Thursday March 6th, 2008. 9:30 am by frog
Here’s a maths problem for you. (i.e. I haven’t got time to work it our myself!) If oil were to remain at yesterday’s record high of $104 per barrel and the New Zealand dollar were to return to its historical average of US60 cents what would the price of petrol be at your local service station?
Posted in Economy, Work, & Welfare | Environment & Resource Management | by frog | Thu, March 6th, 2008 |
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March 6th, 2008 at 10:57 am
Cheap, like $2 or something. But it’s not going to stay at that price, it’s going to continue to rise. I mean, hello?
March 6th, 2008 at 11:02 am
Expensive. Too expensive.
March 6th, 2008 at 11:06 am
Totally depends if the government will lower its tax take consisting of roading tax, GST.
No to mention the proposed local regional tax of 10c per litre.
Somewhere there is going to be break point where the after tax earnings of Joe Blog will not be high enough to enable him to purchase petrol.
We may well face an economic downturn if the government does not provide the public transport infastructure quick enough to enable the workforce to keep functioning while still leaving money in their pockets for living expenses and discretionary spending.
And private enterprise does not come up with alternative powered vehicular sourced transport options.
So the question is not really how high petrol will go but how quickly we can get alternatives on stream before petrol is priced out of the economy.
March 6th, 2008 at 11:28 am
It is indeed, Gerrit, this being one of them.
March 6th, 2008 at 11:31 am
it is a good reason to pull out of Kyoto and keep that money earmarked for infastructure development rather then sending it to the Russians (with Al Gore clipping the ticket on the way).
So collect the CO2 tax but spend it here.
March 6th, 2008 at 11:55 am
Wouldn’t a carbon tax be allowed under Kyoto anyway?
March 6th, 2008 at 11:59 am
StephenR,
Yes it is, but under Kyoto we have to buy carbon credits from someone. What I suggest is we still collect the cabon tax but instead of sending the money to buy carbon credits we spend it here on infastructure and carbon emmision reducing initiatives.
Under Kyoto we have to buy carbon credits AND tax extra to place carbon reducing initiatives such as public transport into the national infastructure.
Lets do just one as we may well bankrupt ourselves in the process.
March 6th, 2008 at 12:24 pm
The answer is reasonably straightforward.
As I described recently, the rule of thumb is that each $US1 rise or fall in the price of a barrel of crude translates to a 1c a litre change at the pump, and each 1c change in the value of the Kiwi against the $US does the same.
The present 174.9c a litre price for diesel was based on crude at $US 100 a barrel on Feb 20. It’s since gone up and down a bit, but is today at $US104, and so has the dollar, which today is about .79c.
To answer your question, the pump price for 91 would rise by 17c a litre if oil stays at $US104 and the dollar falls to 60c, taking into account currency and oil movements since the Feb 20 price rise.
However, predicting whether this will actually happen is impossible. Predictions about the future cost of oil or value of the dollar are invariably wrong.
March 6th, 2008 at 12:54 pm
The thing is, reducing carbon emissions is a bit easier in countries that have not enacted the first basic, cheapest steps of emissions reductions/efficiency gains, so if we want the most bang for our WORLD climate-change buck, sending the money overseas would theoretically work best.
I believe the Greens were going to lower income tax a little bit as way of individual compensation…what about that?
March 6th, 2008 at 12:58 pm
StephenR
Be up to the Greens to spell out how they would budget all the initiatives plus pay for the carbon credits while keeping the countries voters with a penny or two in their pockets.
Hence my unsuccessful request for the Greens alternative budget.
March 6th, 2008 at 1:25 pm
Okay, I think it was making the first 5 or 10 thousand earned tax free.
Well unless they just happen to have one lying around, you might have to wait a while…
March 6th, 2008 at 7:54 pm
It doesn’t matter what price oil will be - there won’t be any petrol left to buy in the foreseeable future. Hopefully there will be some E85 (85% ethanol, 15% petrol).
Trevor.
March 7th, 2008 at 12:57 am
Gerrit, do you seriously understand how much work budgeting is?
Treasury does much of the costing for the government, so it gets off free. (and Treasury gets kept pretty busy all year) Other than that, most parties do not cost their policies rigorously unless they secure support.
Are you pushing this hard on NZF, ACT, UF, the Maori Party, and National to release costed policies?
