Last Thursday Finance Minister Steven Joyce announced that the government was “ruling out” using a regional fuel tax as one way to fill the $4 billion transport funding gap that was identified by ATAP. He noted a few reasons for this decision:
And second, I stress that we are not interested in introducing a regional fuel tax. I have reiterated to Mayor Goff this morning that we do not see regional fuel taxes as part of the Government’s mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.
In some respects it wasn’t particularly surprising that the government made this decision. They have long had a somewhat bizarre hatred of regional fuel taxes, not only cancelling Auckland’s proposed fuel tax in 2009 that was going to pay for the electric trains (a decision that probably delayed electrification for a year or two) but then also changing the Land Transport Management Act in 2013 to remove the possibility of Councils even applying to the government for such a tax.
Many of these “concerns” were addressed in a report (page 15 onwards) that the Council commissioned in 2012 to inform their submission on the LTMA changes. Looking first at the issue of cost-spreading (which basically means the risk that petrol companies will raise prices around NZ rather than just in Auckland to pay for the regional fuel tax):
With the level of scrutiny in this sector it seems pretty unlikely that we would see this happening. Furthermore it seems like there are good checks and balances that could be put in place to ensure it doesn’t happen. So, not really a valid excuse.
Now for “leakage”, which is the likelihood of people travelling outside Auckland to “fuel up” and therefore avoiding the regional tax:
Once again it seems like these issues are marginal and can be easily addressed. This led the commissioned report to conclude that concerns that were raised in relation to a regional fuel tax at the time (which seem very similar to those mentioned by Joyce last week) can be easily addressed.
Of course Joyce’s final point – about accountabilities between central and local government, is probably the real reason for the opposition. Essentially government doesn’t want to give up the power it has through collecting fuel taxes. But this seems a bit petty and I’m sure in relation to such a high profile issue in Auckland (the funding of transport) and the broad agreement between Council and Government on what the priority investments are, there would be clear accountability with the public.
This rejection of the regional fuel tax now puts the ball back in the government’s court to come up with some other ideas for addressing the funding gap. They’d better hurry up as the clock is ticking to get this sorted in time for the 2018 transport funding plans.
Last week Finance Minister Steven Joyce gave a speech to Massey University and Auckland Chamber of Commerce about the economy and this year’s budget. There were some notable elements related to transport in it worth highlighting, especially those in relation to demand management.
The demand management part of the speech came after a decent amount of chest puffing and back slapping over all the major transport projects underway in Auckland including motorway projects, local road projects and the CRL.
However as this work comes to fruition over the next five years, Auckland as a city is going to come up against a hard constraint, and that’s one of geography.
There is no getting away from the fact that central Auckland is built on a narrow isthmus which makes it hard to get around – and the available land transport corridors are rapidly being used.
So beyond the current building programme we are going to have to look at demand management to reduce the reliance on the road corridors, in favour of buses, trains and ferries.
That was one of the conclusions of the joint Government/Auckland Council ATAP process last year.
To have this being acknowledged by Joyce is hugely positive given many of the comments he’s delivered over the years about transport issues in Auckland, especially during his time as Transport Minister. Quite how he’ll act on it could be another thing entirely though and so we’ll need to wait to see if as Finance Minister he delivers any money for PT projects.
If in the future we were to look back on what ATAP achieved, getting the government to finally acknowledge that we can’t just rely on more roads in Auckland will surely be near the top of the list.
Another big outcome from ATAP was the general acknowledgement between government and the council on the need for demand management, including the use of road pricing to achieve that. One positive of ATAP was that it assessed the need for road pricing outside the need to raise additional revenue to pay for infrastructure but even so, it found that just in the next decade alone an additional $400 million per year is needed.
The Government is developing a work programme to look at demand management tools including electronic road tolling in the medium to long term.
But to be clear, we see this primarily as a way to make the roading system work better – and not as a revenue raising exercise.
And today, I can confirm the Government’s position is:
First, we would expect that any road pricing initiative on existing motorways and highways would predominantly be a replacement for petrol taxes and road user charges not in addition to them.
We’ve suggested for many years that if introduced, road pricing should initially done so in a revenue neutral manner by replacing existing rates and/or taxes. While some would pay more and some less than they do today, the idea is that overall revenue gathered remains about the same which would help improve acceptance of any road pricing scheme. So in this case too it feels we’re roughly aligned with Joyce. This isn’t to say there still shouldn’t fuel taxes though, we still want to encourage moves to more fuel efficient vehicles after all.
