Energy (Fuels, Levies, and References) Amendment Bill

I move, That the Energy (Fuels, Levies, and References) Amendment Bill be now read a third time. As a member of the International Energy Agency, New Zealand has a treaty obligation to contribute to global oil security by holding oil stock equivalent to 90 days of net imports. The International Energy Agency system helps to protect New Zealand and its trading partners from the economic harm that could result from a sudden increase in oil prices. Oil security is also closely linked to security generally, and oil security is a key driver of the foreign and security policies of many OECD countries. The stockholding obligation helps to mitigate the market power of large oil-producing nations and is an important contribution to global oil security.

It is also important for New Zealand’s reputation internationally that we fulfil our obligations. This bill expands the purpose of the petroleum or engine fuel monitoring levy under the current Act to include the cost of meeting this important oil stockholding - treaty obligation. In doing so it will provide a sustainable funding source and an enduring financial commitment to global oil security that will ultimately benefit New Zealanders with a more secure supply of transport fuels. The bill moves the cost of maintaining the oil security system away from general taxation and on to those consumers who benefit from it. The bill also introduces greater flexibility in the setting of levy rates and regulations, which I expect will come into force later this year.

A secure supply of energy is critical to businesses and consumers, and is an important part of the Government’s Business Growth Agenda. This bill is the latest in a series of actions that this Government is taking to lift oil security. Encouraging domestic oil production also has the potential to help to continue offsetting our stockholding obligation. This Government is committed to realising our abundant energy resources potential to help grow our economy, to increase exports, and to create jobs, while ensuring that we develop these resources in a safe and environmentally responsible way. The International Energy Agency expects oil and natural gas will continue to account for around half the world’s energy needs until at least 2035. Our approach to our energy future understands this reality. Our hard work in this area has delivered significant levels of activity here by established international players. Spending on exploration development - related activities in New Zealand over the past 2 years has totalled nearly $3 billion.

A key to tipping the balance of investment decisions in our favour has been better data. Historically, the Government’s focus has been on purchasing data and on targeting it to the market. This has represented a significant, albeit costly, investment. Last year we changed the data confidentiality provisions in the Crown Minerals Act. This has enabled companies with multiple clients to acquire data and then to onsell it to industry. As a result, more data has been acquired, with the industry bringing tens of millions of dollars into the mix. In the last 18 months, 26,000 square kilometres of data has been acquired in this way at no cost to Government.

Other work being undertaken to help improve New Zealand’s oil security includes the development of a new oil contingency handbook, which outlines responsibilities and procedures to be followed if there is an oil supply disruption; the formation of an oil security working group of all relevant departments and industry participants; a review of regional oil storage and capacity information; and, through the health and safety reforms, the development of a better understanding of existing hazard prevention and response procedures in the downstream oil sector. This bill represents a significant and more equitable response to our international obligations.

Before I conclude, I would like to congratulate Dr Fatih Birol, on behalf of the New Zealand Government and Parliament, on his election by consensus yesterday, I think, as the new executive director of the International Energy Agency. In my view, Dr Birol has the best long-range perspective on energy matters in the world, and his election ensures that the world’s premier energy agency is in very good hands indeed. I commend this bill to the House.

Before I start on my speech I would like to echo a number of tributes to Celia Lashlie. Most have talked about her contribution to a book on boys, but I remember having a conversation with Celia Lashlie around prison reform. I said to her that I had heard an interview where she said that she believed that in all her time in the prison service she had come across only six men whom she believed could not be rehabilitated. She said to me—

💬 Hon Ruth Dyson: Couldn’t?

Could not be rehabilitated. These were six people who should be locked up and the key thrown away. And she said to me: “Did I say six? It’s probably only two.” So she was a great advocate for prison reform. The Sensible Sentencing Trust and everything that that group advocates was anathema to her, to be quite honest. She was a very fair woman, and she will be missed.

But back to this bill. This is a piece of legislation that we do agree on, for a number of reasons. First and foremost, Labour understands that we need to honour our international obligations—of that there is no doubt—and very rarely will this side of the House argue against a piece of legislation that ensures we do enforce our international obligations. Of course, as the Minister talked about, we have got to ensure fuel security—there is no doubt about that as well. There are a couple of points though that we brought up during the Committee stage. One in particular that I would like to allude to is the fact that the legislation actually says that the levy recovered in the application of this bill “may be applied for the purpose of meeting the reasonable costs and expenses incurred by the Crown …”.

The concern we have on this side is that when a piece of legislation uses the word “may”, there is wriggle room to take any extra money that may be gathered from the taxpayer and put it to other purposes or to put it in the consolidated account. I personally would have loved to see—well, I think we should have seen—the word “must” there, but it is “may” and I guess we will deal with that. And I guess what we have to do is trust the Government when it says the money that will be raised from this levy will actually be used for the purpose that this legislation is about.

There are a couple of other things. There is a slight concern, of course, with petrol that there are levies upon levies and taxes upon taxes, and I know New Zealand First is probably going to elaborate on this. It is a slight concern, but when you put it in context, if you are filling up a 60-litre tank of gas it comes to about 3c to 4c. So it is not a huge imposition. The Minister of Energy and Resources said that it is user-pays. I suspect that that will not be passed on. I suspect that the oil companies will wear that.

One thing that I would be very, very concerned about is that once this bill passes, which will happen tonight at some point, then tomorrow or the next day or by the end of the week we will see oil companies put out a press release that says that the price of petrol is going up at the pump because Parliament passed an Act of legislation that increased the levies we have got to pay. That would be very disingenuous. As mentioned, it is about 3c to 4.5c per 60-litre fill-up, so there is no excuse whatsoever for petrol companies to put up the price of petrol at the pump because of this piece of legislation.

One of the things that the Minister talked about was environmental best practice, but one thing he did not talk about was world’s best practice in terms of the operational excellence that we require in this country in terms of oil drilling. The literature is full of examples of how things have gone terribly wrong and the effects that that has caused. That is the last thing that we want in this country; in fact, it would go a long way to destroying the global competitive advantage that we have worked so hard over the years to build up, and that is “clean, green”.

However, if we start talking about world’s best practice, what we find is actually that the companies that are at the forefront of a lot of this exploration in New Zealand like this. The reason I say that is the Todd Corporations of this world, for example, already operate using world’s best practice, but in our country there does not have to be economic development or environmental responsibility. They should go hand in hand—in fact, we must demand that they go hand in hand—and this is why we say that any form of extractive industry must use world’s best practice, and there are a number of examples around the world where this is put in place. So we are not advocating anything on this side that is world-leading, but it is world’s best practice.

The other thing that I would like to hear the Government and the Minister speak a little bit more about is what is going to happen to the royalties from oil exploration. Norway is often held up as a country that has done amazing things with the royalties it has earned from oil. In fact, I am told—Norway has about 4 million people; similar in population to us—that its wealth sovereign fund, funded from oil, makes every Norwegian, on paper at least, a millionaire. It has been very, very prudent in the way that it has invested the royalties that come from the oil sector, and I would love to see that implemented in this country.

There are a couple of other things that I would like to talk about, and one is the price of oil at the pump. We have heard from the oil companies, in the press, that as the price of crude oil has dropped, so has the price at the pump. Well, between about 2005 and 2010, according to Ministry of Business, Innovation and Employment statistics, the importer margin on oil was about 13c per litre. Well, it dropped as low as 3c per litre at one point, but in December of 2014 the margin of the importers got up to 40c per litre.

To look at the graph of crude oil in New Zealand dollars versus the price at the pump, the gap has widened to such an extent that I believe at some point good, hard-working Kiwis who fill up their car at the pump are getting ripped off. They are absolutely getting ripped off. As I mentioned, in 2005-10 the average was about 13c per litre, and in 2010-14 the margin was about 28c a litre. In the last 6 months of 2014 the importer margin, according to ministry data, was 33c per litre.

I have spoken to some of the oil companies about this and asked what is going on here, and they have said to me: “The retailers make only about 4c per litre at the pump.” The other thing they have said is that they do not trust the ministry data that is coming out. So at some point we need to get a level of transparency and accountability into this process. What I would actually like is the Finance and Expenditure Committee to undertake an inquiry into the price of oil and the margins all the way along that supply chain. The reason I would like to do that is that I believe there are some points along that supply chain where there are super-profits being made—where there are probably monopolistic profits being made—and we have no idea.

