The price of powering civilisation

The crisis in Ukraine and the growing embargo on buying oil and gas from Russia is, of course, creating the greatest crisis in energy since 1979. A crisis over half of the population has never experienced, and it is exposing in clear view the irrationality of energy policies in many countries from the past couple of decades.

Until recently the history of energy policy for humanity has been largely driven by a mix of scientific discovery and innovation, and market demand. As the late Julian Simon once wrote, humanity moved from using wood as a primary source of energy, towards coal in the 18th and 19th century (which saved many remaining forests in Europe from decimation), and then towards oil in the late 19th/early 20th century because of price and capacity.  This also paralleled the rise of electricity, largely generated by burning coal, oil and gas (but also some locations, like New Zealand and Norway, benefited from geography and geology enabling hydro). Nuclear emerged in the mid 20th century, but has been constrained to electricity generation (in jurisdictions not taken over by fear, resulting from hyper-catastrophising) and naval propulsion. 

As the world has become ever more electrified, the demand to generate electricity has been fed primarily by fossil fuel burning, albeit the efficiency of this has grown exponentially. The energy intensity of refined fossil fuels has meant their portability literally enabled aviation to become not just viable, but the dominant means of long distance passenger transport, consigning long distance intercontinental rail travel in the United States and Canada to leisure trips.

The economic impacts are palpable, and all of the rhetoric and hysteria from environmentalists about the evils of fossil fuels ignores what they have enabled in the standards of living for billions.  Goods, services, trade and travel are on the scales they are today because of this.

The push to slow down the effects of climate change has resulted in policies that are almost monomaniacally focused on cutting CO2 emissions at any cost. Sure, there are sound reasons to be encouraging a transition towards energy sources that create fewer emissions that contribute to climate change, but there is little point being concerned about climate change if thousands of people literally freeze to death in winter, or starve due to collapses in food production, or the inability of essential goods to be transported long distances. 

So when tyrannies control much of the energy that powers global economies, and the risks of actually going to war with them to stop their aggression are too high (due to the aggressor's possession of nuclear weapons), then cutting off access to that energy has a price, and you're paying it at the pump.

What the crisis in Ukraine has exposed is how utterly vapid and empty the likes of misanthropes like Extinction Rebellion and other environmental extremists are, because there is no easy path away from fossil fuels.  As wonderful as advances in solar and wind energy are, they still have some significant limitations.  Both require significant storage capacity to be sustainable and useful in their own rights, completely unlike fossil fuel or nuclear generated electricity.  Moreover, for most transport, fossil fuels (or biofuel equivalents) have no cost effective or feasible rivals, yet, for aviation, shipping or heavy road freight transport, or indeed many industrial processes like steel production.

One question New Zealanders might ask is what position the country would be in regarding oil and gas supply if the Ardern Government hadn't stopped enabling new exploration of oil and gas in 2017.  Removing this ban today would have no effect, as it takes years to invest, explore and gain any results, but had it happened in 2017, then there might have been a contribution to global supply. The Ardern Government has deliberately decided to constrain supply of oil and gas, not on economic grounds, not even considering national security, but to virtue signal.

The Ardern Government advanced a radical approach to climate change policy, not just to make a contribution equivalent to NZ's largest trading partners, so NZ would be in-step with those it competes with, but to virtue signal.  To cut net emissions by 50% by 2030 is not going to make a measurable difference to climate change at all, but it is all about Ardern and Shaw looking good on the international stage.  

Yet the oil and gas exploration ban does absolutely nothing to contribute to that, at all.  

The wisdom of the US in enabling unconventional oil and gas exploration has disconnected it from being too concerned about oil and gas from Russia (and the Middle East).  

Germany too, with its Green Party Climate Change Minister advocating a natural gas national reserve and to keep coal fired power stations available for energy security, is learning the value of reliable supply. 

New Zealand, on the other hand...

Mines, railway or jobs

I just had to comment on this.

Green MP Catherine Delahunty is waging war against Nightcaps, a small town in Southland I have long been aware of, as it is the locality of a collection of lignite mines. Well it isn't the town, but the mines she hates.

There is some local concern about the pollution arising from the mines, which have existed in one form or another for over a century. The mining is carried out by two companies. One is Australian (boo hiss bad) which she mentions as "Eastern Corporation of Australia", the other she doesn't mention is state-owned Solid Energy.