The next part to note relates to his response to Mayor Phil Goff who had been pushing for a regional fuel tax.
And second, I stress that we are not interested in introducing a regional fuel tax. I have reiterated to Mayor Goff this morning that we do not see regional fuel taxes as part of the Government’s mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.
However we are keen to have a more detailed discussion about demand management tools, and explore further options for longer term funding for new infrastructure, including the use of private finance for certain projects, such as Penlink for example. Mayor Goff and I have agreed to work together on those.
Finally something to disagree on, I honestly can’t see how regional fuel taxes would be administratively difficult. I’m sure fuel companies know how much they sell at each of their stations and how many people are realistically going to drive outside the Auckland to get fuel. With the exception of a few people, most would probably spend more on the fuel to get out of the Auckland region than they’d save on petrol prices. Fuel taxes certainly may be a raising additional revenue in the short term till other solutions are put in place – and remember ATAP suggests we need to raise $400 million extra each and every year on top of what we’re already spending.
This announcement disappointed Mayor Phil Goff who claimed that without a new funding source, rates would need to rise by 16% – although that also includes covering for the special transport levy which we (and the AA) feel should be retained.
The last comment quoted above is concerning though, Penlink has long been proposed as a toll road but the problem with it has always been that tolls would only cover a small fraction of the costs. Waiving the PPP phrase around doesn’t suddenly make it more viable, in fact it is likely less so as PPPs require significant contracting work by agencies and are ultimately just a private loan which ratepaters would be paying back.
It’s taken some time but last week the government finally came around to starting the City Rail Link in 2018. In the end they were effectively forced into the position as they could no longer ignore the rapidly increasing ridership . Hayden Donnell from The Spinoff put together a great list of statements mainly from the government’s past transport ministers which really highlight how much they’ve opposed the project in recent years. Rather than duplicating the work I thought I’d look at the recent history of the project through some of the cartoons that have been published.
17 March 2009 – NZ Herald – Not strictly about the CRL but commenting Joyce’s plan for rail in Auckland – at the time he had put the plans to electrify the rail network on hold.
28 November 2010 – NZ Herald – Len Brown as the newly elected mayor of an amalgamated Auckland released the business case into CRL. The government and especially Transport Minister Steven Joyce were quick to pour cold water on the idea.
1 December 2010 – NZ Herald – The former Auckland Regional Council chaired by now councillor Mike Lee had been the main supporter of the CRL for main years resulting in the business case getting under way in the first place. This carries on from the one above as Steven Joyce was the face of the opposition to the project.
9 June 2011 – The Press – After one of the Independent Māori Statutory Board members suggested there was a Taniwha in the way of the CRL.
5 July 2012 – NZ Herald – at times it seemed as if the government would never agree to the CRL
18 December 2012 – NZ Herald – As part of the critique into the original business case the Ministry of Transport suggested that one of the ways the council could improve it was the “Development of a robust multi-modal plan for future transport into the CBD, which includes a thorough analysis of all the alternatives“. This led directly to the City Centre Future Access study which looked at almost 50 options for improving access to the city and was worked on by officials from local and central government. It found that the CRL was the best option yet despite central government involvement in the work Transport Minister Jerry Brownlee was quick to dismiss it.
9 March 2013 – NZ Herald – In response to the Auckland’s desire for more investment in public transport Transport Minister Brownlee would continue to talk up the government’s investment in roads.
27 June 2013 – NZ Herald – The Prime Minster John Key surprised everyone by suddenly supporting the CRL – although not starting it till 2020. This was in stark contrast to the position Brownlee and his predecessor Steven Joyce had been taking not long before this. It is believed there were a couple of key reasons for the change in stance. One was polling showing Auckland voters were unhappy that the government appeared to be constantly fighting the council and wanting progress. The second was that the business lobby groups in Auckland were also unhappy with the lack of action and had made that clear to the government.
28 April 2014 – NZ Herald – the day the first electric trains started running.
27 January 2016 – NZ Herald – John Key announces that the government now support the CRL starting in 2018 – even though it appears at this stage that their share of the funding still won’t kick in till 2020
30 January 2016 – NZ Herald – The CRL is suggested to be a white elephant in a weekly wrap-up cartoon.
28 May 2007 – It was around this time that the former Labour government signed off on electrifying the Auckland rail network so I assume it was in relation to that.