When the dollar dropped recently, within about 3 days the oil companies had raised the price of petrol. They came out and said: “The dollar’s dropped. Our price has gone up.” Well, I can tell you that as someone who imported and traded in petrochemicals for about 8 years, the signals in this market are very, very clear. When the price is going down, it is pretty obvious that these guys should be hedging short; when the price is going up, they buy long. This is not a rocket science industry; it is a pure commodity. Everyone knows what the Organization of Petroleum Exporting Countries is doing and everyone knows what is coming out of the United States, but for some reason New Zealanders have been sucked into the public relations of the oil companies that says that when the price drops, they have hedged long. It takes a long way for that to filter through. But when the price increases, within a week the price goes up. I do not think that is fair. I do not think that is transparent. I actually think Parliament has a role to play in finding out what is going on.

So what we are going to ask the Finance and Expenditure Committee to do is make an inquiry into this and, if Chairman Bennett allows this—and I am sure he will because there is no politics in this. This is about good, hard-working Kiwis—good, hard-working Kiwis, of whom I know there are a number in his Hamilton electorate. If we find that there is some skulduggery going on, then there will be no hesitation—will there, Mr Bishop—over going to the Commerce Commission and saying: “You need to come down on these guys very, very hard.”

But, just to wind up, we do support this piece of legislation, partly because it does allow us to meet our international commitments, which is very important. There are a few concerns we have. They are not major concerns; they are just a few concerns. I think we have outlined them, but I will leave my other colleagues to talk about some of those. But, yes, we will support this bill and see how we go. Thank you very much.

I am actually very glad that the member Stuart Nash said as he sat down that he did support the bill and that we are in agreement. This bill enhances New Zealand’s ability to cope with international oil supply disruptions, and we all know what could trigger that. The National-led Government is committed to improving New Zealand’s oil security through the Business Growth Agenda, and an important part of this is the sustainable and user-pays funding of our oil stockholding obligations with the International Energy Agency. Those are the obligations that the previous member was talking about as well.

This bill allows for the cost of meeting New Zealand’s oil stockholding treaty obligations under the Agreement on an International Energy Program to be met through an adjustable levy on fuels. New Zealand has a treaty obligation under the Agreement on an International Energy Program to contribute 90 days of net oil imports to the International Energy Agency oil stockholding. The collective stockholding mitigates the market power of oil-producing countries, and releasing stock during an International Energy Agency - declared oil supply emergency helps to moderate extreme price spikes.

Normal commercial inventories held by oil companies in New Zealand contribute to New Zealand’s obligations. The remainder of the obligation is met through the Crown entering into ticket contracts with oil companies and traders in other International Energy Agency countries. There is an impending rise in the ticket requirement, principally due to a forecast decline in domestic oil production in the medium term. Domestic oil production contributes to the stock that New Zealand is required to actually hold in this country, therefore a decrease will contribute to the amount of ticket contracts the Government must hold with other Governments that have met their own 90-day obligation of access to oil reserves.

The ticket must be backed up by a Government to Government agreement that stipulates that the host country will not impede the release of the stock in the event of an International Energy Agency emergency. To date, New Zealand actually has entered into an agreement and has held tickets in Australia, Japan, the Netherlands, Denmark, and the United Kingdom. Stockholding costs have previously been funded through general taxation. As the Minister of Energy and Resources has said in his speech, this bill allows for the cost to be met instead through the existing petroleum or engine fuel monitoring levy.

The forecast cost of the current method of meeting New Zealand’s International Energy Agency stockholding obligation—the ticketing regime, as such—will not be fully funded by the existing Vote Energy appropriation. In the absence of further intervention, New Zealand would become non-compliant with its International Energy Agency treaty obligations. I guess this whole thing is like quitting your insurance premium. It might alleviate some short-term cash flow problems, but it does not do anything for your reputation with the bank that holds your mortgage. So non-compliance with New Zealand’s treaty obligation is likely to result in significant damage to New Zealand’s international reputation. I guess that is one of the reasons why the Opposition supports this bill as well—that we have an international obligation. It is likely that a number of New Zealand’s closest partners would perceive New Zealand to be free-riding on the collective international oil security arrangement and would exert pressure on New Zealand to comply as well. Oil security is closely linked to security generally, and oil security is a key driver of the foreign and security policies of many International Energy Agency OECD countries. Non-compliance may, for example, have implications for our trade agreements that are already in existence or trade agreements that we could go into with those countries.

What this bill does is shift the ticket cost from general taxation to a levy of 0.113c per litre on fuels, which literally amounts to only about 4.5c for a 40 litre tank. The forecast revenue is roughly around $20 million over the next 3 fiscal years. The root cause of the rising cost of our International Energy Agency obligation is the forecast decline in domestic oil production in the medium term, as I earlier alluded to. However, I think the Ministry of Business, Innovation and Employment expects that the recent increase in petroleum exploration activities will result in an upturn in domestic oil production in the medium to long term, which will result in the downturn of the ticket costs that we have.

This bill provides a sustainable funding source for New Zealand’s International Energy Agency oil stockholding obligations and realigns existing funding mechanisms so that oil consumers, rather than general taxpayers, apportion the cost. It is important. The modern world relies on vast energy supplies to fuel everything from transportation—I know that some members actually do not agree that transportation is actually important to our economy—and also communication to security and health delivery systems. I actually talked earlier in the day about transport delivering for our exporters as well as our manufacturers.

Energy plays an important role in the national security of any given country as a fuel to power the economic engine. Petroleum, otherwise known as crude oil, has become the resource most used by countries all around the world, including Russia, China, and the United States of America. All 28 members of the International Energy Agency hold the minimum of 90 days of their oil imports. This is about our energy security, which affects our economic security. As we all know, New Zealand’s economy is actually growing. It is performing way better than other countries. Thank God for the National Government for that.

This is our commitment to the international agreement that is currently before us. New Zealand is, in fact, too small to mitigate the international oil supply disruptions on its own. The collective arrangement under the International Energy Agency is our best option for dealing with such disruptions. The ticket we are talking about is about 150,000 tonnes of crude oil and refined petroleum products. We have two new Government to Government agreements that have happened in the last 2 years I think, and they are with Denmark and Sweden. We have done a lot of work in this area. I commend this bill to the House.

Firstly, with your indulgence, Mr Deputy Speaker, I too would like to acknowledge the absolutely important contribution of Celia Lashlie to our country and to so many parents—mothers—around this country. Growing Gorgeous Boys into Good Men is a book that I have next to my bed. As I have two 14½-year-old boys it is of great importance in learning how to raise them and listen to them, and not to be too pushy. Her passing is a loss to our nation, and I am really pleased tonight that so many people have acknowledged her.

Secondly, I would like to express my disappointment that the Minister of Energy and Resources in his speech did not address one—not one—of the issues that were raised during the Committee stage on this bill, and there were a number of really important issues that were raised. What that makes me conclude is that the Minister did not even bother to read the Committee stage speeches or even consider some of those important issues, which I am going to list here tonight.

Thirdly, New Zealand takes very seriously its important role as a good international citizen in our part of the global community. What that means is that we have a sense of our place in the world as being independent and sensible and rational and caring. Meeting our obligations with regard to international treaties such as the oil stockholding obligation relating to this bill is just one of many treaty obligations that we take seriously. But we do that with a sense of knowledge, thinking, and being clear about why we are fulfilling those obligations. As a nation we are not lapdogs, and never should we become lapdogs, blindly going and following the path of other countries without really thinking through and debating the reasons for doing so. That is an important point to make in the current context. We on this side of the House have no quibble over fulfilling our international obligations with regard to oil stockholding. It is clear that we have to fulfil those obligations. The point of this bill, which is not a major piece of legislation, is that we are looking at how we can do that better and how we can do that in a way that is more modern and is an updating of legislation.

There was quite a lot of discussion at the Commerce Committee. I am one of the few members speaking on this bill who actually sat through the select committee debates on this, which I am going to acknowledge were not massive and were not long and ongoing, but there were some important questions asked. One of those questions was around the cost of this bill and the impost on petrol costs and whether that would be significant. We were reassured and told very clearly by officials that this would have a very minimal effect on petrol costs.

I would like to acknowledge tonight the important contribution that my colleague Stuart Nash has made around announcing that Labour is calling for an immediate inquiry into the way that petrol costs are actually happening and into the supply chain in this country, and into who is actually bearing the cost, given that the price of oil has actually gone down and we are not seeing the results of that in our own country. So I am just putting on the record and reinforcing what Stuart Nash has said, which is that it is critically important that we watch what happens following the passage of this bill and we must ensure that there is no leeway given for oil companies to use this as an excuse to put up costs in this country in any way, to halt the reduction in the cost of petrol, or to in some way use this bill as a cover for the anti-competitive practices or practices that we would need to consider in an investigation.