Now let's be fair here, if the mines closed, then the town would be a shadow of its current self. Jobs would be lost, and people would have to relocate (although Catherine would probably want a generous welfare state to keep people living there off the taxpayers' back).

What she neglects to mention is that the government COULD actually cut back the mining there rather easily. Solid Energy is the obvious first target. Presumably the Greens would close the company down.

However a less visible target is Kiwirail. You see most of the mined lignite leaves Nightcaps on a railway branch line, which has a daily coal train. The line is the last railway branch line in Southland (other than that there is the Main South Line running from Dunedin to Invercargill and onto Bluff), and if it was being run commercially it would probably face closure. Unless, of course, the mining companies would pay commercial rates for freighting the coal (they did under privatisation, but the line needs bridge and track replacement as it has not had serious renewals since it was built).

Yet with Kiwirail now state owned and subsidised, a policy endorsed and cheered on by the Greens, it effectively subsidises the mining operations they despise.

On top of that the mine she talks about is apparently on local authority land. Presumably she believes in empowered local government, yet Southland District Council doesn't do what she likes

So one state intervention - propping up a railway, is having results (keeping open some mines) that those who PROMOTE state intervention, despise.

So what will it be Catherine?

Keep subsidising the railway?
Keep local people employed in mining and supporting those employed?
Let local authorities continue to own land used for purposes you don't like?
Close the mine and the town?

What a choice for those addicted to planning the world around them.

What would I do?

1. Run the railway commercially or offer it to the mining companies to buy if it is that important to them.
2. Enable the property owners of Nightcaps (and across New Zealand) to enforce property rights against noxious levels of trespass of gases (smoke) and dust.
3. Tell the local authority to sell the land (as it should with any surplus land).
4. Leave the mining companies to do as they wish.

Will the UK contribute to South Africa's energy crisis?

For the past two years South Africa has faced a serious electricity crisis. Demand has been exceeding supply, with the reasons for this being multi-faceted:

- Electricity generation remains dominated by a state owned company (Eskom), which has been severely undercapitalised (so not investing in new capacity) as the Government refused to inject capital into a company it was seeking to privatise. State ownership without the state seeking to invest;

- Electricity tariffs have been generously subsidised (described by the Chairman here), so that the price of electricity is around a third of the cost of generating it. The reason being the political desire to supply cheap electricity to the population Eskom makes a substantial loss, so cannot finance expansion from its own revenue. Socialism is crippling electricity generation (although tariffs are increasing by 30% to start to address this);

- Privatisation of Eskom has been stalled for political reasons and because no new owner would want to buy a company that loses money without the power to increase tariffs to address this;

- The government deregulated the electricity market, but there is no foreign interest in building new capacity whilst the state continues to bear Eskom's huge losses as it continues to price electricity well below cost.

So South Africa has been stuck, with ample coal reserves, but without the capital investment to translate this into electricity generation, and pricing a scarce resource so cheap, it gets rationed through blackouts.

Now the appropriate answer to all this is to split Eskom into three or more companies, privatise them one by one, letting each privatised one set its own tariffs. This would effectively allow new entrants to decide how to invest in new capacity and match price and demand.

In the meantime, South Africa has sought a World Bank loan to help pay for a new power plant for Eskom. Setting aside whether this should happen at all (it should not), the UK government is apparently considering vetoing it at the World Bank. Why?

Not for economic or financial reasons, but because Greenwar, Foes of the Humans and Christian Aid oppose it as the new power station would be coal fired.

They want money into so-called renewable energy, even though the cost would be twice as much per unit. Not that these organisations are planning to build and fund power stations themselves. No, they would rather South Africans endure blackouts and keep their economy crippled than to let some coal be burnt.

Why is the UK interested? According to the Times, Gordon Brown is looking for a way to capture the "Green" vote, though it is interesting to see how this clashes with the interests of some of the poorest on the planet.

So if the UK vetoes the World Bank loan, it will be about pandering to a Green agenda - it wont be about incentivising South Africa to engage in serious reform of its electricity policy.

After all, even if South Africa did privatise and reform electricity, the anti-human environmentalists would no doubt continue to oppose new coal fired power plants, also oppose more nuclear power, and want to force taxpayers in wealthier countries to subsidise "renewable" energy.