2 November 1954 – NZ Herald – lampoons the scuttling by the National government of a previous plan to build an underground rail link through Auckland. The bound and gagged figure depicts Auckland Mayor J.H. Luxford
Minister of Transport Gerry Brownlee, along with Economic Development Minister Steven Joyce, issued a press release on Wednesday stating there is little evidence to support the reinstatement of the Gisborne – Napier railway line:
Transport Minister Gerry Brownlee and Economic Development Minister Steven Joyce today released a study of the East Coast region’s economic potential over the next 30 years.
The East Coast Regional Economic Potential Study assesses the region’s economic performance and barriers to development, and models five economic growth scenarios along with their implications for transport infrastructure and the skills needed.
Mr Brownlee says the study shows the economic importance of maintaining and boosting the road network in the East Coast, particularly in Gisborne.
“There will be an increase in logging freight over the next decade and improved roading will be vital to support that and other industries,” Mr Brownlee says.
“The study illustrates the need to develop further capacity for heavy vehicles on State Highway 35 north of Gisborne and to maintain the quality of State Highway 2 between Gisborne and Napier, and northwest of Gisborne to the Bay of Plenty.
“I will be asking the New Zealand Transport Agency to review its plans for these highways in light of this study.”
The report also concludes there is little evidence to support the case for reinstatement of the damaged rail line from Gisborne to Napier.
“When operational, rail only accounted for 2 to 3 per cent of freight from the region and the report finds no clear evidence of a significant economic impact following its closure,” Mr Brownlee says.
To provide context, a map of the area shows the distances involved in the region:
Hawke’s Bay and Gisborne
It is a distance of 214 km from Napier to Gisborne, and it takes about 2 hrs 40 minutes to drive according to Google maps. Tolaga Bay to Gisborne is 55 km.
The study referred to in the press release comes in two parts. The first is a desk-based review of available research and analysis of economic data, which runs to 197 pages. The second is a relatively lightweight 141 page document called “Economic forecasting and transport and skills implications“. The Transport and freight section of the second document on page 33 contains an analysis of heavy commercial vehicle (HCV) use, and also talks about proposed plans to use Tolaga Bay as an inland port for Gisborne’s Eastland Port. Bear in mind that traffic counts on the state highways in the area are low, with around 3,000 veh/day or less away from the main urban areas of Gisborne and Wairoa.
Storage space at both Napier and Gisborne is an issue for logs, but it isn’t clear from the report why Tolaga Bay has been chosen as the inland port for Eastland Port, who made the decision, or why the Government has effectively chosen to subsidise Eastland port by upgrading the road to HPMV (“big truck”) standards. The last sentence looks like consultant-speak for “upgrading SH2 between Gisborne and Napier to support heavy trucks will be bloody expensive and will have ongoing high maintenance costs”.
The report states that logs currently make up 97% of export traffic through Eastland Port. There are very few imports.
The Port of Napier exports a slightly less volume of logs and timber than Eastland Port – 1.4m tonnes vs 1.9m tonnes annually. However Port of Napier imports a significant amount of fertiliser, lime and cement.
The report sets out rail freight flows between Gisborne and Napier, before the line was mothballed in 2012:
Note that 2011 rail freight volumes were less than half of the 2005.
The report goes on to make assumptions about future economic growth over the next 20 years, including oil and gas production encouraging between $11bn and $85bn worth of investment. The report does not analyse how likely either of these scenarios are.
Page 75 of the report looks at the role of the railway between Napier and Gisborne:
The report’s conclusion on rail is:
We also emphasise that, even if rail services are reinstated, the majority of freight traffic and surface passenger transport will continue to travel by road. The possible resumption of rail services does not detract from the need to improve the road network to ensure the resilience and reliability necessary for providing attractive linkages in the region and minimising the effects of distance from the neighbouring cities and the rest of the country.
