Straggle Muster 167 - 9/9/2005
Fuel Price Crisis - Chris Garland, farm consultant
Reproduced with the compliments of Baker & Associates (Wairarapa) Limited, Farm Management Consultants & Rural Valuers. To receive your weekly copy of their Ag-Letter email team@bakerag.co.nz.
What has caused the recent steep hike in oil prices? What's the outlook? What can you do about it?
Real Prices
Even at their present levels, NZ fuel prices are substantially lower than at any time from 1981 to 2001. Current international prices are around $US70/barrel. They would have to reach $US80/barrel to equate to the price hikes experienced in the late 70's.
International Events
International crude oil prices are being driven by concerns about the industry's ability to supply. The nuclear stand-off in Iran, militant strikes in Saudi Arabia, and unprecedented demand from the Chinese, US and Indian economies have put pressure on supply. The most recent shock is the damage to oil production in the Gulf of Mexico wrought by Cyclone Katrina. At least 20 oil rigs are reported to be sunk or adrift.
No Investment in Production and Supply
One of the main reasons for the current oil shortage is that there has been virtually no investment in oil exploration or refinery infrastructure for 10 years. World commodity prices were depressed from 1998 to 2003. World oil prices languished at $10 - $20/barrel. There was no incentive for investment.
Commodity Cycle
The prices being received for oil now are a definite incentive for investment. A recent survey of oil producers and refinery companies indicates an intention to lift production by 17 M barrels a day by 2010. Global production is currently 87 M barrels/day, so this represents a 20% increase. This is a classic commodity cycle.
Effect on Economy
There will now be secondary round of price inflation where the higher fuel prices become built into the price of goods and services. (There has been a significant lag while suppliers have absorbed these price increases before passing them on). Being so energy hungry, these price increases hit the arable, horticultural and livestock industries hard.
FUEL SAVING ADVICE
On The Farm
- Plan your trips to take in more jobs with one trip. Avoid over-lapping and covering the same ground twice.
- Make sure your vehicles are well serviced, with tyre pressures high enough to reduce rolling drag.
- Think twice before using the tractor when you could use a bike.
- Think twice about using a bike when you could walk (to get the mail).
- Set a goal of making a 10% reduction to fuel consumption per month.
In the Car/Truck
- Get the car serviced. Have the wheel alignment, engine tuning (including air filter and spark plugs) and tyre pressures checked. Soft tyres use more fuel. Use the maker's recommended maximum for holiday loads.
- Keep the drag down. Every 25 kg of weight increases fuel consumption by one percent. Roof racks add an extra five percent or more. Open windows make the car less streamlined and even the air conditioning is a drag on the motor. Both add to the cost.
- Change gears early but don't labour the engine. If you have one, use the "economy" or "overdrive" gear option on the open road.
- Keep within the speed limit and what is safe for the conditions. Travelling at 100km/h instead of 110km/h will cut around 13 percent off your fuel bill.
- Look ahead three or more cars. If they're turning or slowing, ease off early rather than waiting and braking.
- Ease through the corners. Take a smooth line and minimise movement of the steering wheel. Don't accelerate on short straights - you'll only have to slow again, saving little time and wasting fuel.
- When climbing hills, ease off the accelerator when approaching the top, and use gravity to help you regain cruising speed on the other side. But don't hold up the following traffic.
- Reduce idling time. If you are going to be idling for more than 30 seconds, and it's safe to do so, switch the engine off. But never coast with the engine off. If you're making a cold start, don't sit around idling. Move off as soon as you can and stay light on the accelerator until the engine has warmed up.
- Fill the tank to the first automatic cut-off click. Overflow wastes your dollars.
Reproduced with the compliments of Baker & Associates (Wairarapa) Limited, Farm Management Consultants & Rural Valuers. To receive your weekly copy of their Ag-Letter email team@bakerag.co.nz.
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