For all of the fatuous claims of those who think fossil fuel use should be ended "as soon as possible", we can all see that the world values them, not just to power transport, and provide base-load energy generation in many countries, but to provide the essential materials for a vast range of industrial and consumer goods. Notwithstanding the nonsensical claims by the likes of Greta Thunberg and de-growth multinationals like Greenpeace, oil use continues to grow worldwide according to the International Energy Agency. Half of that growth comes from aviation and chemical feedstocks - in other words the use of oil as an input into the manufacturing of everything from pharmaceuticals to pipes to electrical insulation to asphalt and paint.
Yes there is some substitutability around energy in some sectors. Most obviously in electricity generation, although no single alternative to oil or coal is "ideal". Hydro-electricity is geographically dependent, nuclear is difficult primarily due to extremely high capital costs and public opposition, and solar/wind power is intermittent (and storage remains expensive).
In transport there have been huge leaps ahead in technology for light road vehicle, and medium weight trucks and buses doing short to medium haul trips are increasingly electric as well. However, it is going to be some years before long haul heavy trucks (and coaches) will go electric.
Aviation isn't moving from petroleum for some time, although hope it being seen in biofuels, that has its own issues. Shipping likewise, which mostly uses heavy fuel oil, is also not moving away from petroleum. What many activists ignore is that most transport, certainly commercially provided transport, is only too aware of the importance of minimising fuel costs. Conventional engines have never been more fuel efficient, and that is driven by market factors more than anything. Airlines, shipping companies, trucking companies all want to save on costs, because most of what they do is motivated by profit.
Private individuals less so because they trade off high capital expenditure vs. lower operating costs, and many don't have much capital to spend on cars, but the incentives are there. As someone once said, the stone age didn't end because of a lack of stones. Similarly railways did not move from steam locomotives because coal (and fuel oil) were scarce, but because technology made diesel and electric traction more cost effective.
Outside transport, and outside the wishes of planners hoping people will trade off time and comfort to use public transport and active modes more (which will happen anyway due to cost), the big consumers of fossil fuels are in agriculture, industry and manufacturing, and much of that isn't changing soon.
So what SHOULD government do when petroleum gets more scarce and more expensive?
1. Not meddle with prices. Higher prices ensure more supply and encourage more supply. When people face the real price of energy they will take steps to conserve or change energy sources, and trade off whether they think it is a short or a long term saving they get from switching. The idea that politicians or bureaucrats have any clue as to what best meets the needs of everyone using petroleum products now is simply absurd. High prices are already encouraging people to shift modes of transport, to drive less and consider what their next vehicle's fuel consumption is. Let that work, and don't listen to the excitable planners who think more needs to be done. A majority of the costs of urban public transport are already predominantly paid for through motoring taxes and rates, as it is already "being encouraged" with fares well below cost. It doesn't need to be more.
2. Don't get in the way of exploring for more energy. The Ardern Government's ban on new oil and gas exploration was always an act of virtue signalling to fly a vacuous flag around climate change to the world, even though the impact of no more exploration on climate change is nil. The even more preposterous argument that "there isn't any more to discover" makes it more ridiculous, because there is no need to ban something that wouldn't happen anyway. Norway has the world's highest takeup of electric vehicles (96% of new light vehicle sales are EVs) and it is the world's seventh largest exporter of petroleum and gas (and there is bipartisan consensus about expanding it).
3. That means all energy. Whether it be wind power, solar power, nuclear power, tidal or coal, government should get out of the way. There are negative externalities with some options, but these should be treated as property rights issues. Pollution is an escape over property boundaries and permission should be obtained from owners of such property if pollution represents anything from nuisance level onwards. There should be minimal restrictions on installing solar panels, wind turbines or damning waterways if you own them, and the replacement of the RMA should enable this. It also means that electricity generators should also be able to plan for future supply.
4. Maintain constructive foreign and defence relations with allies: Freedom of navigation is critical to survival for New Zealand. That means defence matters, including the alliance with Australia in particular, but also other like-minded liberal democracies. Yes that includes the United States, Japan, south Korea and Singapore. It means that there should be a blue water navy and an air force that is a credible contribution to collective defence of sea lanes. It doesn't mean having to go along with every military action by allies, but it does mean contributing to the defence of allies, and having clear lines about what matters in the national interest.
5. Maintain a minimum critical reserve of supply: The International Energy Agency recommends member states keep reserves worth 90 days of supply. This isn't "free" to do, but should be considered a core part of national defence. Without such supply, significant parts of the economy and the public would be in danger.
6. Sell off your ownership in gentailers: As clever as it seemed for the Key Government to sell 49% of three electricity gentailers, it doesn't go far enough. For these generators to build more supply they need more capital, and it shouldn't be constrained by governments having to put their own capital into the three SOEs. Government should state that, at the very least, it is relaxed about becoming a minority shareholder, or better yet just hand over the shares to the general public for it to do with as it pleases. They can sell them or hold onto them. Before that happens, it should break them up. Generation and wholesaling electricity should be separated from retail, so the retail market can thrive. I don't mean the private gentailers like Contact, just the majority state owned ones. That will stir up the market and encourage investment in capacity, which is just what is needed as more choose electricity over gas and petrol.
I'm old enough to remember how the National Party's greatest conservative socialist, Muldoon, tried to centrally plan New Zealand away from the volatility of oil prices, and lumbered the country with billions in debt for inefficient pet projects. From the Motunui gas to gasoline plant, to the North Island Main Trunk electrification, many Think Big projects were an economic disaster because officials assumed oil prices would remain high perpetually, which was not to be the case.
The Muldoon government subsidised CNG and LPG conversions for vehicles, and subsidised the roll out of CNG and LPG refuelling at service stations across the country, and by the mid 1980s the growth in demand in CNG and LPG had collapsed. It also indirectly subsidised road use by such vehicles, as fuel duty on CNG and LPG was (and still is!) significantly lower than that for petrol.
In a few months, the US-Iran war will be over and the crisis in fuel prices will have ameliorated, and despite the eager calls by central planners, the best government can do is to