Not everyone shares KiwiRail’s pessimism about the viability of the line, however. A report by BERL in December 2012 called KiwiRail’s analysis “very conservative”, and there are fundamental flaws with the way KiwiRail have determined profitable freight volumes. That report states that the cash flow neutral tonnage is only 226,000 tonnes per year. The same report also states:
The spending on the Napier to Gisborne road in the last ten years has totalled $102 million. In the last four years it averaged $14.8 million per year. If the number of trucks, and heavy trucks at that, increased by 33% to 38% because the rail line is not available for wood freight, the annual spend on the road can be expected to increase at least proportionately, namely by $4.9 million to $5.6 million per year. This indicates that it would likely be in the national interest to make the capital expenditure required on the rail rather than having to increase spending on the road, and suffer the negative externalities on the road.
In their Draft Annual Plan, the Hawke’s Bay Regional Council is proposing to invest $4.5m in the Napier Gisborne Rail Establishment Group, which estimates that $10.7 million will be needed to finance capital and operating budgets, including $5.3 million to buy rolling stock, $2.4 million for working capital and a $3 million disaster contingency reserve.
A 51 per cent shareholding from the regional council is proposed, with a contribution of about $5.46 million through to the 2018-2019 year, with investors from Hawke’s Bay and the Gisborne region holding the remaining 49 per cent interest in a holding company, which would be formed especially for the purpose.
Submissions on the HBRC Annual Plan close on Monday 12th May. You can find out more and make your own submission here.
Julie Anne Genter questioned Steven Joyce in Parliament today about the City Rail Link. Perhaps the most laughable comment is when Joyce claims they are speeding up the project, not slowing it down. If they were speeding it up then at the very least they would be looking to have it started at the same time the council is wanting for it to happen.
As I discussed yesterday the debate on big urban issues of housing and transport far too frequently descends into left/right debates and today I’m looking at transport.
One of the reasons this has come up is that we’ve had some interesting conversations on Twitter in the last few days with a couple of Nationals MPs, which apart from highlighting a scary lack of understanding about transport, inevitably touched on the issue about whether the transport policy that we generally advocate on this blog fits into the traditional “left-right” political spectrum. Here’s what the fairly new National MP Paul Foster-Bell said on Twitter:
We have a fairly diverse range of bloggers on this site: a couple of economists, a transport planner, an urban designer, an architectural photographer, a planning student etc and of course myself who most recently working in banking and from our discussions I think we have some reasonably broad political viewpoints.
Furthermore, many of the key changes to transport and planning policy that we have advocated for strongest over the past few years hardly align with any traditional definition of a “left worldview”. Let’s take a look a few of our most common arguments:
- Cut back or cancel some of the Roads of National Significance that do not provide value for money. This seems to me like basic fiscal conservatism – as some of the RoNS projects are simply a huge amount of money being spent on a problem that really doesn’t warrant such high investment. Puhoi-Wellsford could be replaced by Operation Lifesaver, Transmission Gully is just overkill for a city that’s hardly growing in population, the Kapiti Expressway has a cost-benefit ratio of 0.2, the Hamilton bypass will carry fewer vehicles in 20 years time than the Kopu bridge did when it was a single lane… and so on. This seems like cutting wasteful spending, something that those on the right of the political spectrum say they want to do?
- Built the Congestion Free Network instead of the Integrated Transport Programme. Ultimately the CFN proposal is at least $10 billion cheaper than the current transport programme for Auckland. It probably has a much higher chance of achieving the many targets that Auckland has set for its future transport outcomes than the ITP is able to meet (although that’s not hard as the ITP failed to achieve just about any of its targets). Similarly to above, this is achieved through chopping out an enormous amount of wasteful spending on unnecessary projects (both road and rail) – yet again, something that those on the right of the political spectrum say they support?
- Built complete Streets. Democracy equality and choice are meant to be good things aren’t they? Most of our roads focus solely on the task of moving as many vehicles as possible and give scant regard for anyone not in a car. Building complete streets that treat each user equally and allow people to have a real choice in how they get around is the ultimate form of transport democracy.
- Improve walkability. We’ve seen both locally and internationally that when there is a focus on improving the walkability and the pedestrian environment (that includes wheeled pedestrians) a couple of significant things happen. One is that people shop more boosting local retail, perhaps the best example of this is the upgrade of Fort St to a shared space which has seen the hospitality retailers revenue increase by a staggering 400%. The second thing is that people walking (and cycling) more is good for them, improving health and therefore reducing long term costs to the health system. This is further enhanced as often these improvements also see a reduction in traffic crashes. So once again we see a case where we can lower costs while also increasing revenue and therefore tax at the same time.
