Security in petrol supplies

Press, 7 December 1987, Page 12

Security in petrol supplies

Concerted opposition to the proposed deregulation of the petroleum industry is unlikely to sway the Government from its course. The Petroleum Sector Reform Bill is due to be introduced tomorrow. This is in spite of a High Court action by the oil companies that own the Marsden Point refinery, and in spite of opposition from the Motor Trade Association. One of the possible results of deregulation is that the refinery might be forced to close down in the face of increased petrol imports from Australia. S The Government candidly acknowledges the prospect. Outwardly, at least, the Government does not seem greatly concerned. The New Zealand Refining Company, a consortium of oil companies, wants the High Court to rule on various undertakings given to them when the refinery was established, chiefly the one which guaranteed that the refinery would be the only point of entry for oil products to New Zealand. The Motor Trade Association is fearful that retail outlets for petrol will be swallowed up by wholesalers and that, after a brief price war, an effective monopoly would push retail prices up. The Minister of Trade and Industry, Mr Caygill, says that all interested parties will have until Parliament resumes in February to study the bill and prepare their submissions. Most of the considerations at work here are economic. Most also relate to the short or medium term. They tend to ignore the special consideration about secure fuel supplies. Even the Government’s drive towards a free market in all commodities and towards the next step in closer economic relations with Australia — which dictates the removal of at least some of the protection being enjoyed by the Marsden Point refinery — sidesteps this issue. Money is not the only matter that has

to be taken into account. The New Zealand Official Year Book explains it very well. “Until late 1973 there seemed to be little difficulty in meeting the expanding demand for energy from a combination of indigenous resources and imported petroleum, although New Zealand had been steadily moving into a position of increased dependence on imported fuel. The oil supply embargo announced in October, 1973, by the Organisation of Arab Petroleum Exporting Countries sounded a clear warning of the danger this entailed.” This message reserves as much > consideration as the economic arguments being advanced by the Treasury.

The refinery expansion, which was responsible for the large debt-servicing bills that are a chief commercial reason for the refinery’s uncertain future, was part of a plan to give New Zealand 50 per cent selfsufficiency in transport fuels. The object is no less desirable today. Even though the world now has abundant cheap petrol, the uncertainties of Middle East wars, coups, and other turmoil can change this rapidly. Without Marsden Point, New Zealand could find itself, almost overnight, at the mercy of suppliers not in the least concerned for New Zealand’s interests.

An obstinate determination to create free markets at any price could be a suicidal crusade in a world that, for the most part, does not believe in free markets and does not want them. If agriculture is the heart of the New Zealand economy, transport fuels surely are its life-blood. They are too important to be hazarded on the caprices of other countries’ policies, pricfe-fixing, wars, and tenuous transport links. The risk is more foolhardy when it need not be taken and New Zealand still has the means, even at some cost, to obtain a measure of security in petrol supplies.