NZ home insulation foolishness tells a lot about attitudes

Following on from the Australian catastrophe in subsidising home owners who can't be bothered paying for their own energy bill savings, there is now the consequences of the New Zealand scheme. However, what it says about the general public speaks volumes about the trust they have in the state, trust that anyone who has spent time working with the bureaucracy knows is misplaced.

The New Zealand Herald reports that many insulation installers are upset that:

"the government subsidies are allowing competitors to hike their prices and still undercut them using taxpayers' money.

They say customers are avoiding them because they see government approval to offer subsidies of up to $1300 for insulation and $500 for energy-efficient heating as a "badge of quality".

Of 249 companies wanting to join the $347 million scheme for the next four years, 60 were chosen based on factors including geographical coverage, financial stability and their ability to carry out self-audits."

So in other words, 60 firms are suckling off the state tit, whereas the rest are out in the cold, helping to PAY for their competition to undercut them.

It speaks volumes that the EECA subsidy is seen to be a guarantee of quality, the same stupid mistake Australians made thinking government approved installers were somehow a higher standard. Seriously, do people think bureaucrats exist that check the quality and standards of insulation installers? Do people think that if a state approved installer does work for them that they have a greater degree of sanction if it turns out to be poor quality?

The notion of this is ridiculous. I've known literally hundreds of bureaucrats, most of whom know the limits of their competence. There simply are NOT people out there able to check this sort of thing. Yet people believe the state is somehow benevolent and offers some sort of reassurance.

Now I oppose the fundamentals of the scheme. Yes it might save energy bills, but that is a private good. Those with insulation shouldn't pay for those without to save money. Yes it might improve health of some, but when are people meant to take responsibility for the cold and damp in their homes?

The political reaction to this is predictable. Energy Minister Gerry Brownlie effectively endorsed the idea that the scheme ensures a "tight control" on quality of work, although it isn't clear quite how that quality is being ensured. This contradicts EECA claims that just because some aren't part of the subsidy scheme does not mean their work is poor quality. So is Brownlee just knifing those who don't get taxpayers money to run their business?

Labour spokesman Chris Hipkins thinks the subsidy should be offered to everyone, doing a Peter Garrett.

You see a better response is this:

- Stop the subsidy scheme;
- Tell homeowners that if they want to make energy savings, they should buy their own insulation and use recommendations, word of mouth and other means to explore the market to find good installers and suppliers;
- Tell homeowners who already have insulation that it is unfair to tax those who already have insulated their homes to subsidise those who haven't;
- Used the savings to cut the budget deficit, working towards tax cuts WITHOUT countervailing new taxes. Hiking GST wont help people pay for insulation.

After all, if people paid less taxes they would have more money to spend on discretionary expenditure, and if would rather pay higher heating bills than insulation, why should nanny state save them?

UPDATE: Not PC also has a recommendation of a GOOD installer. A recommendation I'd trust over any government "endorsement" that apparently isn't one.

Don't sing in the shower says Chavez

He's calling on Venezuelans to wash quickly and not sing because it wastes water and electricity, according to the Daily Telegraph.

He called jacuzzi's "anti-communist" (so he is a communist then), and his solution to electricity shortages? Create a Ministry. He also demanded all government departments cut energy consumption by 20%.

Why is there a problem? Chronic underinvestment in new electricity generation.

Of course it should hardly be a surprise that with socialism, shortages appear, and the solution to the shortages is not to allow entrepreneurship, market prices and let private individuals find solutions, but to tell people to use less.

Who does that remind you of?

Just sell them

Labour is moaning about big dividends from electricity SOEs. Labour of course took big dividends when it was in power. However, the idea of cutting dividends and having this flow on to power prices is completely absurd. It would be unfair, because private power companies have less capacity to refuse dividends, and it would mean the taxpayer getting ripped off by the capital investment in the SOEs being undervalued. Of course, non-customers of the SOEs would get nothing, and given around 30% of the market isn't with the state, that's quite a bit.

So the best solution is simple: Privatise.

Partly by sale, when market conditions improve. Partly by giving away shares to taxpayers. Then the dividends wont just be money for the state to spend, but for people to choose how they wish to spend it.

That's true public ownership. However, those on the left don't like it, because they think they know better. You see you might spend a dividend on food, clothes, a holiday or your mortgage repayments, they'd spend it on state health, education and picking winners (or losers) in business or the voluntary sector.

However, you know the state will hold onto these for now, because the National Party thinks that the majority of you lot think privatisation is a dirty word.

