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Oil: the life blood - or black gold

Much is written about the role of oil in our economies. More is written about its scarcity. Recent media releases indicate that the OPEC ( Organization of Petroleum Exporting Countries) are cutting back oil supply, which has forced the price up, which will affect our economy. If the dollar drops oil prices will soar.

We now have grain prices rising rapidly. This is due to biofuel production from grain competing with grain scarcity for animal production; 95% of the world's milk production is from grain fed cows. It also competes with human consumption; it takes the same amount of grain to feed a human for a year as it does to run a SUV for a week.

A recent survey by Ralph Sims, energy research expert from Massey University, talked extensively of not if, but when, farmland will be used for growing our own biofuels. Within the foreseeable future he identified that we would have to make a decision whether to run beef and sheep for their production of meat, wool and dairy or use the land for biofuel production.

The supply of fuel is relatively static with ever increasing demand, particularly from China and India. The Dominion Post, July 17 2007, a David McEwan of the Investment Research Group identified that per capita oil consumption for Australian and Japanese people was 15 barrels per person per annum and rising. There is no reason to think that New Zealand uses much less than that either.

China, on the other hand, uses just two barrels per person per annum. In India and China alone if they went to 7.5 barrels per person per annum, which is half of what we use, consumption for those two countries alone would see an extra 39 million barrels increase in use per day. Current world consumption at present is 85 million barrels per day so that is close to a 50% increase over only two countries.

Let us make no error about it; the eastern countries want our western lifestyle, so they will be striving to get to our standard of living which will ramp up demand for oil and its usage.

Research and exploration for new fields has been relatively static. Everybody can now see the shortages in supply chain coming up, as against increase in demand. This has put exploration back on the agenda and Tim Shadbolt is in his element down in the Southland, as it has now been confirmed the Great South Basin is one of the biggest unexplored conventional oilfields in the world. This has to be good news for New Zealand and particularly for Tim and his team.

So where is all this leading you, the farmer, you may well ask. Well if we look forward a few years, say 5 maybe 10 years, fuel will be very expensive. We will all have had to look at our fuel efficiencies and alternative sources of power and fuel. Farmers with croppable land will have crops for biofuel planted and producing. Rural economies will be looking at the cost of fuel in everything they do. Innovative people will be looking at harnessing the energy that they have available on their farms.

Ken McIntyre of McIntyre Piggeries, southeast of Morrinsville, recently had an article about harnessing the energy from his pig effluent to generate power. Investing in companies that are involved in research, exploration, harvesting and refining of oil products have got to be a good bet.

In summary, the issues around oil production and consumption are becoming more paramount. Retaining and owning of land suitable for biofuel production must be a good bet for farmers in New Zealand. All the statistics point to a fuel shortage and a biofuel increase. And what do you really need for increased biofuel? Good quality land. Fortunately for New Zealand that's what we've got, good quality land, and we are able to export product to the world.


 

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