The other thing that has not happened as the result of this bill—there was a very big opportunity and the Minister, unfortunately, has not taken that opportunity—was to look at exceptions. During the discussion on this bill it was pointed out that the cost of airline fuel is excluded in the levy that is being collected as a result of this bill. Officials said that international jet fuel is exempt from taxation under the Convention on International Civil Aviation. It is currently 15 percent of New Zealand’s fuel consumption, including the fuel used for international transport. Just as an aside, we are also not seeing a reduction in the cost of airline travel despite the reduction in the cost of the fuel, and that is another issue that I think is important tonight.

But the point of saying that is that during the Committee stage of this debate, the importance of biofuels as part of the way that New Zealand will produce fuel in the future was touched on. It was touched on in the discussion on the bill, but its importance was never acknowledged. An amendment put forward by my colleague Dr Megan Woods to exempt biofuels from this bill was voted down by the Government members across the Chamber. Why they did that was never discussed because we have never had the opportunity to discuss it.

The importance of that part of the industry has certainly been acknowledged. In fact, the Government has got some investment in biofuels, but in terms of using them—in fact, I am just going to read you a bit of the officials’ advice here, where they said that “[A] way of reducing New Zealand’s net oil import dependency is through greater efficiency of transport and use of alternate fuels such as domestic biofuels and electric vehicles. … The use of biofuels and electric vehicles in the transport sector is increasing from a small base and has potential to meet a greater proportion of transport energy demand in the future.” Well, why then was this not used as an incentive for that sector? Why could this bill not have been used as a way of increasing the incentive for that sector?

I guess that goes to the heart of another problem that Labour has with this bill, which is that there is no “joined-up-ness” about this bill. There is no sense of it forming part of a bigger picture around energy security generally in this country or of developing alternative energy sources. There has been inaction on a wider energy strategy and, therefore, it is a bill that sits on its own. It is a piecemeal piece of legislation. Labour is supporting it because we support our commitment to meeting our treaty obligations and because we do not have any particular issue with the change in mechanism that is being used for the levy, but we do raise issues around the cost of petrol and the bigger picture around that as to why those costs are not coming down, why the Government is not looking at that as part of a bigger picture, and why there is not a bigger discussion happening about an alternative energy strategy for New Zealand.

Those are the big questions in this debate and this discussion. Unfortunately, not once has any member of the Government on the select committee or anyone representing the Government who has knowledge of this sector got up and had a discussion about the bigger picture in this area. Now is the time to do that and, although we support this bill, we are putting that challenge across the House.

First, I am absolutely delighted at this opportunity to speak on the Energy (Fuels, Levies, and References) Amendment Bill. But before moving on to the substance of the bill, let me please join the chorus of sincere condolences on the passing of Celia Lashlie. I think that as an incredibly strong woman she challenged perceived wisdom around how to deal with the challenges of raising children, specifically young boys. I think no one could ever accuse Celia of being soft in her approach. If anything, she was very, very clear and tough in her expectations. Her passing is a sad loss for New Zealand and for her family, and I would like to pass my best wishes on to her family.

But tonight the matter at hand is indeed the Energy (Fuels, Levies, and References) Amendment Bill. This is a very important bill. It is very important to honour our obligations, and that is what this bill is all about. Our international energy programme obligations are that we have a stockpile of approximately 90 days of fuels to deal with shocks. This Government considers our obligations to be extraordinarily important, and we look to honour those, so a 90-day stockpile it is.

Unlike some news that we received today—some allegations—there are some people, perhaps aspiring Labour leaders, who do not have quite the same honouring of obligations, and 120 days to pay a bill means nothing to them. But we will honour our obligations around our 90-day stockpiling, because it is indeed a very, very serious business. It will provide some protection from oil shocks.

Let me say that those of us who are of advanced enough years can still remember the times in the 1970s when it seemed that the Organization of Petroleum Exporting Countries controlled the world, and its choice about production and pricing sent shocks through every developed nation.

💬 Chris Bishop: When was that?

That was in the 1970s. Do you remember that? Do you remember the economic conditions of those times, Mr Bishop?

💬 Chris Bishop: No, I don’t.

Well, let me touch upon those. It was also a time of Keynesian economics and stagflation.

💬 Chris Bishop: Tell us more, Dr Hudson.

Well, let me tell you, it was a time when growth was backwards and inflation was upwards. I do believe it was a Kirk and Rowling Government at the time.

One of the implications of those oil shocks, of course, and one of the weird cases of regulation in the New Zealand economy and society, was when we introduced carless days as a means to try to deal with oil supply shocks and price shocks.

💬 Chris Bishop: Winston remembers it.

I am sure he does. But what a rort, I have to say. You would be struggling to find a single New Zealander who was not able to find a way to get around it, but none the less we felt that you could control the world, turn time backwards and manage people’s daily lives. We certainly do not want to go back there. We do not want to go back to those economic conditions. We do not want to go back to areas where we have no protection and no buffer against oil shocks.

This stockholding will give us some protection. It is just a buffer. It is not going to be a long-term solution, but arguably it permits New Zealand to deal with those unexpected and definitely unwanted shocks. Globally, the stockpiling is enormous. According to the US energy administration, approximately 4.1 billion barrels of oil are held in strategic reserves. That equates to approximately 650 million cubic metres. I tried to find a reference on that wonderful tool Google as to what 650 million cubic metres would amount to, and I could not find anything of any sanity. I found something like 18 times a certain water capacity for a dam, but that did not mean a whole lot either. What I think we can say is that it is an extraordinarily large amount of oil to stockpile, and it does in fact reinforce just how serious this is across the globe.

What we could look at, if we are not complying with our obligations, is what that would mean for us. For New Zealand, a small country that is wholly reliant on trading with other nations, I think we can all agree that it would almost certainly damage our international reputation. It has been well established that oil security is a key driver of the foreign and security policies of many OECD countries. In fact, another example, this one from the 1990s, showed a very clear correlation between oil security and oil shock, particularly oil pricing shock. I can remember—because in those days I was briefly employed as a petroleum transference engineer, occasionally known as a pump jockey or a forecourt attendant—that around that time in the early 1990s we saw petrol rise from just a bit under 90c a litre to well over $1. Kiwis were finding that really, really tough.

What was driving that was uncertainty around the security of oil supply out of the Persian Gulf at the time. What it established for New Zealand, and has become the rule of thumb, in fact, for all of the intervening years, is that security of oil supply is a huge driver of price and economic performance, particularly in our country, but also of supply. So we need to make sure that not only do we have our own stockpile to deal with some shocks as might come around, but that we do not damage our international reputation to the extent that we might find it a struggle to do business on the same terms that we have been over recent decades.

Damaging our international reputation around our oil stockpiling obligation would also have flow-on impacts on our economy, without question. As is the case in every developed country, oil and oil products are extraordinarily important to what we produce and how we transport it—how we get it to the markets that we want to sell it to. In fact, today what we are seeing, and we are seeing it in recent times, as other members have highlighted, is that in actual fact at the moment we are going through a wonderful time where instead of oil prices going up, as we have become accustomed to in recent years, they have actually gone down markedly.

New Zealanders are feeling that in their back pocket in a very, very positive way. In fact, it is helping, in effect, to give us record low inflation—some might say even a period of minor deflation, but not a bad one. It is not a bad one that will lead to a spiral of unemployment and price decreases, but one that is helping.

💬 Chris Bishop: Like a tax break.

It is a bit like a tax break, Mr Bishop—that is a wonderful way of putting it—and it is a tax break that impacts positively on almost every New Zealander. In fact, even New Zealanders who, for instance, do not own and drive their own cars are probably using public transport and having some consequential benefit there.

So it is an extremely good story there. But we cannot take it for granted. We have to do our bit to be a good global citizen. We have to do our bit to meet, obviously, our obligations. We are too small, on our own, to mitigate our oil supply disruption potentials. The way we deal with this, and it is a very clever way of dealing with it, is that we do not put thousands of barrels on a wharf somewhere in New Zealand. No, we buy ticket contracts so that we can in fact get an oil supply in the case of a crisis. In fact, in 2013 New Zealand successfully tendered for 150,000 tonnes of crude oil tickets. In doing so we established two new Government to Government agreements with Denmark and Sweden, which help to provide some risk mitigation across the potential suppliers of our oil. That is a very sensible thing to do.

