When and how might oil decline affect New Zealand?

A long ago I worked for Shell International in London. IC/13 was the department that employed me where I was a Systems Analyst building computer models for Shell's Strategic Planning and Econometrics gurus. It was after the Oil Crash...

Anyway. I prepared a few graphs to tell a wee story....

Imagine NZ's economy goes like this graph. It graphs annual GDP change. We're in a recession now, so GDP change is negative. Plan is it will turn positive. Not till 2013 here...


Much of New Zealand's economic growth will need to be fuelled by oil - because we are still very much a carbon economy. It turns out that a good indicator of what is happening in global oil terms, is the number of days of oil supply there are - above the ground of course - in OECD stocks....

So let's have a look at that, if nothing was happening "bad" - ie there was still an "infinite" amount of oil under the ground. The rest of world would be in +GDP growth territory, and would be drawing more heavily on those OECD stocks. More would be pumped from OPEC oil reserves correspondingly, and the number of days in stock would stay about the same - maybe go up a bit to keep pace with growing demand...

But actually that's not happening. This graph shows that actual levels of stocks are falling behind forecast - despite the decline in global GDP/economic activity. This information is among the pile of inputs that world experts are looking at, with increasing concern... because....

...the reality is that when Western economies get geared up, get their finances sorted, recover from the recession, and move into production, the energy they need - that they will demand - will be more than can be supplied from the OECD stocks, even with the OPEC pumps going full bore...

A major finding at Shell, and one which I am sure is shared everywhere, is that the first big trigger for price rises, for spot price rises that fed into price rises at the petrol pumps, was that OECD stocks went into decline... that seems to be the risk Western economies are looking at.

So. The recovery brings the risk that there will not be enough oil around to fuel it. And the proverbial will hit the fan...

I haven't yet been able to find a good historical data graph charting crude oil price vs inventory (stocks), but this one shows the general relationship.