- Get rid of Minimum Parking Requirements. This key proposal is to get rid of a current regulation that causes more harm than good, that adds significant cost onto developers (thereby discouraging development and growth) and often just adds regulatory churn cost for no gain (as it seems most applications for parking waivers appear to be granted). I would have thought this aligns quite well with a “right of centre” political ideology where reducing regulation (especially regulation that harms economic activity and growth) is a very very good thing.
- Relax Planning Rules to give people more Housing Choice. This was covered yesterday but worth repeating again. Most planning rules limit development potential in existing urban areas: whether that’s through height limits, yard setbacks, density controls, parking requirements, minimum unit sizes or whatever. Through the Unitary Plan process we have advocated for (and will continue to do so) the relaxation of planning controls – particularly in areas where it makes good sense to allow high density developments to make best use of existing infrastructure. Similarly to parking controls, this is a relaxation of current regulation that significantly limits development potential and the prospects of economic growth through making better use of inner parts of the city. The relaxation/elimination of economically damaging regulation should be music to a right-wingers ears you’d think.
There are probably many more examples than above, but they give a good overview of why transport policy (and land-use policy) really doesn’t fit well into a traditional “left-right” ideological spectrum. We could easily point out how bizarre it is that our current supposedly centre-right government has significantly increased petrol taxes to spend on a series of very dubious mega-projects in the form of the RoNS. That seems rather more “tax and spend” than fiscal conservatism.
Furthermore, if you look internationally there are many examples of centre-right political parties taking public transport seriously. In Britain, the current Conservative government is making a big contribution to the £15.9 billion Crossrail project in London and is also likely to spend even more money on the High Speed 2 rail project. That government seems to understand the economic importance of having good rail infrastructure. For example, Crossrail massively increases the residential catchment of the Canary Wharf employment area – somewhat similar to how the CRL vastly increases the residential catchment of the city centre. London Mayor Boris Johnson is a big champion of not only Crossrail but also getting more people to ride a bike and is planning to invest huge amounts of money in cycle infrastructure. In Australia, the centre-right New South Wales government is championing and making a massive funding contribution to the North West Rail Link project. Even in Auckland we have business groups who politically are considered “right of centre” supporting projects like the City Rail Link and improved cycling infrastructure.
It’s interesting to try to understand this political divide through other lenses than a traditional “left-right” spectrum. Pro-urban and suburban/anti-urban is perhaps a better lens in my opinion – particularly because it seems to explain better why some right-wing parties (like the Republicans in the USA, the current Liberal Government in Australia and the National government here in NZ) appear to be sceptical at best about public transport, while others (e.g. NSW government and UK government) seem to really understand the importance of public transport.
Perhaps this “pro-urban” and “suburban/anti-urban” divide even exists within the current National Party. It was interesting that John Key (an Aucklander who has lived in big overseas cities for much of his life) was the person who changed the government’s position on City Rail Link while Steven Joyce (grew up in New Plymouth and now lives on a lifestyle block in Auckland) and Gerry Brownlee (from Christchurch) were apparently the biggest opponents of that change. Or how we get current Associate Transport Minister Michael Woodhouse saying this on auto-dependency:
From Dunedin, in case you were wondering.
Steven Joyce has made some pretty crazy statements over the years however his answer in parliament yesterday surely has to rank as one of craziest. He was being questioned by Labour MP Jacinda Ardern in relation to how the film industry is performing and the odd part starts at about two minutes in.
The key part is also in the transcript below:
Jacinda Ardern : Why are venues like Studio Auckland, which was 100 percent full until a few years ago, now the quietest it has ever been, and why is Studio West, which was fully tenanted for much of the past 12 years, now getting one booking query a month with the owner, stating that this is the worst he has seen the local industry in 20 years?
Hon STEVEN JOYCE : As I say, I acknowledge that some companies are finding it a little bit difficult. I understand, though, in relation to one of the venues the member raises, that one of the particular issues is that it is associated with a railway line nearby, and, of course, Auckland Transport has increased the frequency of trains hugely so it is not as popular as it once was. But I have to say it is a little ironic to be questioned by that party on the health of the screen industry when it was that party that wanted—
Now just so everyone is clear, the studio he is talking to is out west near Glen Eden and is located near to the rail line. You can see it on the map below.