I will just go on to the levy. The levy is in fact the fairest way of funding our obligation. Historically, we have dealt with this through general taxation. In some senses general taxation seems to make sense to people. We see it in our education system and in our health system. But what it actually meant was that some people who use little or no petroleum products were still being taxed to meet those obligations. What we are proposing now, by putting a per litre levy on those fuels, is that we actually impose the cost of our obligation on the consumers of the product, and that is most certainly the fairest way to do it.

Now we have, as I have mentioned in the past to my parliamentary colleague in the Green Party, Mr Hughes, an actual situation where people who choose, for instance, to take public transport such as buses—and they may be diesel buses, or electric transport, such as Wellington’s fine electric trains—are not being hit, in effect, by a taxation if you will, direct or indirect, to pay for those obligations. That is a far more sensible way of both meeting our obligations and fairly discharging those obligations or charging for those across our society.

There is even more good news, though, because we can potentially offset some of our obligations through domestic oil production. Our block offer position proposals and the amendments to the Crown minerals regime are going to continue to encourage exploration and harnessing of our oil potential. We cannot know today what those finds might bring, exactly, because, like many things in New Zealand—our country, our resources, our people—we produce high-quality commodities and high-quality products, not to mention our extremely high-quality people. An example of this is aluminium. When the smelter was going great guns, as it was for many years, it was producing some of the finest grade aluminium in the world. Our Invercargill smelter, Tīwai Point, was basically producing the aluminium hard-disk drives for the world. Our oil is very similar. Our oil is very high grade. What it means is that we can sell it on the global market for a higher price, and that gives us another way of finding funds to meet our obligations. So this is a highly commendable bill. It is very sensible, it is very pragmatic, it is very practical, and I commend it to the House.

Kia ora, Mr Deputy Speaker. Ngā mihi nui ki a koutou. Kia ora. I would like to share the condolences of other members for Celia Lashlie. I would like to acknowledge her passing and I send my love to her friends and whānau. I think it is quite clear that she was someone who made our country a better place, and I think that if that is the least you can say about anyone, it is an amazing achievement they have made.

To draw the two issues together, one of her most remarkable feats, and one that has had an influence on Kiwis’ lives, is the book Growing Gorgeous Boys into Good Men. Reflecting on when I was a boy in high school—and talking about oil, which is what this legislation is about—I have got to say that I burnt my fair share of oil up and down Gladstone Road, which is Gisborne’s main street. There are a lot of first-term members in the House who may not be aware of this, but my passion in high school was my red Mark I Ford Escort. It was lowered, it had mag wheels, and we had modified the engine. I loved it. So I burnt my fair share of oil driving up and down the main street every Friday night.

I am the first to acknowledge oil’s important role in our economy. I used to love nothing better than getting my hands dirty in oil. It was such a bad car, to be honest, I learnt very fast that you had to work on the engine. In the end I was able to change a gearbox and even a motor, not very well, but it was still a great experience. I learnt mechanical skills, which are so important in our economy.

What we know is that oil is the lifeblood of our modern economy. It does not mean that it always will be. It definitely has not always been, but it is the situation we find ourselves in now. When you look across the last four decades, every major recession or depression has been preceded by a global oil shock.

The Green Party supports this bill. We support oil security and having the oil stock ticket system as part of the international arrangement to deal with oil price shortages, but I do want to pick up on a couple of points. The first point is from the last member, Brett Hudson. He said that the answer to increasing our security and resiliency is to drill for more oil. That is logically inconsistent because what we know is that our oil grade is a totally different type from what we can refine. Even if we found a whole bunch of oil—and, despite Simon Bridges’ best endeavours, they are still looking—we could not refine it in the current refinery.

💬 Brett Hudson: We can sell it.

Even if we found it and they tried to sell it—that is right—we would still be selling it at the global market price. This does not increase our security.

The fact is that there is a live debate about what is the best way to pay for the oil security of offshore oil stocks. Should it be stored in New Zealand? I think there is a valid argument. It is a little bit more expensive, but we could be guaranteed that the supply would be assured. Should biofuels be allowed, as Z Energy has contended, and which the Green Party supported—and which, sadly, the Government members voted against, both in the select committee and in the House?

What we know is that this security stock has a cost. We know the cost is rising to around $15 million, I believe, in the 2016-17 financial year. Who is going to pay for it? At the moment it is paid for out of general taxation, and the Green Party believes that it is fair in this case that costs fall where they lie. We like the idea that there is transparency—that those people using oil are paying their fair share. There is the equity argument that Mr Hudson talked about, which is that those who are taking our fantastic electric trains or buses in Wellington and who are not using oil do not have to pay for it. That is sending a market signal, a price signal, and incentivising it. I am not saying that it is a large market signal, but it is a market signal all the same. This is what the Green Party supports. We have been open about saying that markets have their role in the economy. We think price signals have an important role in a smart Green transition to a greener economy, because at the moment those externalities—those costs—are being paid by anyone, and no one has that economic incentive to invest in efficient vehicles, for example.

The analogy I would like to use when it comes to this bill—although supporting it—is that New Zealand is an oil addict. We are one of the most oil-dependent economies in the Western World. It is incredible. We have got one of the oldest vehicle fleets in the developed world. We drive some of the longest kilometres with some of the fewest passengers in some of the oldest, least efficient cars in the world. Despite our amazing—and we should celebrate it—three-quarters renewable electricity production, when it comes to oil we are still one of the most oil-dependent economies in the world. The analogy is that we are like an alcoholic. When it comes to an alcoholic’s security of getting the next drink, with this legislation it is just like an alcoholic storing some bottles at a mate’s place—a place where they know they can always get some bottles. What you should be doing if you are an addict, be it an oil addict or an alcoholic, is getting treatment, acknowledging you have a problem, and finding strategies to reduce consumption. What the climate scientists—the doctors—urge us to do is to reduce our consumption to as close to zero as possible.

The major missed opportunity of this legislation is that biofuels—sustainable, clean biofuels—are still going to get lumped with the same charge. That entirely negates the economic price signals that we should be sending through having a fair, transparent mechanism, which is what this legislation tries to do—that is, costs should fall where they lie when it comes to paying for the oil stocks overseas. To keep the alcoholism analogy going, imagine if, as part of their treatment, the alcoholic was not storing bottles of alcohol at their mate’s place but that they did, in fact, have better, healthier alternatives there, so that when they went around to their friend’s house there was something good there that would not lead them to drink. This principle is why we should be encouraging biofuels. It would increase our resiliency, it would reduce our dependency on oil, and, lastly, there are all the associated subsidiary benefits of producing jobs, developing our regional economy, and boosting the national economy.

Looking at this legislation, we have to ask ourselves why it is in front of the House. Why has this bill been identified by the Government as such an urgent piece of action? This is a great example of third-term tinkering. The Government has run out of ideas. Where is the big picture to deal with the serious strategic and economic challenge of our oil dependency? This is all that the Government has come up with. When we have so many solutions available, when technology is changing the world so rapidly, and when disruptive technology is having such an impact already, National is looking at the small picture.

We are a country that imports $8 billion of oil per annum. Effectively, the income from our entire tourism sector, one of our biggest income earners, just gets the oil to New Zealand. It is incredible that a country that is as well-developed, as smart, and as entrepreneurial as ours is wasting the entire tourism sector income on oil imports. We should be having a discussion on how we grow jobs, how we boost the economy, and how we do more with less oil.

The fact is that we have a huge number of solutions available to us, which I want to run through very quickly. We have the efficiency of the vehicle fleet. New Zealand has just imported almost more cars than we have since the early 1970s—it is a record during my lifetime—yet we are still importing relatively fuel-inefficient Japanese imports. We could be doing so much more by upping our fuel economy standards, as America, Japan, and Europe have done, which would save the entire country money, would save consumers money, and would also reduce the hundreds of deaths that are caused by particulate pollution from oil.

When it comes to electric vehicles we have a huge opportunity as a country to use our clean, green renewable electricity to power our vehicle fleet. For the cost of the oil stocks we could be rolling out a national network of fast-charging stations. There are more Ladas on our road than there are electric cars. There is a chicken and an egg problem. People are not buying electric cars because there are not the charging stations, and people are not installing the charging stations at cafes or supermarkets or malls because people are not driving electric cars. There is a chicken and an egg problem. But when you look around the world, the growth is phenomenal, particularly in countries such as the US and Norway.

