Dwindling oil supplies threaten economies

BY MARTIN KAY
Last updated 13:39 13/10/2010
Petrol guage
PUMP PAIN: The world faces decades of economic turmoil and a vicious cycle of recessions as oil supplies run low and prices spike, according to new research.

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The world faces decades of economic turmoil and a vicious cycle of recessions as oil supplies run low and prices spike, according to a Parliamentary research paper.

The paper, The Next Oil Shock, says that known oil reserves would last for another 25 to 32 years, but an oil ''supply crunch'' could occur in 2012 or shortly afterwards as demand rises and supplies fail to keep pace.

It was likely to be followed by a pattern of supply and demand crises.

''While the world will not run out of oil reserves for decades to come, it cannot indefinitely continue to produce oil at an increasing rate from the remaining reserves. Forecasts indicate that world oil production capacity will

not grow or fall in the next five years while demand will continue to rise.
''There is a risk that the world economy may be at the start of a cycle of supply crunches leading to price spikes and recessions, followed by recoveries leading to supply crunches.''

The paper, by Parliamentary Library economics and industry research analyst Clint Smith, is based on international research, reports and data.

It says the present world demand for oil of 86 million barrels a day was predicted to rise to more than 87 million barrels per day next year and continue to increase.

Greens co-leader Russel Norman said the report showed that the Government's $11 billion road-building programme was ''shortsighted and irresponsible''.

''This report makes it clear that the Government's decision to spend over $11 billion on horrendously expensive new expressways is short-sighted and irresponsible.

''Continuing to spend the vast majority of the transport budget on roads will only make us more dependent on oil, and more vulnerable to high prices. The idea that New Zealanders will be able to switch to electric vehicles in a short period of time is unworkable - it would cost us a fortune.''

He said the Government should focus on investing in rail, buses, walking and cycling.

''We need to future proof our transport system now. The Government has the means, there's no excuse not to act.''

The report can be found at www.parliament.nz

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