I’m also not claiming that the train noise isn’t having an impact as I’m sure our noisy diesels can definitely cause problems. What I did find odd is the claim that the issue has come out due to increased frequencies. The reason for that out west we still have only 15 minute peak services – the same as we have had for years – and off peak we only get half hourly services.
So in the graph below I have added up from old timetables how many trains go past the studio within each half hour period of the day. What it shows is that the number of trains going past the studio on a normal weekday is not that different from what it was over 5 years ago with the only difference being that the peaks have been extended slightly.
If we were getting 15 minute frequencies through the middle of the day (which would be great) then yes that would be a dramatic change but until that time it seems like Steven Joyce is just using his dislike of trains as an excuse for what are likely to be other issues. I guess the good news is that in a few years things will be much quieter with the new electric trains running around. I wonder if the benefits to the film industry was listed in the business case for electrification?
We’ve covered this before, but it’s worth repeating. The OECD nations are all driving less, while developing nations are all driving more. Basically, and I bet almost 99% of westerners will be shocked at this thought, but people in China, India, and, yes, Iran, are increasingly more able to do what we used to do without thinking about it: They are outbidding us for oil. More on that later, but first here is a nice summary of the US situation from the New York Times:
Here are some quick points from the article:
1. decline preceded financial crises by 2 to 3 years [but that crisis intensified it]
2. US Vehicle Miles Travelled is now 9% below peak and equivalent to 1995 percent level per capita.
3. it definitely reflects a generational shift:
‘From 2007 to 2011, the age group most likely to buy a car shifted from the 35 to 44 group to the 55 to 64 group, he found.’
4. and seems to be related to new technology:
‘The percentage of young drivers is inversely related to the availability of the Internet, Mr. Sivak’s research has found.’
Perhaps Joyce’s investment in Ultra Fast Broadband will be the complete undoing of the longed for great economic outcomes from his other and much much more expensive idea; The RoNs programme?!
A couple of charts from Advisor Perspectives:
Anyone still think that pushing up the petrol price won’t or can’t influence driving behaviour? More contradiction in government policy; the recent and continuing fuel tax rise is in order to fund their lavish road building programme but those extra nine cents are adding to the incentive to park the car and find another way around. This government is over investing in the wrong mode for the times.
These charts also make it clear that this is no blip; this is a discontinuity. A once in a lifetime shift in direction by our culture. We really, really, need to be designing policy with this fact in the front of our minds. It seems there is a problem here, because if there is one group that haven’t got the memo it’s the older wealthier male, that’s right, the group that makes all these kinds of decisions for us:
The Driving Boom — a six decade-long period of steady increases in per-capita driving in the United States — is over.
Americans drive fewer total miles today than we did eight years ago, and fewer per person than we did at the end of Bill Clinton’s first term. The unique combination of conditions that fueled the Driving Boom—from cheap gas prices to the rapid expansion of the workforce during the Baby Boom generation — no longer exists. Meanwhile, a new generation — the Millennials — is demanding a new American Dream less dependent on driving.
From the Frontier Group, PDF here [my emphasis]. And here’s how they illustrate this change to the American Dream:
Nevermind, cos all that fracking business is going to make petrol as cheap as chips again isn’t it? Er, No. Here is a link to a long [50mins] interview with a Texan Oil Geologist, Jeffery Brown, who explains the technicalities and economics of this in a straightforward language just why, despite all this talk of abundant supply, the price of oil stubbornly stays high and will almost certainly keep going up:
Jeff Brown and JH Kunstler
In short, we are scrapping the bottom of the barrel; not in total, there’s still a lot of oil in the ground, but for the rate at which we are consuming it the corresponding production flow is too low because all the easy to get fields are diminishing. The supply demand balance is now determinedly hitting into geological and practical limits. We have to use less.
But we are aren’t we? Well if that ‘we’ is the OECD then that’s true, the US and Europe certainly are. In fact these two areas have shed about 5million barrels a day in consumption at just the same time that China and India have increased their imports by this amount and then some:
The developing world is outbidding the ‘west’ for this most crucial of commodities. Listen to Jeff Brown above for how this can be. Basically the developing countries can put that same oil to more productive use than we can. Because they are only beginning to base their economies on liquid fuels their uses of this valuable resource are more useful than ours. Jeff Brown’s example above is that the fuel an Indian farmer uses to run a pump to irrigate his fields is a more productive use of that fuel than us westeners burn driving to the mall to pick up a latte in an SUV.
