Petrol to cost $2 a litre by year end, warns expert

Petrol will rise to $2 a litre by the end of this year and society should be preparing now for the day when oil runs out.

This is the bleak picture painted by Michael Saunders, a transport energy specialist studying for a doctorate in Brazil.

His presentation to a forum of Tauranga engineers, Planning for Long-term Fuel Shortages, was partly about weaning Kiwis off their cherished cars.

Mr Saunders, a former Tauranga Boys' College student, harked back to recent comments by United States President George Bush about America's "addiction" to oil.

But, unlike the president, he is campaigning for the introduction of global petrol rationing to avoid the economic destruction caused by market forces dictating prices when demand for oil outstrips supply.

The 25-year-old will be pitting his ideas against international experts at a conference in Denmark in May.

Tauranga City Council traffic engineer Cliff Griffiths said Mr Saunders was probably right in his contention that petrol would reach $2 a litre this year.

Mr Griffiths said it reinforced what he was reading in technical papers, the oil consumption of big industrialised nations and the political situation in the Middle East.

"I see no reason to disagree."

Apex Consultants' Tauranga manager, Geoff Morgan, who also attended the meeting, said $2 a litre was a possibility.

"It could happen."

Underpinning rationing was the importance for communities to take a more sustainable approach to transport planning - such as ensuring new housing developments did not reflect old practices in the days when petrol was cheap and people lived a long way from work.

Mr Saunders said he expected petrol prices would drop to about $1.30 a litre next month - typically the lowest demand month on world oil markets.

He predicted prices would then climb steadily to reach US$100 a barrel by the end of the year - about $2 a litre at the pump for unleaded 91.

A litre of petrol costs about $1.41 at present.

The only thing to prevent this happening would be the collapse of a global economy such as China, he said.

Mr Saunders, studying for a PhD at the University of Sao Paulo, said the current imbalance in supply and demand meant there will be no end to increasing oil prices, leaving New Zealand vulnerable to massive balance of payment deficits. New Zealand's debt blowout last September caused by rising oil import costs made news around the world, he said.

Mr Saunders has proposed an international regime of oil rationing as an interim measure so that economies did not collapse between now and when "prices became irrelevant" and oil supplies were exhausted in 10 years.

The world had entered a cycle of demand exceeding supply and prices would become increasingly sensitive to anything that disrupted supplies or increased demand.

When prices reached about US$100 a barrel and economies really started to hurt countries should restrict their use of petrol, he said.

Rationing by international agreement would ensure consumption was forced down to exactly match supply. Systems would be fully automated, using existing technology like vehicle-specific fuel cards that communicated through computers at the fuel pump. It did not need to be expensive and could be quickly implemented.

Mr Saunders believed rationing could see the price of petrol in New Zealand fall to 50c a litre before taxes. Without rationing, the growing international demand for diminishing oil supplies would impact on national economies and the whole fabric of societies.

He explained that fuel alternatives like ethanol/ bio-diesel, hydrogen and electricity all had drawbacks.

Apart from Iceland, hydrogen was not feasible - even for wealthy countries. Ethanol and bio-diesel had massive cropping requirements and could only replace 10 per cent of oil consumption in New Zealand.

Rechargeable battery- powered cars could work but raised the issue of adding to the pressure to generate more electricity. Electric cars also required massive changes to the way people travelled because an eight-hour recharge gave a 100-200km range.

Sustainable transport ranged from energy conservation becoming part of the criteria for local authority planning decisions, to workplaces encouraging staff to leave the car at home.

Mr Saunders is on secondment to Opus Consultants, Tauranga, which has successfully launched its own sustainable transport initiatives.

These included bike, bus and car pool promotions among staff, lockers for a change of clothing for those riding or walking to work, and Opus' new company bicycle.

The meeting highlighted Western Bay's new planning bible, SmartGrowth, and its emphasis on building high-density housing clusters in Tauranga's existing urban areas.

- BAY OF PLENTY TIMES