Simple policy lesson on energy

The Electricity Commissioner position was created by the Clark Labour Government.

It was never needed before. Jim Anderton and Helen Clark were keen on Ministerial Inquiries into industries that had no fundamental problems.

The Electricity Commission isn't needed, nor is an Electricity Market Authority.

My first step would be to choose another electricity SOE to privatise. Although whilst National has promised to sell nothing, there is no reason why it cannot issue shares in an electricity SOE watering down the shareholding. Similarly, shares could be distributed to everyone. Private owners, after all, demand better performance and seek to be more competitive than the state.

Lines companies should be allowed to retail electricity, as the recent review recommends.

So hopefully Cabinet will agree on modest steps to liberalise and get crony bureaucrats out of the way - and so the question will arise as to why the government owns the majority of the generation and retail market.

Electricity review might deliver useful answers

I tend to be sceptical of reviews, but the report in the NZ Herald of the government's announcement of a Ministerial review into the electricity sector is likely to look at how this state dominated generation and retail sector needs to be unshackled to allow competition to operate more freely.

Gerry Brownlee has indicated one issue is duplication of sector governance, which basically means too much bureaucracy. Energy security is important as Labour interfered considerably to try to guarantee supply (at high cost), and pricing given the government is the key market player is worth observing. The question being whether Labour milked the SOEs for dividends compared to investment in capacity.

The panel appointed includes some useful heavyweights. Brent Layton and Lewis Evans are excellent infrastructure sector economists who understand markets, Stephen Franks should add a reasonably sound legal perspective, and David Russell while on the left, becomes the consumer representative. Toby Stevenson knows the electricity sector intimately, and Miriam Dean is a competition lawyer.

Not a unionist, token ethnic representative or gender balance in sight, a review made up of intelligent, talented people.

However, will it be allowed to recommend privatisation of the sector? There is little sign that it will support the crazy Green agenda of recreating a single state owned monolith electricity generator.

So I am cautiously optimistic that it will unshackle the sector, and support more private sector investment (after all minority private investment wouldn't be full privatisation would it?).

More importantly, will a similar heavyweight team review the telecommunications sector?

Green Party so wrong on oil

US$60 a barrel! That's right, it was never going back down, it was running out, panic panic, make you all pay for low carbon energy and transport modes you'd rather not use. All those predicting it would drop are wrong. You see the Greens have maniacally been cheerleading, gleefully, the rise in oil prices in the last year. Oh how wrong they have been...

Let's look at the forecasting geniuses got it wrong:

Greens describe Treasury, MED and Reserve Bank forecasts of prices dropping "dishonest" 20 February 2008
Greens debunk Treasury, MED and Reserve Bank view that oil will return to US$60-US$70 within two years 6 May 2008
Maybe we are at the peak now 7 May 2008
Greens debunk John Key's view that the supply side will respond 23 May 2008
Oil's going to hit US$150 a barrel - it's peak oil! 7 June 2008
There could be pre-emptive war against Iran because of the price of oil 20 July 2008
"We" need to do something about "our" reliance on oil 28 July 2008
Not believing oil will drop below US$100. 3 September 2008

Yes and they still have a "peak oil" policy which hasn't changed. It still believes in forcing you to pay for different transport modes, it doesn't believe that you make the best decisions about your energy and transport use. No.

Oil isn't running out, the price has dropped dramatically because demand has weakened, and supply increased at the peak of price in response to demand.

It's called a market- something the Greens can never understand, because they are far too busy planning for what hasn't actually happened. The price of petrol went up, and you and millions around the world drove less. Transport companies consumed less, so the price has dropped. Amazing really.

The only people disappointed with the drop in oil prices are the ecologists, who absolutely love people not being able to drive and fly, they want peak oil. They are looking for your vote to take your money to act as if it still is happening.

Greens take from the wise to pay for the foolish

The Greens are all in a funk about the Nats proposing to drop Labour’s “subsidise the wasteful” policy of paying for homeowners to insulate their own property. Their approach to this issue speaks volumes about what it thinks about incentives, rewards and penalties. Stuff reports on Jeanette Fitzsimons moaning about how she thinks it is a huge return on investment - which of course makes you wonder why people wont do it themselves.

Now having said that I support insulating state houses, as it increases their value for a future sale, but that isn't going to happen soon.

