Stockpiling of oil discounted

Press, 24 June 1978, Page 19

Stockpiling of oil discounted

Wellington reporter The stockpiling of oil byNew Zealand in . anticipation of the next price rise by the O.P.E.C. countries has been discounted by the Ministry of Energy. Stockpiling would not benefit New Zealand, for several reasons: The O.P.E.C. countries themselves were encouraging their customers to buy in advance and then stockpile, which would firm the present market for oil.. ■ Production from the North Alaskan and North Sea fields had weakened the international market for oil. but stockpiling would strengthen it again. Stockpiling oil could cost more money than might be saved by buying it earlier and more cheaply. according to a Director of the Ministry, Mr S. Milkop. “If you buy before the price goes up 5 per cent, it costs 10 per cent to service the money you had to borrow in order to buy early. Any saving is prob-

I lematical,” he said. ! “Also, you would have I i to pay for the storage to ■ I stockpile the advance oil j 1 you had bought,” said Mr j t Milkop. New Zealand did not ; have the capacity to | stockpile much more oil i than it already did, he : said. For its own security, ! New Zealand did have ! some storage capacity, and this was kept fairly full. Building tanks was ex- j pensive. A tank could cost I about $4O per tonne of oil ! to build, compared with a ; rough cost of $lOO per ! tonne for the oil itself, he ! said. New Zealand was a member of the Inter- - national Energy Agency : and as such had an obli- [ gation to stockpile a quantity of oil. This gave security I ! against unforeseen events, : such as the use of oil as a ; political weapon, a fire at a major supplying oil I . field, a shipping strike, a i ■ poor advance estimate of • : demand, or an explosion I : at a power station, Mr I Milkop said.