Energy (Fuels, Levies, and References) Amendment Bill

It is a pleasure to take part in this Committee stage of the Energy (Fuels, Levies, and References) Amendment Bill. The purpose of this bill is that it seeks to amend the Energy (Fuels, Levies, and References) Act 1989. That is because New Zealand has an oil stockholding treaty obligation under the Agreement on an International Energy Program. The bill proposes to expand the purpose of the petroleum or engine fuel monitoring levy to include the cost of meeting the oil stockholding treaty obligation. Although it is important to meet our international obligations, it is also concerning that this could see petrol costs rise higher and it highlights the Government’s inaction on developing alternative energy sources.

We know that we need to have security of energy supply and we appreciate on this side of the House that that is what this bill seeks to achieve: to ensure that we have a stockpile of fuel resources in the event that some crisis should befall us and our supply of fuels and energy is somehow cut off, and that we have an appropriate stockpile of fuel so that the country can carry on. In the interests of good economic management, this is a treaty that New Zealand has signed up to. So, yes, we have been happy to work alongside the Government to ensure that we do meet our international treaty obligations. We have had situations in the past where this Government has failed to move quickly enough on international treaty obligations. Of course, probably the example of that that the public knows best is the CV Rena disaster, when we ended up carrying far more cost that we ought to have, had we passed legislation to ensure that we met our treaty obligations.

This is an important piece of legislation. It is important because it secures our economic well-being, and it is important because it ensures that New Zealand is a good international operator and that we meet our international obligations. But it is a bit of a concern that it may force fuel prices up. Right here and now, your ordinary New Zealander on the street might not think that that is too much of a concern, because as we drive past BP, Mobil, and Caltex, we are seeing some numbers up there that we have not seen for quite some time—numbers that do not start with a 2, which is probably quite pleasing to the New Zealand public. I have not yet heard the Government try to take responsibility for that. I am sure it will at some point in time, because it is the only good economic news that any New Zealander is seeing right now. But the price of fuel is certainly lower than it has been for some time. So a little bit of an increase in the price of fuel might not be something that right now is too much of a concern.

But, of course, we know that this Government has hiked the fuel taxes up to pay for its unaffordable roads of national significance, that in recent times fuel prices have been extraordinarily expensive, and that an increase in the price of fuel can be a significant constraint on our economy and it can put a lot of pressure on families, particularly vulnerable families whose income is unstable and insecure and who need to know that they are going to be able to afford the basics in life, such as being able to fill up a car so that they can get the kids to school. So although it is important that we do meet our treaty obligations and although it is important that we do have security of supply, we do note that one of the consequences of passing this legislation could be the rising cost of fuel. We implore the Government to ensure that ordinary working families have enough income and stability of income to be able to afford those types of additional costs that come with the passing of legislation like this.

New Zealand does have a treaty obligation under an international energy programme to contribute 90 days of net oil imports to the Agreement on an International Energy Program oil stockholding. The collective stockholding mitigates the market power of oil producing countries, and releasing stock during an Agreement on an International Energy Program - declared oil supply emergency helps to moderate extreme oil price spikes. As I said, the price of oil does move around quite a lot. It is not too bad at the moment, but when OPEC decides to exert its power, that can have significant impacts on the New Zealand economy.

Kia ora, Mr Chair. Ngā mihi nui ki a koutou, kia ora. I rise to support this bill. Part 1 of this legislation essentially is the guts of the matter, the heart of the bill, which basically sets up that the Government has the ability under regulations to set an oil levy to recoup the income. Just a slight point from the speech of the last member, Iain Lees-Galloway: this legislation and the debate around it is not really a question of whether we should have an oil stock; it is of how we fund it. And what this legislation empowers is the ability for the Government to gain revenue from the Customs Service via a charge per litre of oil instead of the current expense coming out of the consolidated account.

The Green Party supports that entirely; there are a number of reasons. But let us go to the big picture, which is that we know how important oil is to our economy. I know that the National members have probably heard me rattle on and on about the risks of deep-sea oil drilling. What the Greens have always said, though, is that it is an important part of our economy. We have never said that we are opposed to shallow or onshore drilling, where the data clearly shows that there is a much lower chance of an accident or a spill occurring. You know, it is clear, based on US data, that the deeper you drill, the greater the risk of the spills. What I have always said is that we need a planned out, staged transitional strategy, because everyone from the International Energy Agency through to the OECD are saying we are going to have to leave oil before oil leaves us. So let us do it in a planned manner. Although I have often talked about the risks of deep-sea drilling, I am the first to acknowledge the importance of the role that oil does play, and has played, in our economy.

What we have seen—and I wish I had brought my graphs with me to the Chamber—is that when you chart the global recessions in the last 50 years, all of them have been preceded by a sharp oil shock. We saw the most recent of this in 2008. So the point of this legislation, in Part 1 of this bill, is to deal with the global or the developed world response to those oil shocks—which led to global economic recessions and, in some cases, to depressions in some countries—and the international energy agencies oil stock treaties, of which we are a member. We have empowering legislation sitting on our statute book to deal with carless days or other events or other strategies the Government may adopt to deal with it.