For the cost of this oil ticket system and security, we could be rolling out a State highway network for the 21st century with fast-charging stations. We could be helping New Zealanders get into electric cars. The equivalent of the price of a tank of petrol—you know, say, 80 or 100 bucks—is about $2.50 in an electric car. We could be rolling out public transport across the country, such as what we had in today’s Dominion Post in Wellington, which was a five-point plan for better, cleaner, cheaper buses, and the central business district rail link for Auckland. We could be reinvesting in our regional rail network and in cycle infrastructure, so that people could cycle around safely. We have got such clean-energy potential—be it solar, which is growing at 330 percent in the last 2 years, through to wind, where there is more than 2,000 megawatts just waiting to be built—and we would have the potential to grow jobs and save money and reduce the current account deficit by having an oil reduction plan.

When you look across the country there are many, many businesses and councils that have oil reduction plans, and when you look across the world there are militaries and Governments that have oil reduction plans, but all we have—and we heard it from Brett Hudson—is an oil production plan. It is time for less third-term tinkering. It is time for some big solutions that are going to make a real difference. That is why, despite supporting this bill tonight, the Green Party is going to be putting the case to New Zealanders that we can tackle climate change, we can grow jobs, we can reduce oil imports, and we can give people more options to get around the way they want to. Kia ora, Mr Deputy Speaker.

May I add my personal commiserations to the family of Celia Lashlie. I have fond memories of working with her as a high school teacher at Rotorua Boys’ High School for an extended period of time as she was developing her book. This is indeed sad news. I do wish to send on behalf of New Zealand First our condolences to her family. I stand on behalf of New Zealand First to oppose this bill. I have been sitting here this evening with building frustration at the supposed solutions to this supposed problem. It seems like a short-sighted and naive attempt to fix a problem we do not actually have. This bill seeks to amend the purpose and the amount of petroleum or engine fuel monitoring levy that is currently provided for under the Energy (Fuels, Levies, and References) Act 1989 in section 24. Let us be very, very clear. New Zealand First agrees with the obligations to meet our international energy commitments and respects the commitment to improve our oil security. That is a treaty obligation, but it is also a common-sense mandate that this country must seek. Some of the members spoke quite eloquently about the secure supply of oil. It is essential.

However, we currently do meet our obligations through some small stocks held domestically, but, more significant, we currently hold a large amount of so-called tickets to meet our obligations. We have been told that the cost of these ticket obligations is going up. There is a current decrease in the domestic production of oil, but, as the Minister himself alluded to, the exploration activity, albeit it in some marine reserves, at any given time has increased quite significantly and the aim is to increase domestic production. What I would question, and I would ask the Minister, is: the select committee was told that the ticket price is increasing, but what is the situation with the ticket price currently? We know that we also need to increase the volume of stocks. We are using more oil, as alluded to by our Green MP, and our fleet is growing. New Zealand First does not dispute any of these facts. We know that we are highly dependent on these stocks, and to run out of fuel for whatever reason would be devastating for our domestic economy. To suggest that we should not comply with our international obligations would be inappropriate.

But here is where the frustration kicks in on the part of our party. There are so many alternative actions that could be taken rather than just adding another tax on to the New Zealand motorist. We are told that the Vote Energy budget is now insufficient. Why is it insufficient now? Why do we not increase the budget? It is a simple question. I will come back to that point later. What has the Minister actually done to establish whether or not the ticket prices forecast by the Ministry of Business, Innovation and Employment are still increasing? What is the current ticket price? We currently have huge surpluses of oil being manufactured in the US and Canada right now. It is one of the leading determinants of the world retail price at the moment. Also, we are informed that the ministry responsible did investigate and did determine that the cost of holding physical stocks in New Zealand was prohibitive.

The Minister himself spoke rather eloquently about the need for security. Some of the other National MPs actually spoke really well about the need for secure supply. I put it to the House tonight that the tickets are not necessarily going to be that secure supply that we could necessarily rely on in case of some world crisis that would necessitate the need to leverage our tickets with regard to our 90-day stocks. It does not hold well, in my mind. We spoke about these treaty obligations in the Committee of the whole House and we were assured by some of the members that we had treaty obligations with these partners, but if they are running out of oil themselves, what is their motivation to send oil to New Zealand on the other side of the world? I again question what the situation was in terms of asking our oil companies to make that capital investment to hold physical stocks. I know it would be expensive. I acknowledge that. But, as I noted in an earlier speech to the House on this issue, it is an unusual situation in terms of oil prices, such that I genuinely believe that the oil companies could take on much of that cost themselves, without having to burden New Zealand motorists with that additional cost that, it is argued, would be implemented if we were to ask them to take that on.

The climate in which this legislation was written has changed and the questions of cost could be reviewed. Does this not give us some time now, I would suggest, so that we could address the issue of the Vote Energy budget? The reason for this question is that I question the National Government’s supposed motivation for this legislation and the user-pays issue. I question how a crisis that restricts the supply of oil to New Zealand, to our country, is just an issue for New Zealand motorists. One of the National MPs spoke earlier tonight about how this would be a national disaster, if we were not getting our oil and if we did not hold these stocks. How is that just the issue of the New Zealand motorist? In fact, the legislation, which we are currently seeking to add to, speaks to National’s historical acknowledgment that this is an issue for all New Zealanders and not just New Zealand motorists. This burden of supposed “user pays” is, in New Zealand First’s mind, unfair and unnecessary.

The solution to add another tax to New Zealand road users—we currently already have one of the highest levy or tax regimes on oil in the developed world, paying 67c per litre on petrol. So at the current price that seems to be, I mean, an unsustainable component of the retail price. What I suggested earlier, and I take this opportunity to suggest again, is that currently we have this levy, we have all of the other levies that our motorists are burdened with, and they currently pay GST on it. What was this committee’s or the Minister’s motivation around—well, how about we look at how we could fund this problem, our commitments to our international obligations through existing taxation? We have a tax on a tax. Why not look at making good use of that?

As noted earlier by one of the members on this side of the House, the wording speaks about how the levy may be used for the purposes outlined in this bill. It also speaks about the Minister’s responsibilities to consult and it speaks about his ability to consult with those people whom he would choose to consult with. New Zealand First has a strong opposition to that particular part of the legislation. If New Zealanders want to consult on tax, especially petrol tax, they are well within their right under our democratic process to come to this Parliament and give their voice on a tax that they are obliged to pay.

Also, to finish, it is with some reservations that we note that although numbers were given to this House on what the levy may be and a formula was suggested, it is also within the purview of the Minister to set the rate himself. Then, on top of that, it was acknowledged earlier also that the length of the imposition of the levy is such that we could have paid our commitments off with regard to our international obligations but continue to impose this levy on the New Zealand motorists. It makes no sense, it is open-ended, and it is completely unfortunate. I stand on behalf of New Zealand First tonight to oppose this nonsensical legislation. Thank you.

Thank you for the opportunity to speak during the third reading of the Energy (Fuels, Levies, and References) Amendment Bill. The fact is that each nation needs to ensure that it can cater to its energy demand without being reliant on others. We in New Zealand too would like to be energy independent in case there is some kind of disruption in supply. This National-led Government wants to ensure that New Zealand’s ability to deal with any disruption internationally gets enhanced.

New Zealand’s oil demand has grown steadily since the mid-1980s and has been driven by the demand for transportation fuel such as petrol, diesel, and jet fuel. Along with the encouraging further exploration and production of oil in New Zealand, we can also make oil imports from many secure countries. As New Zealand is too small to mitigate international oil supply disruption on its own, the collective arrangement under the International Energy Agency is our best option for dealing with such disruptions.

New Zealand currently fulfils its oil stocking obligation by entering into the ticket contract with oil companies and other traders. In 2013 New Zealand successfully tendered for a ticket for about 150,000 tonnes of crude oil and refined petroleum products and secured two new Government to Government agreements, with Denmark and Sweden, increasing the pool of potential suppliers we can look to. When we returned to Government we made a promise to improve New Zealand’s conditions for businesses, whether small or large. Like any competitive nation, if we are serious about a more competitive and productive economy, we need to ensure that we have energy resources to sustain. As these are matters of national importance, we want to put forward this legislation to the House, which will ensure we are able to fund our energy requirements in a sustainable manner. We want to ensure that New Zealand sticks to its oil stockholding under the International Energy Agency’s obligations.

The International Energy Agency provides a critical mechanism for conditional international energy responses among 29 member countries to oil market disruption as well as timely market data. We also want to ensure that our stockholdings are based on the user-pays model. The purpose of having stockholdings is to create balance against the power of large oil-producing nations as well as creating global oil security. Furthermore, we are part of the International Energy Agency. We have mitigation measures in place to protect New Zealand and its trading partners from economic harm as a result of volatile situations. With the demand for energy resources such as oil increasing day by day, it is vital to ensure that our sources will import oil and that agencies are secure. Of course, as a responsible Government we are taking every step to facilitate exploration for oil and gas locally.