If you own your home, you either bought one with insulation or had it installed yourself, in either case you paid for it – with your own money. It’s called private property, a concept the Green Party has remarkably little time for. Presumably you did it for all of the good reasons the Green Party outlines, it saves money on heating, reduces risks of dampness and the related health problems (and damage to other property). In short, it can make very good sense to have insulation. However this is where the Greens, freedom and responsibility separate.

Choosing not to have insulation is a valid choice. The Greens don’t think it is, so want to bribe those who choose not to install insulation. What they don’t get, because they believe the state is some sort of benevolent Santa, is that the money to pay for this bribe comes from those who did choose to install it (and those who didn’t).

It is NZ$1 billion, not a paltry sum, over NZ$650 per household (more when you strip out state and council housing), a fair contribution to paying for installing insulation. That money could be returned to those who have and have not got insulation, and they could choose if they prefer insulation or prefer new clothes, a holiday in Australia or to invest it. Choices the Greens would disapprove of, because nothing is as important as the religion of “reducing emissions”.

So the Greens want to penalise those who have made a “good” choice and reward those who made a “bad” choice. Why? Jeanette Fitzsimons gives this banal explanation “This will keep people in worthwhile work during the recession, reduce power bills, improve health, especially for children with asthma, and reduce our climate change emissions”

Worthwhile work!! Because the way YOU would have spent your money wouldn’t have been for worthwhile work, those shops, that business you own, the airline and hotel you may have bought a holiday from – that isn’t “worthwhile work”, no.

National has made the right move. Taxpayers shouldn’t be forced to pay for those who don’t see value in insulating their properties anymore than they should be paying for new carpet, better heating, new hot water cylinders or curtains. The Greens should butt out of the decisions that property owners make about their own properties, and if they want to help people get insulation, give them their taxes back, instead of rewarding those who can’t be bothered paying for insulation themselves.

Their press release that the Nats plan to keep homes cold and damp speaks volumes of their statist centrally planned mindset. The message kiddies is simple, if you own a house YOU are responsible for whether it is cold and damp. If you depend on a politician to fix it then you are too stupid and irresponsible to own a home, and if your child's asthma is exacerbated by it, what kind of a parent are you? The sort who votes Green and Labour to get other people to tell you what to do and give you money to do it I suppose.

Peak Oil right?

Oil below US$90 a barrel according to CNN.

It's basic economics. The US, European and Japanese economies are stagnant, demand for oil has dropped as the high price suppresses demand globally, demand for Chinese exports has dropped, reducing economic growth there. So with less demand for oil, the price drops. Those hurt now are those, such as some airlines, who hedged jetfuel prices to be getting higher.

Inflation drops, and relief appears for motorised transport users.

The oil age wont end due to a lack of oil. It also doesn't need anyone thieving more of your money to subsidise alternatives.

Contact Energy prices rises are an opportunity

So according to the NZ Herald, Contact Energy, a privately owned electricity generator and retailer raises its prices. It is reported that "Commerce Minister Lianne Dalziel said she failed to see how Contact Energy's increases could be justified".

Contact Energy shouldn't have to justify to her. Especially since the government owns Contact's three biggest competitors. You see, it is an open market. The government if it was a responsible shareholder would be pleased that Contact offers its electricity companies an opportunity to compete. Meridian, Genesis and Mighty River Power could all now offer lower prices than Contact, and consumers would win, the government would win and Contact would decide how to respond.

Don't expect that to happen though, Labour Cabinet Ministers are scrambling for an inquiry. Muldoon like, they want a justification from a private company for a price increase in a competitive market.

National's response? To criticise Labour for not doing something soon enough!! What would National do? Blank out - nothing. Mindless politicking for the sake of it. The right response would be to say "National broke up the state owned ECNZ monopoly when it was in power so New Zealanders could have choice and competition in their electricity providers. The recent price rise announced by Contact is an opportunity for New Zealanders to shop around with other suppliers, and for those providers to compete. Sadly as three of the main competitors are state owned, we anticipate they wont be that nimble and responsive as they may well be in private ownership".

Grey Power punts up its usual Muldoonist socialist racist whining "This is a classic case of greedy foreign companies ripping off New Zealanders" says Les Howard, Grey Power President. Les, choose another company. You couldn't when your mate Rob was in power, now you can, go on choose a less greedy state owned company!