In New Zealand a few years back, my office undertook a study of the New Zealand economy, and what we found was that for every US$1 price increase in the barrel of oil, it shaved off between $40 million and $60 million from our gross domestic product. We know it is important. We know it has played a key role in driving recessions in the past for a country. In fact, despite our high percentage of renewables—three-quarters—New Zealand is one of the most oil-dependent developed world economies in the world. We import around $8 billion per annum of oil despite exporting about $2 billion to $3 billion. Our vehicle fleet is one of the oldest in the OECD, so per capita we are one of the largest consumers of oil in the developed world despite the high percentage of renewables. It may not be a fact that many New Zealanders or members are aware of, but it means we are particularly vulnerable. Given we are a country that needs to export our products around the world, the Green Party believes that enacting the provisions to actually set a charge on it, as in Part 1 of this legislation, is critically important.

So we support this bill and the imposition of a charge. I want to address the point made by the member Iain Lees-Galloway about the cost, but first we need to look at the raw facts, which is that this is simply about recouping the costs of maintaining the oil stocks. It is not a question of should we have oil stocks, although I note that one submitter did recommend that we should actually store all this oil in New Zealand, but I understand the estimate there of cost would be about $20 million. Already the costs of the 90-day oil stocks are rising from between $5 billion to $10 billion, or doubling, by 2016-2017 from 2012-2013. So it is a clear cost that needs to be borne by the taxpayer. We think costs should fall where they lie.

Secondly, it is a question of transparency. There are all sorts of costs and expenses the Government has got to account for. We think it is fair that the taxpayers should be able to see exactly where it is coming from and where it is going. So we think it is fair that there is an element of transparency for any petroleum customer or user in New Zealand to see the costs of maintaining that oil security stock supply overseas. Thirdly, it is an economic signal. It is not exactly a huge one. I understand that it is in the order of 0.045c per litre of oil. It is not really going to have an impact, particularly not on the scale of the price reductions we have seen over the previous few months. So I think it is fair and appropriate that there is an economic signal for the cost of maintaining the oil stocks.

I do want to pick up on the point that fuel poverty is a genuine and real issue in New Zealand. The data is a lot more common for electricity, where, potentially, up to a quarter of New Zealand families are in energy poverty, spending more than 10 percent of their disposable income just to keep the lights on or keep warm. I am not aware of any data for oil consumption, but I am sure many members read the recent story about the worker, I think from Auckland, who was literally walking for about 5 hours a day to get to work. We know energy poverty is a real issue, but I would not say that subsidising energy, as other countries are doing—the International Energy Agency is actually recommending against it—is the answer. I do not think we want to spend taxpayers’ money to make oil cheaper. What we want to do is give people choice. We want to give people options to get around their cities or towns or regions safely, cheaply, and fast.

What we did see in the last recession was very little choice for Kiwis. In my home town of Wellington they literally went to the National Railway Museum and pulled a unit out of stock, because of the demand on the railway because of the price of oil. In my home town of Gisborne, where I grew up, people wanted to export their products on the rail line to avoid the high oil costs but could not because the rail line had shut and there was no funding to reinstate it. So we support the legislation and the idea of costs falling where they lie because it is fair and it is transparent.

I would note an issue of equity for, say, those superannuitants who cannot or will not drive, those students who cannot afford a car and prefer to bus or train, or those people who, as a lifestyle choice, have decided not to purchase a car or use oil. I think it is important that they are not the ones bearing the cost of all the oil stocks. I think it is an issue of equity, sending a price signal, and that is why I just wish this Part 1 was more substantial. As The Economist magazine points out, this is a fantastic opportunity, with the low oil price, to actually address some of our structural dependencies on oil. We are one of the most oil-dependent countries on an oil-dependent planet, yet we have got one of the least-effective emission trading schemes in the world, sending that price signal view.

Sadly, Part 1 does not deal with biofuels, which is an issue that was not addressed at the Commerce Committee. Biofuels will be covered in this legislation and face the same charge, despite the fact that biofuels support the energy resiliency of New Zealand and lessen our dependence on foreign offshore oil stocks. I note the submission of the likes of Z Energy saying that it was a counter-productive measure. I note from the latest data that has just come out, which I have received from the Parliamentary Library, that the percentage of New Zealand biofuels has actually fallen catastrophically in the last 7 years, from a high of 1.2 million litres to less than a quarter of that today. I think policies have played a role. The lack of an effective carbon price has played a role and this further, more punitive measure is further going to dampen demand.

All members in this Parliament and all parties should be able to agree that if it is sustainable, if it is not competing with food, we should be encouraging biofuels if they have a net reduction of carbon emissions. It is good for Kiwi workers, it is good for Kiwi farmers, and it is good for Kiwi petroleum users. I think this is a point that may be picked up in the debate today. Why have biofuels not been exempted from this charge, given other products have? I think of bitumen and liquefied petroleum gas, but biofuels are not exempted. It would be good to get a contribution from the Minister or the National members to address this point. Thank you.

I seek leave for all questions on the Energy (Fuels, Levies, and References) Amendment Bill to be debated as one question.

The CHAIRPERSON (Hon Chester Borrows): The member seeks leave to debate all questions as one. Is there any objection? The question therefore is that Parts 1 and 2 and clauses 1 to 3 stand part.

Part 1 Amendments to Part 3 (Levies) (continued), Part 2, and clauses 1 to 3