach tourism and probably JIT delivery systems. Maglev is the only form of electified transport that can provide the speed of domestic air travel and overnight freight deliveries and could provide the spine in a hub-and-spine transport network. The hubs could be provided by short-haul tour coaches and delivery trucks or cableways or light rail. Essentially that is the approach taken by the planners of the provincial railways in the 1860s, we just sex it up with a century and a half of electric propulsion advances. While this approach will be expensive in capital costs, it could well be less expensive than the social cost of letting the country regress into the parlous state endured by residents of the Province of Auckland in the 1860s. Much better to strive for the relative affluence of the railway building Provinces of Otago, Canterbury and Wellington in the 1860s.
February 28th, 2008 at 9:38 pm
The actual energy cost per tonne per kilometer isn’t the only significant factor. Time to deliver can be important, and rail should have an advantage over shipping in that respect. However the type of energy used must be taken into consideration. Electrified rail can use any of the renewable electricity sources, but shipping relies on oil. If there is no oil, shipping is pretty much dead in the water. (OK so sail is an option, but not a fast one.) Another factor is the location of the transfer points. Shipping needs ports, but railway stations really only need some flat ground where the railway meets a road (or the warehouse). Therefore rail can take the goods to/from points closer to the need than shipping can.
I wonder if it is feasible to power an electric train off batteries or flywheel energy storage systems for short periods, to cover unelectrified sections of track?
Trevor.
February 29th, 2008 at 1:53 am
Trevor, Perhaps my perspective on this matter is distorted by living in Cristchurch. There are no electrified railways in the South Island. There is no railway to Nelson but it does have a port. Coal is railed from Buller to Lyttleton for export even though Westport is closer. Maybe these are the only situations where investing in ports would be better than investing in railways. Gisborne and Whangerei may be the only North Island centres where improving the ports would be cheaper than improving the railways.
The reason I say that coastal shipping may be the better option initially is the sheer tonnage that currently travels by road. There is currently a surplus of medium sized container ships suitable for intercity runs. I doubt that there is enough rolling stock to handle that much extra freight. How many trains can be run on the existing tracks before they reach gridlock and require double tracking? Not a problem on the line south of Christchurch where a right of way already exists and rivers a are a long way apart. but that is not the case anywhere on the Christchurch-Picton line or the Midland line.
The situation in the North Island could be completely different. Predicted future freight volumes may have led to double track rights of way being provided for the entire main trunk. That would make it relatively quick and easy to double track between the numerous viaducts and tunnels and use scheduling software to safely and efficiently route the trains past each other.