Meanwhile, isn't it about time that Genesis, Meridian and Mighty River Power were all privatised too, so that the market could thrive, and new capital be injected into electricity generation?

So stop moaning, change supplier and don't complain when a state owned company raises power prices - you don't want to vote for a party that privatises do you?

Oil below US$100 a barrel

So reports the Times.

Environmentalists will be bemoaning this and repeating their comments that it is still the age of "peak oil". Of course what has happened is demand has eased up, supply has changed little, so the price has dropped.

It's called the market.

So while the market respond, as the economics of oil exploration remain high, and demand eases off - you might ask yourself:

1. Why so many still don't understand how markets work?
2. Why environmentalists get so excited with the prospect of oil "running out" or becoming unaffordable? Why are they more excited about that, than by their being substitute fuels found?

Energy policy that is economically sound

Since National has shown a lack of imagination, (which Not PC has ably exposed for the vacuousness that it is)

The Greens are scaremongering about gas, and constantly talking about "we" lose control and "our" energy, as if they somehow own what others produce, sell and buy.

So what should be done about energy? Well here are my thoughts:

1. Remove the legal restriction that prevents local lines companies from investing in generation.
2. Replace the RMA with a comprehensive legal framework for land use based on private property rights, including rights to air, adjacent waterways and sight lines based on long standing past planning approvals.
3. Remove sector specific legal barriers to building any kinds of power plants. Whether any are built should be based upon commercial assessment by the private sector.
4. Sell 49% interests in all three government generating/retail companies to separate buyers partially as injections of new capital. Issue remaining shares to all New Zealand citizens. Adopt a similar approach to Transpower. Investment in new generation and transmission is unlikely when the government controls 70% of the market.
5. Cease funding EECA and subsidies for energy efficiency.
6. Abolish the Electricity Commission.
7. Require local authorities to privatise their ownership of local electricity lines companies, so that underinvestment in those companies can be addressed by a combination of new capital and private entrepreneurship.
8. Give no subsidies, assistance or preferences to "alternative energy" including biofuels. New fuels should survive on their merits.
9. Abolish the proposed regional fuel taxes, existing local authority petroleum tax and inflation indexing of fuel tax. New funding for roads should come directly from charging road users by road owners.

Because, after all, why do you think politicians know any more about what energy supplies New Zealanders should and will use today than Rob Muldoon and Bill Birch thought they did in the late 1970s and early 80s?

As oil prices settle back

Will the Greens end their armageddon like cheerleading about "Peak Oil" which is simultaneously seen as disaster, and a wonderful opportunity?

Will the ease in the price, inevitable as the high price was choking off demand, mean the Greens will see it as a victory, but a disaster now? Of course!! Lower oil prices will be seen as "no reason to be complacent", and "fueling climate change" and "we still need to worship subsidised collectivised transport that isn't necessary more environmentally friendly than cars and trucks".

What do the Greens fear?

So the Greens have blogged about nuclear energy, typically using "we" phrases as if the Green Party speaks for what everyone thinks and does.

Its statement below is one I don't necessary disagree with in part, except it rather inanely draws a conclusion that means the opposite of what is Green policy.

"Given that it is easy, even here in NZ, to get private finance to line up and support renewable energy projects, without a penny of government subsidy, one has to wonder why we continue to buy into the hype that nuclear is the way to go. The economic rational simply does not exist. With peak oil and climate change breathing down our necks, it is time to take decisive action. Action that can stand the test of time, sustainably." (sic) (can't this lot use English properly?)

Well if the economic rationale for nuclear doesn't exist, then there shouldn't be any legal impediment to nuclear energy being developed in New Zealand should there? If the argument against nuclear is economic, then set that argument free to be tested.

Secondly. If "renewable" energy apparently is economically viable as the statement implies, why take action at all?

Of course the truth is that the RMA stymies the development of the most viable and renewable electricity source - hydro.

Fuel taxes and subsidies

Whilst those in New Zealand complain about fuel tax you can be grateful of three things:

1. Petrol tax in New Zealand is not high compared to Western European standards (UK fuel tax on both petrol and diesel is just over 50p, that is NZ$1.30 a litre before VAT). European politicians are bigger pillagers of motorists than NZ ones.

2. New Zealand has no specific tax on diesel besides a derisory 0.33c/l local authority diesel tax, almost every country in the world has diesel tax, and the Greens actively support introducing one.