March 7th, 2008 at 2:24 am
Toad, In what way is rail an alternative to petrol (or diesel)? Serious question, please take the time to think it through as I think the subject is important enough to deserve/demand a thorough answer. Bearing in mind that only a minority of New Zealander’s work in Auckland or Wellington, that only a minority of farms and tourist spots are located on railway lines and that very few major retailers can function without mobile warehousing.
On three previous occasions the real price of petrol has risen above $2.50 a litre during periods of major capital in the railways. None of these occasions saw a reversal in the decline of passenger numbers or the slower growth of rail freight compared with road freight.
How much road freight could be carried by rail with the existing amount of rolling stock? I ask this because the focus of the press release and most comments on this blog is on the maintenance condition of the tracks. How much of the existing tracks and bridges needs to be realigned or reconstructed to carry all of the freight that currently travels by road, swiftly and reliably. The lack of alternative routes in the event of derailments is something else that needs to be considered for a rail dependent future.
We are still along way from seeing $2.50 a litre, which according to Poneke’s rule of thumb will happen when crude hits $US150 a barrel. Frog says “Deutsche Bank thinks that supply constraints could push the price of oil to $150 a barrel by 2010.”
There is one positive thing I can see. When circumstances do dictate a shift from road to rail we will have a lot of unemployed heavy trailer designers looking for work. Their expertise in building low floor, low tarre trailers within the RUC environment means they should be able to design railway rolling stock that will be vastly superior to anything used anywhere else in the world. The simplest way to improve the economics of rail is to reduce axle loadings as maintenance costs fall with the cube of axle weight. Simple maths:
60 tonnes on 4 axles = 15×15x15×4 = 13500
60 tonnes on 6 axles = 10×10x10×6 = 6000
30 tonnes on 6 axles = 5*5*5*6 = 750
The final number is approximately the RUC dollars per 5,000km
Heavy trailer designers can’t legally exceed 8 tonne per axle but RUCs have created an economic limit and the cost of an axle, brakes & tyres currently makes 5 or 6 tonnes the limit they have to aim for. That focus is what is missing from train design anywhere in the world.
March 7th, 2008 at 6:18 am
Ari
As much work as it is, I think Gerrit has an excellent point. One of the things about our image that scares people is that we have ideas of how to do things that are vastly different from the way they have ever been done. This means that we bring uncertainty and in particular, SERIOUS uncertainty about the economic results of our policy of eco-taxation. That’s a drag on our numbers. Working up a policy is a mere walk in the park compared to a budget… we’d need a couple of people researching full time for a good year to come up with anything better than the WAGs we use now… and they’d have to be pretty smart people.
So I think you’re right too… we cannot afford to do a full budgeting. We might manage a simplified budget estimate that would serve.
One advantage to doing it is that some of the opposition would start doing the work for us… finding problems and allowing us to refine the concept. The other advantage, it would make us a “serious” party with few unknowns attached to us and thus make us far more electable.
respectfully
BJ
March 7th, 2008 at 10:12 am
BJ,
Tthanks for that explanation. Am an Engineer who spent a good 20 years in marketing.
And setting the alternative budbet is an exercise in marketing. People are not going to buy anything or vote for a new regime without seeing the cost (in both monetary and freedom/restriction terms).
Ari , becasue no on else does it one is not an excuse to not do one either.
In terms of the cost/benefit ratio it would be a major marketing advantage for the Greens.
March 7th, 2008 at 10:17 am
You won’t get e85 in NZ anytime soon. The Govt is already getting nervous on the biofuels obligation and the company whose lobbying is widely believed to have tipped the balance in increasing the biofuel obligation - Lanzatech, which promised ethanol from NZ corn - has (unsurprisingly to everyone bar the Minister of Energy) withdrawn from the market saying it is too hard and too expensive.
March 7th, 2008 at 12:33 pm
Can anybody tell me what would happen if the govt decided that we were going to pull out of Kyoto immediately?
March 7th, 2008 at 12:51 pm
I can Big bro. Almost nothing.
March 7th, 2008 at 1:07 pm
So there will be no economic ramifications from those countries that have signed?
If not then why the hell do we not at least put the whole thing on hold for a bit, we are facing an economic downturn and the increase charges and taxes will only hurt those who can least afford it.
March 7th, 2008 at 3:57 pm
(Strangely finding myself in agreement with Big Bro) - My long-standing objection to Kyoto is that its a money transfer scheme, not a CO2 reduction scheme, so in effect nothing really happens of any real value.
On the other hand, it is the only game in town…