We also continue to advocate energy efficiency. However, as I said earlier, energy pricing and consumption are both volatile. The current fuel monitoring levy charged by the Government covers the costs of monitoring fuel quality and the cost charged by the International Energy Agency. By way of legislation we are trying to ensure that the levy fulfils the Crown’s oil stockholding obligation with the International Energy Agency. The purpose behind this, as mentioned earlier, is to create sustainable funding that is paid for by the users of the service.

The last context is to fulfil New Zealand’s financial commitments for ensuring global oil security. By doing so we are securing constant supply of transport fuel. One side benefit the bill also delivers is that those who choose to use public transport will end up paying less compared with those who continue to drive their cars. So apart from adding the New Zealand energy security, the bill protects the environment too.

The bill is now in its third reading. It was considered by the Commerce Committee, of which I am honoured to be a member. The committee has made minor amendments to the bill, which we firmly believe will help New Zealand.

One important point I would like to share with those who may contemplate opposing this bill is that New Zealand is part of the international community. By not complying with the International Energy Agency’s obligations we are risking our reputation. Further, any nation State’s foreign policy is driven by the need for energy. A decision needs to be made, keeping in mind our energy needs. By keeping us as part of an international agreement, we are being realistic in recognising that as a small nation State we may not be in a position to mitigate any disruption in the international oil supply. However, by being a part of a collective agreement, we have chosen the best possible option of ensuring that we are able to meet our energy needs.

The need for the legislation arose from the 2012 review that this National-led Government undertook. Based on the review, we decided that the most cost-effective way for New Zealand to meet its obligation was to implement the user-pays model. Apart from being prepared for international volatility, in terms of oil and gas, the Government has got the Business Growth Agenda and the Petroleum Action Plan to facilitate and encourage local production. The amendments made by us to the Crown mineral regime and the block offer process will continue to encourage New Zealand to look to our petroleum potential.

This National-led Government is committed to realising our abundant energy resources potential to help our economy increase exports and create jobs, while ensuring that we develop these resources in a safe and environmentally responsible way. As a member of the Commerce Committee, I am grateful to the officials and the submitters who contributed to this legislation. As I said in my speech earlier, these are matters of national importance and every New Zealander should engage in them. It is only due to the feedback that we received from all the submitters that we can ensure that this sound legislation can be put in place.

Finally, all of us have said earlier that this New Zealand-led Government is serious about ensuring that New Zealand’s economy and its people continue to grow and enjoy the lifestyle that we have always had. This bill is another example of positive legislation that we have for New Zealand and its citizens. With these words, I commend this bill to the House.

I just wanted, once again, to reiterate that the Labour Party is supporting this piece of legislation, the Energy (Fuels, Levies, and References) Amendment Bill, because we feel it is important that we fulfil our obligations under the treaty. Rather than going on about how much this is putting on to a litre of petrol, which is about 0.045c, I say that it is not significant, unlike what New Zealand First was saying. It means that if you have a tank of gas of about 60 or 70 litres, you are going to be paying about 3c extra for that tank. Now you might say: “Well, that’s another tax.”, and you would be absolutely right. But I think what most people in New Zealand are most concerned about is not about this, which is about fulfilling our obligations—and is, effectively, an insurance policy to ensure that we have, and continue to have, petrol available to us even if there is some world price shock or some sort of manipulation of the market—but about the fact that yesterday prices of petrol went up 4c a litre overall when the price of oil per barrel actually went down $3.

I am asking the same question as all other New Zealanders. They are very thankful about the fact that petrol prices have dropped around 50c a litre over the last few months because of the abundance of oil, shale oil, and all the other issues surrounding what is happening out there in the global market. But, really, the question is why petrol prices have now gone up 20c from the low they reached a few weeks ago, when, actually, the margins of profit that the oil companies are making are still the same, or have even grown. This is something that I believe is in people’s minds, and I think it will become more acutely embedded in people’s minds as prices continue to go up. People cannot understand why prices can possibly go up, even taking into account the fact that there are taxes on petrol, because the taxes are not changing at all. But the price is going up, even though the price of oil is going down and the New Zealand dollar has not moved substantively over that time.

Stuart Nash, in his address this evening, talked about the need for an inquiry into the price of our petrol and why it costs so much, and I would like to say that, as the consumer affairs spokesperson, that is absolutely needed and it is what New Zealanders are looking for from this Government. They actually want to see some leadership in standing up for people who are filling up their cars every day in order to get to work. They are thankful for the prices going down, but now they see those savings that put a little more money in their pockets being eroded day by day, as in when the price per litre went up by 4c today without any real justification for that price increase. That is wrong and we need to have an inquiry. If nothing else, that inquiry would at least satisfy people that they are getting a good deal—or not—and we can have that out and it can all be made public.

I want to commend the AA—the Automobile Association, not Alcoholics Anonymous—for the good work that it has done in this particular area, because it has been keeping an eye on this. It is a neutral observer. Obviously it is on the side of motorists, but certainly it has been watching this carefully. To paraphrase its spokesperson just the other day, it cannot understand why the price of diesel has gone up when the margin that oil companies, are making per litre is about 35c. How is it that that price can go up when they have already got very comfortable profit margins from diesel? That increase has an effect right across our industries and our businesses.

Coming back to where we are in this bill, as I said before, the increase in levy that we are putting through—yes, at the behest of the Minister of Energy and Resources; the Minister can determine what the price is going to be—is about 0.045c per litre. From the Labour Party’s point of view, of course, we do not want to see any additional burden being placed on motorists, but what this burden is for is a levy that is taken out of general taxation—it would have otherwise come out of your taxes—and is being shifted across and applied to fuel so that, effectively, the user pays, in terms of who actually pays this levy.

As many of the other speakers have said tonight, this is part of our international obligation. We want to have a stockpile of at least 90 days of fuel that is there in case, as somebody mentioned tonight, some of the oil-producing countries decide to put the price of oil up. We have at least 90 days in which to see through that shock and mitigate and do something about that shock, rather than feel it in our economy. We could actually store it physically in New Zealand, but the cost of doing that is actually pretty exorbitant. What we have chosen to do instead is buy tickets, or promissory notes if you like, that say that out there our oil, in various multifarious places, will be secured, and if we need to draw on it we can draw down 90 days’ supply. To ensure that that is guaranteed and maintained, we sign a treaty. We sign the Agreement on an International Energy Program, and that ensures that the tickets that we purchased are actually able to be redeemed when we do need that oil. For that service we pay a price, and it is that price that we are talking about today, because up to now that bill has been met through general taxation—Vote Energy. The proposition in this bill is to ensure that that money instead is coming out of a levy that will be levied on petrol.

There are a couple of issues around here that I want to mention, because although we agree with the way this is occurring, there are some exceptions. There are some exceptions and some anomalies that I believe need to be addressed. For example, air transport—jet fuel is exempt. Fuel oil is exempt. Liquefied petroleum gas (LPG) is exempt. Bitumen is exempt—bitumen, of course, coming from tar, etc., coming from oil products. What is not exempt—and I believe this is a major anomaly; it has been talked about—is biofuels and ethanol.

The biofuels and ethanol industry is an industry where we have considerable added advantage in New Zealand. The great work that is being done by Scion in Rotorua with what we could do with tree waste, with forestry waste, in terms of generating ethanol and biofuels—just taking this levy off those products at least gives an indication that we are serious about supporting those particular industries in New Zealand. Instead, we have neglected to do that. Yet, we provide exceptions in fuel oil, jet fuel oil, LPG, and bitumen. That does not seem right. Dr Megan Woods from the Labour Party put up Supplementary Order Paper 45 to rectify that, to make sure that biofuels and ethanol would be exempt. It was voted down by the Government. That really reflects where this Government is going. It is a Government that looks over its shoulder at what is behind it and not forward in thinking what is going to be driving our economy in the future—and it is about those biofuels.

Once again, I want to come back to where I started. This is a very small amount of money to be applied to the cost of a litre of petrol. It does provide us with security, and I believe that that is important, but we are not seeing, right now, the price of petrol coming down as it should be as the price of oil falls. And the price of other products—plastics, bitumen, road tar, etc.—is not coming down, as well. We should be seeing a decrease in the price of those oil-based products running right through the economy. In fact, that is not happening. There needs to be an inquiry and that is why—

Sorry to interrupt the honourable member.

I want to thank members of the House for their speeches tonight, which have been very exciting, I must admit, in regard to this bill.

💬 Hon Member: Oh, seriously.

Yes, including—

💬 Hon Member: Especially the last one.