While this is true for now these countries will also hit a limit to what they can afford as well, especially as they are beginning to use it less efficiently too [many there are pursuing last century’s lifestyle too] and that includes the producing countries, especially when, because of either rising consumption or falling production or both, they flip from being net exporters to becoming net importers. As have the UK, Indonesia, Vietnam, Egypt, and a few others recently.
Egypt seems topical so here’s the oil history, note it’s much more the rising consumption than the decline in production that is troubling them. But still that’s half a million barrels not on the global market for other net importing countries like New Zealand to buy and burn. It basically is not good for social harmony to run low on energy:
From here: The Energy Data Browser
Here’s a brilliant comparison. Italy has been hard hit by recession, in 2011 apparently more bicycles were bought there than cars, but there’s a different story in Iran, despite the US sanctions:
Both of these charts are from Gail the Actuary on The Oil Drum, in a fascinating article on the politics of oil, here. And basically illustrate how the old postwar definitions of the world are being inverted.
It is true that the US/Canada are in different shape compared to Europe because of the Shale and Tar Sands resource, as Gail’s charts below show. But while that uptick in US production is significant the really good news is that drop in consumption. Europe’s chart is showing the rapid decline of the North Sea fields swallowing any new production. And remember Shale Oil faces swift almost immediate declines unlike conventional fields and is extremely expensive to extract. The US production honeymoon is only half the story and will not be permanent.
What matters now more than ever is what sources and forms of energy we have available and especially what uses we put it to. If only the US were putting more of that Shale resource into transitioning away from oil-dependency, and from other fossil fuel sources for electricity, then it would be of even greater value. And here in New Zealand if only we understood our wealth in electrons and our relative poverty in hydrocarbons must shape the way we live more if we are to prosper through the coming century. Unfortunately those in charge are determined to cling to old models despite of the facts.
And the key to people understanding that this shift is necessary and is not to be feared is that prosperity and happiness are not dependant on us all burning ever more amounts of oil and other fossil fuels, in fact quite the reverse is clearly the case. I do believe as a society we are going to power down, but that will not necessarily mean a step back in time to a less comfortable existence, but if we do it well it will mean a more sophisticated society just one based on less brute force.
There is a Saudi proverb I really like [for they too, despite their current riches, face the same problem, perhaps even more so]:
“My Grandfather rode a camel, my father drove a car, I fly a plane; my son will ride a camel”
It seems to me that the son’s camel will be different from the grandfather’s one:
[Solar Camel: delivering vaccines in the desert]
Over the last few weeks there has been a renewed media focus on Auckland’s transport issues. This has been spurred on by two main events the first was the Green Party launching their Reconnect Auckland campaign and the second was the announcement of alternative funding options to help pay for future transport projects. Along with that it has seen a resurgence of an annoying myth that members of the government like to perpetrate. In an effort to try and make their transport policy sound more balanced than it actually is they love to state that the government has invested $1.6 billion into the rail network. Government MPs talk about it on social networks or at meetings, Gerry Brownlee mentioned it in his recent interview on Campbell live and Steven Joyce, repeated it this morning on The Nation (on TV3).
Now $1.6 billion certainly sounds like a lot of money and of course it is. It is also true that it the amount of money that central government has, or will be spend on rail up until the electrification project has been completed. The issue I have is that a decent proportion of the money was approved or spent before the current government even came into office. So let’s look at the figure a bit more closely, the $1.6 billion can be boiled down into three key areas:
- $600 million for Project DART
- $500 million for the electrification infrastructure
- $500 million for the new electric trains
As the government are using the total figure to suggest that they are investing in a more balanced transport system, the question becomes whether the money was invested by the current government or not, so lets have a look.
Amongst other improvements it included double tracking the western line, various station upgrades, the Newmarket Station and changes to the junction, the New Lynn trench and station, reinstating the Onehunga Line, building the Manukau branch line. Kiwirails page on the project also states:
The 2006 Budget included funding of up to $600 million for rail infrastructure improvements to speed development of the Auckland network.
So yes this was paid for by central government but as you can see, funding started before the current government came to power which was late in 2008. Of course not all funding is spent in one year and as Brownlee said the other day, they didn’t cancel it. But even if they wanted to, how much could they have cancelled anyway? Well probably not much.
