The science of stupid

Sometimes you come across government decisions and policies so fundamentally stupid that there are no words to describe them. You may understand the reasons why these decisions were made but, when looking at the bigger picture, all you can say is… “Whaaaat?” Quote:

Oil industry bidding for new?exploration permits?was set to be the strongest in years in 2018, industry body Pepanz claims, with government officials seeing a sharp upswing in interest.

Documents released under the Official Information Act show the petroleum and minerals team at the Ministry of Business, Innovation and Employment (MBIE) was receiving more interest from oil explorers at the end of 2017 than it had seen since at least?2012.

On April 12, Prime Minister Jacinda Ardern announced that the Government would no?longer offer new offshore exploration permits, with several years of new permits to be offered in onshore Taranaki.

While falling interest in new exploration was not given as a reason for the ban on new permits, Ardern has previously pointed to the lack of permits being offered. End quote.

This shows a complete lack of understanding of the commodities sector. All commodity prices are cyclical. The oil price was likely to rise at some point in the near future, as commodity prices inevitably do. As we are not yet back into a world of horse-drawn carriages, oil is still needed and, therefore, demand will be strong again at some point. Quote:

“Those block offers and their popularity have diminished over time. It’s become less economic, particularly for offshore,” Prime Minister Jacinda Ardern said in an interview with?Newshub?on October 21. End quote.

The prime minister demonstrated that she had no understanding of how these markets work, and just assumed that a fall-off in block offers meant the eventual end of oil exploration. What an absolute amateur. A little bit of research would not have gone amiss. Quote:

But the MBIE document from July 2017 pointed to an expected upswing in interest as the oil price firmed, especially offshore.

Oil companies, which had slashed exploration budgets since 2014 as prices tumbled, were expected to increase investment, the report said.

Officials reported that there was “high” interest in both the Taranaki basin and Pegasus-East Coast (which stretches up the east coast from south of Cook Strait up to near the East Cape) basin, as well as moderate interest in the Canterbury-Great South basin. End quote.

In other words, just as exploration was likely to ramp up again the prime minister pulled the rug from under the industry, thinking that she wasn’t actually doing much harm in the long term and, of course, it would make her look good in Europe. Quote:

MBIE officials recorded?23 “nominations” from companies expressing interest in certain areas, more than had been seen in any of the previous five years. The nominations do not necessarily lead to a company bidding for exploration space.

US seismic surveying company Schlumberger had conducted what MBIE said was the largest survey in New Zealand in 2016/17 off the East Coast of the North Island.

When Anadarko gave up its permits in the basin at the end of 2016, MBIE received “a number of requests from interested parties” for the areas to be reoffered in future block offers.

French oil and Gas giant Total had named the Great Southern Basin as among its “top 10 basins for capturing acreage globally”.

Cameron Madgwick, chief executive of oil and gas industry body Pepanz, said interest in coming to New Zealand appeared to have been higher than in the “heyday” of the block offer process. As a result of the ban New Zealand may have missed out on “billions” of investment.

“Investment looked?like it was coming back to New Zealand and with that the opportunities for jobs in New Zealand and the opportunities for potentially more discoveries and we’ll now miss that opportunity,” Madgwick said.

“The government had been doing a lot of work trying to get that interest up, even in the down part of the cycle and this [Official Information Act request] shows that that work was bearing fruit, but unfortunately that opportunities now been lost and the potentially billions of investment that comes with it.” End quote.

Yep. That’s right. This government have cost the country billions of dollars of investment funds in the lucrative energy sector. Quote:

A spokesman for Energy Minister Megan Woods acknowledged that “the commodity price cycle is on an upswing” and a large amount of New Zealand waters were currently under existing exploration permits.

“The Government’s decision was about future proofing our economy. Continuing to rely on fossil fuel production in a changing world will set us up for sudden economic shocks that will hurt communities, businesses and individuals as the world moves away from those fuels,” the spokesman said.

“This Government’s decision was about lifting our sights beyond the three year political cycle and getting ahead of the curve. Our plan is for a long term managed transition to a low carbon economy.” End quote.

What about the economic shocks when tax revenue falls through the floor because of the loss of a billion-dollar industry? What about the economic shock when we run out of gas and have to import it? What about the economic shock to the entire Taranaki region? This woman is talking through a hole in her head.

I can’t help thinking that the government have miscalculated badly on the oil and gas decision. They really thought that it would be business as usual for the next couple of decades and then oil exploration would simply fade into oblivion, and everyone would live happily ever after. They never considered the immediate effect might be for investors to pull the plug on the country now, rather than invest funds that might be completely wasted in the future.

They never considered the cyclical nature of commodity exploration and pricing. Either that or they were held to ransom by the Greens. Either way, it shows we have a government of rank amateurs who do not care at all for the future of our country, so long as they can virtue signal and look good to their counterparts in Europe and the Commonwealth. Most of them will be voted out of their tenures even before this government next goes to the polls and we can only hope that the smart people of Taranaki and New Zealand will take that opportunity to show them what we think of them.