3. All fuel tax money is hypothecated into the National Land Transport Fund. Whilst around 15% goes on public transport, walking/cycling projects and the like, the rest is on road related activities. However don't forget Don Brash was the one that pushed for this at the last election. By contrast NONE of the UK fuel tax is dedicated to transport at all, and if the fuel tax is matched against spending on roads, only 9% would be required. UK motorists have every right to protest, New Zealand motorists have got it comparatively easy.

Now having said that, cutting or abolishing GST would make a positive difference. It would also be positive to charge motorists for using roads directly instead of through a tax on an input to road use. However I've written much on that before, having a fuel tax is so tempting for politicians. Treasuries like it because it costs little to collect and the elasticity of demand for fuel is low, so it is a cheap and effective way to pillage the population. On top of that environmentalists typically support taxes on fuel because "fossil fuel use bad".

Fuel taxes are an appalling way to pay for road use, they bear next to no relationship to the costs of maintaining or building roads, the costs imposed by road use on other road users, and it is only getting worse. Moreover because they are easy for politicians to manipulate they should be avoided like a plague. As a transition they should only be used as a source of dedicated funds for road maintenance, but this should be phased out over time.

Meanwhile, another simple reason why demand for oil is high are the large number of countries that subsidise the price for consumers. That, thankfully is eroding away, with China, Malaysia, Zambia, India and Indonesia all cutting fuel subsidies significantly. Of course these subsidies mean demand is inflated, according to the Christian Science Monitor the IMF reports half the world's population live in countries with subsidies, but the top 20% of income earners in those countries receive around 42% of the value of the subsidies.

Sadly the leftwing government in Chile is increasing fuel subsidies, as is South Korea, and Fiji is looking into it.

So when you take into account the overdemand created by subsidies (yes offset by under demand created by excessive taxes elsewhere), the underproduction created by prohibitions/taxes on exploration, what should be the price of petrol? The truth is that no politician or bureaucrat will ever know, but we can know the distortions that interfere with that price. That should be where people focus attention.

UK company makes record profit, makes BBC gloomy

So what was the lead item on BBC breakfast news on TV this morning? It was about Royal Dutch Shell making the biggest profit of any UK company in history. Now in Japan, South Korea, Hong Kong, Singapore or even China, this would be something celebrated, an enormous success. However not for the BBC on TV, the manufactured story was “are they ripping us off?”.
^
Now the BBC isn’t stupid. It knows that a profit figure of £14 billion means little unless you have the context of the value of the company. After all, if the assets are worth £500 billion, it isn’t great, if the assets are worth £50 billion it is a tidy profit indeed. However the socialist minded British public see profit like a lottery win – not a return on investment. The BBC didn’t disclose the current market capitalisation of Shell. Secondly, it didn’t reveal where the profit goes. This isn’t clear yet, but presumably some will be reinvested capital and much will be dividends to shareholders, many of which are financial institutions with pensions, deposits and other funds that affect the wealth of many people. Keeping vague about this ensures that many think that it just means a few people living the life of Uncle Scrooge or Montgomery Burns, whereas Shell has generated a profit that will benefit plenty.

^

There is a bigger question about reserves and whether discoveries and current production can keep up with demand, which is what the Daily Telegraph focused on.

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One thing the BBC did report was where the profit came from – exploration and discovery of new fields, the wholesale market for crude and refined products. It wasn’t retail at the pump, where the margins are closer to 1-2p per litre (noting than in the UK around 70p is tax). This doesn’t stop the leftwing union Unite stating calling it obscene – when what is truly obscene is the extent to which taxes on fuel fund big government at Westminster. Of course Unite doesn’t produce anything itself, it calls for a tax to add to the money that the state takes from oil customers, like far too many socialists Unite worships the fist of the state over the choices of consumers and shareholders.
^
So there you go, big British firm makes a hefty profit and it is held in suspicion. The UK wonders why so many people have a poverty of ambition while a culture of envy is cultivated, and the thieving hand of the state is largely ignored.

^

Of course given that by owning a TV set in the UK you are legally obliged to pay for the BBC, under threat of fine and criminal prosecution, regardless of whether you watch or listen to any of the BBC's content - I would wonder why the BBC can't answer why it can judge Shell, when its customers don't get forced to buy its products, but the BBC forces people who aren't its customers to pay for all of its products? Presumably TV and radio are more important than energy.