Interestingly the funding for this project was kept out of the normal transport budget and instead is listed under the finance budget. The government’s budget documents for the 2006/2007 financial year shows that the money was to be spent over a four year period and it was only the fourth year that National had any control over the budget. By then pretty much all of the various aspects to the project were either already completed or well under way meaning it was probably impossible to cancel anyway.
To me there is no way that the current government can claim the $600 million spent on Project DART as their spending or that they had anything to with it.
This includes new signalling, modifying existing infrastructure like bridges and of course the wires themselves. Funding for electrification was initially included in the 2007 budget and was separate to the funding allocated for Project DART.
Now from memory the government intended to pay for the Auckland work via a regional fuel tax which would work in conjunction with one the region would also impose to fund other projects, including new trains. When National came to power they stopped the regional fuel tax and put a hold on the electrification project. They eventually agreed to let it go ahead and paid for it out of the nationwide fuel tax increase. It is however quite clear that funding for the project was initiated in 2007, over a year before National came to power.
There is obviously not much point in paying $500 million for electrification without trains to run under the wires. As mentioned, the original electrification proposal was to see Auckland pay for the trains out of a regional fuel tax imposed by the regional council. The national governments cancelling of that fuel tax took that funding option off the table. When they finally agreed to let the project go ahead it was announced that the trains would be paid for by way of a loan that Auckland would have to pay back (without the extra source of funding). Worse still was that even after paying back the loan the proposal meant that Auckland still wouldn’t own the trains, Kiwirail would, however this has now changed and Auckland will own the trains directly.
Since then there has been some positive news, it was announced that Auckland would end up getting more electric trains that first proposed, that was partly possible due to better than originally expected exchange rates along with the government kicking in an extra $90 million. The NZTA are also going to contribute to the loan payments in the same way they provide money for PT operating costs however oddly it turns out that the government appears to be clipping the ticket on the loan by charging a margin on top of their cost of funding.
The first EMU will be here in a few months time
So when the government states that they have invested $1.6 billion in to rail in Auckland, it is frankly untrue. In fact the only new funding they seem to have provided is the extra $90 million they provided to buy extra EMUs and the 50% share of funding for loan repayments. Other than that all of the funding is the same as what was agreed to before they came to office.
Interesting news out this morning of a report, paid for by the government and Auckland into the economic competitiveness of the NZ economy. While the whole report hasn’t been released yet, information has emerged about a chapter in it relating to Auckland. The report has been put together by Hong Kong-based Professor Michael Enright and another expert, Michael Porter. It appears that the report has been fairly critical of the current state of Auckland however positively it does suggest that we are going in the right direction, just not fast enough. The report follows on from a similar one from him done in the 90’s on the same issue.
Auckland, Professor Enright said, lacked entertainment and cultural facilities, still depended on cars to get around and needed to move the container port off the most important piece of land in New Zealand for an iconic building.
“We should ask, ‘What is the value of the Sydney Opera House to Sydney, or the Eiffel Tower to Paris?’
“While foreign impressions of Auckland are positive, very few foreigners can name a single thing that is distinctive about the city,” the report said.
Some of his strongest criticism was directed at the CBD, calling the $45 million upgrade of the Aotea Centre a “concrete jungle” and bemoaning the lack of a world-class entertainment or nightlife district, like a Times Square.
“Queen St, which should be the Champs Elysees, the Fifth Ave of Auckland, is deteriorating … there is limited outdoor cafe culture near the city centre.”
Professor Enright said Auckland’s first priority should be a mass transit system, including the city rail loop, followed by revitalising the CBD – calling the $45 million upgraded Aotea Square a “concrete jungle” – and an end to urban sprawl in favour of an “overall denser Auckland”.
That would lead to a “complete change” in what Aucklanders consider the ideal lifestyle, including giving up the house in the suburbs and the car.
Many of these ideas are contained in the Auckland Plan – a 30-year blueprint for the city – but Professor Enright said the plan was not bold enough and Auckland might arrive in 2040 prepared for 2022.
Personally I’m not convinced for the need for an iconic building on the waterfront, but in general I agree with many of the sentiments. As with my post this morning, I think that many of the projects in the Auckland plan are good but do need some re prioritisation. You can also hear a report on this from Radio NZ below.
Or listen here.
But naturally a report like this, which generally supports the council in the key areas of housing and transport doesn’t sit well with the Government. Steven Joyce has already criticised the report and blamed officials for organising it.
Or listen here.