Especially the last speech, which was so exciting that the member is now seeking to have another call. This bill, as members have said tonight, is about providing security for New Zealand’s supply of fuel. Everybody would want to see that happen because, as net fuel importers, New Zealanders are at the whim of the international market and especially the international supply in the market.

💬 Dr David Clark: There’ll be an inquiry at FEC. I can see it.

That member over there, the red jacket member of the Labour Party, is not dressed in his normal attire tonight, but I am sure he will come back once a year with his happy-go-lucky jacket, which we like to see. He is into his seventh year of chanting now, and we look to him for 11 years of chanting, which that member is known for in this House.

This is an important bill in the sense that oil supply is something that New Zealanders understand and want to guarantee. This is about an international convention, basically, where countries have come together and decided that with unity of supply by purchasers, they can regulate and control any action that sellers may take with this product, trying to dictate supply on the market. That is a very important approach to take, especially when you consider that most of the supply comes from regions of the world that are very delicately placed at the moment and have Governments that are in some kind of trouble of one form or another.

When we look at the bill, we see that all it does is effectively shift the cost of that ticketing process. Currently the ticketing, which is basically ensuring that you have that supply held at some point, is now paid for through the consolidated fund. Basically, for every tax dollar you pay, a portion of that goes to making sure we have a base supply through this agreement. The change that this bill makes is to reflect that cost in the cost of fuel for the consumer. Rather than central government paying through its central government fund, it would do it through the fuel cost for consumers.

There are a couple of points we need to discuss in that area. One of them is just what the last member raised about the conjecture around the pricing between international fuel prices and the domestic market. There can be a variety of reasons for that. Although you may see some commodity products reduce in price, that does not necessarily reflect in the price of that end value-added product that you get reducing to the same effect, because there are a lot of intermediary manufacturing processes, shipping processes, and the like that do not change to the same degree, and that can influence the price differential. So there are a lot of factors in regard to the point that Mr Nash made that need to be taken into account. You can see that in your milk price. That is another indication of a commodity that has had a reduction, but the value-added side of it does not necessarily have a reduction in cost. The other—

💬 Dr David Clark: Spot the farmer.

Yes, well, that is the reality of someone who actually produces something in this country, not of somebody who sits there and talks about how to transfer money around.

The Green Party came into this House and actually supported this bill. It is unique for its members to actually support a Government bill. We thank them for that, and may that be a sign of many more things to come. I notice they never mentioned peak oil. When we came into this House 10 years ago, every Green speech was about peak oil—“You need to be worried about peak oil. The world’s supply of oil is going to stop.” In fact, the world’s supply of oil was supposed to have stopped about now, under the Green philosophy. Now we get the Green Party coming in and telling us what the future of the world energy supply will look like. Well, it never got it right then, it will not get it right now, and we do not need that economic plan from the Green Party to come in front of us.

The other side is that New Zealand First—and I would not be smiling if I were in New Zealand First—is the only party that is opposing this bill. The neo-communist economic ideology of the New Zealand First Party is something we need to take into account here.

💬 Clayton Mitchell: Mr Bennett, seriously.

Yes, neo-communists—that is what you are; yes. The New Zealand First Party just does not know why it is opposing it. I think Fletcher Tabuteau in his speech sort of talked about it and said: “Well, maybe it’s because the Government has to fund it, or maybe it’s because the consumer has to fund it.” Maybe there were some other reasons. What were those other reasons?

💬 Clayton Mitchell: I said “Very eloquently put.”, unlike the waffle that we’re hearing.

“Very eloquently put.” Well, Clayton Mitchell did not actually answer it, but I can tell you what Fletcher Tabuteau said. He said he wanted the consolidated account of New Zealand, the Government of New Zealand, to pay, not the consumer. That is what New Zealand First is saying in this case. It is the only party in this Parliament saying that. The Labour Party and the Green Party do not agree with New Zealand First in this case, and good on them. They actually see the advantage to what we are doing in this bill. There are a lot of reasons that New Zealand First will be taking that approach. It is really just the shallowness of its economic thinking that is probably the fundamental reason. Its attraction to oppose anything is probably the other main reason, and its negativity and inability to consider wider issues are probably other reasons that New Zealand First is taking the approach it is.

Members of Parliament, we have a bill in front of us today that essentially enables New Zealand to sustain its obligations under the international treaty. The way it does that under this bill is to actually pay for that through the consumer, through that excise levy, rather than through the Government spending money from its consolidated account. That is something that members in this Parliament have considered and decided is in the best interests of New Zealanders going forward.

When we look at the global oil supply, it is changing. America is now self-sufficient, if not a major producer and exporter of energy. The world price of energy has dropped markedly in the sense of that raw commodity product. The value-added product we get is maybe somewhat different. This international obligation we are part of really has at the heart of it a focus on maintaining supply for crude oil. The last speaker from the Labour Party mentioned other types of oil-based products, and a lot of those are very value-added, specific products. The international obligations are really aimed at countries trying to take advantage of the crude oil supply, to try to change that market, rather than those more specific value-added products, which often are not made in those countries of origin. They export the crude oil and then that is converted into the value-added types of energy products you see. So that may be an answer to the question the Opposition raised around why there are certain exemptions for different types of products. I see a member over there smiling because he is learning something. It is good for him to actually learn in this House.

💬 Dr David Clark: Always sitting at the feet of the chair of FEC.

Yes, yes. This is a bill that all parties in this House should support. It is a shame that our neo-communists from the New Zealand First Party do not support it. It is good to see the Green Party come to its senses and support it, even though it is well off track in its desire to see this as a debate around wider energy issues rather than actually looking at the reality of what New Zealand industry and the economy are based on and their need for the basic crude oil that we have at the moment in our economy. Thank you.

The member resuming his seat, David Bennett, made a few laconic remarks, and I wish to engage with one or two things. I understand he is a little defensive, certainly around the petrol pricing issue where an inquiry is being sought. As the chair of the Finance and Expenditure Committee, he will have the job of receiving that request and dealing with it fairly. Perhaps the pressure of that is getting to him and making him a little looser-tongued than he otherwise would be. He may also be a little defensive right now.

There are other issues that are harming his electorate. Of course there is the Skycity deal, which is taking jobs away from Hamilton—from the convention centre industry there. A no longer iconic international centre is proposed, but it is one that is competing more in the domestic market. So he will be feeling the pinch, and a few loose remarks may result, but those things can be put to one side as we talk about the bill that is focused on meeting our international obligations in respect of petroleum reserves, the Energy (Fuels, Levies, and References) Amendment Bill.

This bill is one that we will be supporting. It is one that makes some sensible steps forward but one, of course, that we have a few concerns about too. The rising cost of meeting this treaty obligation is something that Labour is concerned about. The cost of petrol, of filling up the car at the end of the week, is something that New Zealanders feel very directly. This does impose a cost on consumers, and that cost must be minimised because, after all, as a society, we want everybody to have access to transport and have the ability to move around and participate in society, and we do not want people excluded by unnecessary price increases in petrol. Of course, that is why Stuart Nash has put forward this proposal that petrol prices be looked into.

The bill itself has that international stockholding treaty obligation it is trying to meet. New Zealand does pride itself on being a good international citizen. Having these kinds of stockholdings also increases the stability of the world markets when responsible countries have stocks in place. We know that energy, and politics around energy, is a volatile thing. It is a good thing that there are international agreements and treaties to make sure that countries do not find themselves in vulnerable positions.

I think there is also a concern around the price signals that are sent here, more broadly in terms of energy and energy policy. In a previous life, I worked at Treasury on the emissions trading scheme, which aimed to—[Interruption] I am not that old, I think the member was meaning, and it cannot have been a previous life. I was working on the emissions trading scheme. We in New Zealand introduced the first all-sectors, all-gases scheme in the world. It was meant to send a signal around fossil fuel prices and give certainty to business about the future path that energy prices would take, so that businesses could be sure that in the future renewables were going to be rewarded. And, in fact, at the time a bill was also passed to ensure that new generation—what is called baseload—would not be from anything but renewable sources and that fossil fuel generation would be outlawed except as spinning reserve in emergencies. This Government got rid of the Act as soon as it came into Government. It was less concerned about price signals, ironically, than one might think a party that talks a lot about markets would be.

At the same time the Government also got rid of the biofuels sales obligation, which saw the biofuels industry that was emerging in New Zealand flee the country. That is very sad, because New Zealand was on a path to having itself well positioned to take advantage of the renewable resources that we have here, to lead the world in new technologies, and then to export the intellectual property with that. Instead, we saw those industries flee the country as the Government gave more certainty to the oil industry that their interests would be protected.

Once again, here we are, talking about the rising costs, and this gives yet more of a buffer for the oil industry where the prices are higher overall and the margins as they come and go are less noticeable. That is of concern because the price signal is something that I would like to come back to, and that I would like to see clearly laid out so that we actually have transparent and efficient markets working around fuels more generally.

What we know, of course, is that these energy resources are abundant in New Zealand—the alternatives—and they do compete with petrol, when the markets are efficient and in place and working. Things like solar-distributed generation can replace generation from the old-fashioned diesel generators. When geothermal is tapped, we have more baseload generation. That means fossil fuels do not need to be tapped into. Likewise, in New Zealand we know that most of our major cities on the coastlines have access to wind. There will be a few things here that will be challenging for the Government to get its head around, I am sure. Solar may be a challenge to think about in the future, because in Auckland the huge shadow cast by the iconic Skycity gambling structure may be putting more clouds on the horizon, ruling out thinking of a sunny future there to compete with the oil industry.

With that light-hearted comment aside, there are great opportunities there, and I really think it would be wonderful if the Government was thinking more about those broader price signals as it thinks about our international obligations and, with them, the climate change obligations that were signalled in the emissions trading scheme I mentioned at the beginning of my speech. We still have those international obligations. Although the emissions trading scheme has been watered down by this Government and does not send the price signal it once did, we still have those obligations. The principle of meeting our international obligations is an important one across this legislation, as it is across other legislation.

That comes back to the concern about our international reputation. New Zealand trades in world markets. We are very proud of that. We are an exporting country and we want to export more as a country so that we can enjoy the prosperity we have now into the future. If we have a diminished international reputation and a diminished ability to trade, we will be poorer as a country over time relative to competing countries in the export markets that we participate in.

Our other concerns around growing alternative sources of fuel, and the international reputation that goes with that, I have mentioned. The lack of alternatives that comes with that for businesses for their own business planning and the implications that might have for their prosperity into the future—and, with it, ours—means that this energy security issue is a serious issue that we do well to debate here. It has been debated. It is something that affects our future prosperity, not just in an abstract way but in a very real way, as businesses do contingency planning and work out their margins and so on. We want efficient businesses competing in international markets, secure in the knowledge that they have the energy sources that they need.

So, as I said at the beginning, we on the Labour side of the House will be supporting this legislation, despite our concerns about the rising fuel prices that will go with it. We think that the overall good means that this bill should go through. We think the Government could be doing other things to address those prices, like the very sensible suggestion Stuart Nash has of an inquiry into petrol prices. David Shearer raised the issue of transparency in electricity bills, which the Electricity Authority supported, again in the same general market area. Those kinds of things should be explored. At the moment, it feels very much like we have a Government that, instead of focusing on those issues, is distracted and mired in controversy. The Skycity saga drags on and on, and there have been others like Rio Tinto and Novopay before it. Thank you.

I understand that the next call is a split call. Andrew Bayly—5 minutes.

I am very pleased to be able to rise to support the Minister of Energy and Resources in this third reading of the Energy (Fuels, Levies, and References) Amendment Bill. For me it is a very easy decision and I note that it is great that a number of members from the Opposition do, in fact, support the thrust of this bill, including the members from Labour and, interestingly, from the Greens, which is fabulous. As many of you have noted previously, this bill is all about New Zealand meeting its international obligations. We cannot and should not contemplate welshing on our obligations as a State. You do not have to go back too far in history to see when New Zealand was worried about having sufficient physical quantities of oil.

At this juncture I want to acknowledge the great New Zealand oil industry, most of it centred on the Taranaki region. This region is generating significant amounts of foreign earnings and it is to be commended. That industry generates a lot of jobs and supports a growing New Zealand economy. However, although our products that we produce are of high value, they are not the right type. That is why we need to look at how we offset that. This bill is about doing that. We need to address the imbalance. The sheer fact is that we need to look for commitments around protecting 150,000 tonnes of crude oil and refined products every year.

The smart thing about this bill is that we are actually entering into good and innovative procurement processes. Entering into ticketing arrangements means that we get the oil requirements that we need in a proper manner. We have also set in place physical back-to-back arrangements with State Governments, and I note that we previously have worked with the Governments of Denmark and Sweden. This is all about reducing our actual risks around these supplier arrangements, which is good business.

Specifically, the bill covers three aspects. First of all, it provides for the purpose of the fuel monitoring levy to be extended to quite legitimately cover or meet the Crown’s compliant costs. Secondly, it removes the present maximum levy. Thirdly, it allows for the levy rate to be set by an Order in Council. Personally, I cannot contemplate what would happen if New Zealand did not have sufficient oil reserves. As a Government we have been increasingly focused on other forms of energy. I do note the previous speakers who have talked about the wonderful, creative New Zealanders who have been looking at alternative biofuels, whether they have been ethanol or tallow based, or the good work that has been going on at Scion around timber products. All that is exciting stuff and it shows the dynamism and the inventiveness of New Zealand scientists. But, in essence, this is about protecting the fuel that we require for our transport industry, which is still significant and fundamental. If we do not pass this bill and put in place the adequate measures that we have talked about today, then we are undermining the essential element for the well-being and continued growth of the New Zealand economy. I fully commend this bill to the House.

I call Stuart Smith—5 minutes.

First of all, I would like to mark the passing of Celia Lashlie, as has been done by colleagues earlier in the evening. As a father of teenagers, I certainly was one of those people who took a lot of note of what she said. She has left her mark on New Zealand and will be long remembered.

The Energy (Fuels, Levies, and References) Amendment Bill is a very important bill, and I would like to start by just challenging what was said earlier in the evening about the price and calling for an inquiry into the price of fuel.

💬 Carmel Sepuloni: What’s going on? Filibustering going on over there.

I think if we want to talk a little bit about fuel running out, we can hear what happens when an engine runs low on fuel, with that spluttering coming from the other side of the House—running quite roughly.

As I said, price has actually got a lot to do with exchange rates. It has to do with the price of oil. Incidentally, it might come as a surprise to members across the House, but the oil price is going back up. It is over $61 a barrel today, so it is quite considerably higher than when it was in the high forties just a couple of weeks ago. The interesting thing is that the exchange rate is going in the opposite direction to fuel prices. So that has caused a buffering effect and that is why the fuel price has not moved at the pump in the way people would have expected.

Anyway, having said that, I would like to dwell for a little minute also on what would happen should we run out of oil. I think one of the things that is not appreciated, should that happen, is that most petrol stations around the country do not fill their tanks all the time. What they do is put in the minimum amount for a couple of days’ supply, quite simply because they do not want to bank on the price of the day. They want to meet their buy price and sell price and keep that gap at pretty much the same, so that they are buying and selling on the same market. So a change in supply would have an impact almost immediately at the fuel pumps, and New Zealanders would very quickly find that their car that was on half full would run out in a few days and then they would not be able to fill up because all the fuel supplies around the country would run dry very, very quickly. So this bill aims to alleviate that.

Also, the instability in the Middle East at the moment is something that we should not just sit back and hope will not ever have an impact on us. Although the Islamic State of Iraq and Syria is a terrible beast at the moment, the instability that it is causing over there could quite easily interrupt supply. It is not that hard to imagine things blowing up in the Middle East, and New Zealand, like the rest of the world, going through an oil shock, which was alluded to earlier on—like in the 1970s. That was a long time ago, I appreciate, but carless days did not happen only here in New Zealand. They also happened in Europe, in major parts around Europe, where you could drive your car only on alternate days, I understand. So that would be a pretty difficult thing to imagine today.

While it seems for some a utopia to imagine a world dependent on public transport, New Zealand is not ideally suited for public transport. We are not densely populated enough to really get the frequency of service that we see around the world in places like the UK, Paris, and Singapore. Although Singapore has a very similar sized population to New Zealand, it is in an area roughly the size of Lake Taupō, so you can see how a density of population makes those things work.

The ticket contracts are quite an interesting concept in that we do not have to stock a whole lot of barrels on the wharf. I am quite surprised that the Greens were calling for us to actually do that and keep the actual physical supply here because that, I would have thought, would be of great concern to them. That would carry quite an environmental risk for New Zealand—not one that would be taken lightly. Besides the cost of installing all of that infrastructure to look after those supplies, it would really be a great impost on our environment and an environmental risk.

There is a lot to be said for domestic production, as has been spoken about before, but our oil is light sweet crude oil and our refinery at Marsden Point is designed for heavy crude. So on that note I take great pleasure in commending this bill to the House. Thank you.