Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby ape on Sat 30/Aug/14 9:20am

Petrol/diesel are a high use commodity, and make up a significant proportion of many individuals and businesses' spending.

Viewing the country as a whole, use of this imported fuel requires NZ to pay money to overseas interests, directly removing money from our economy. Despite this, most of us are willing to spend very large sums of money on fuel as we view it as something that is just a necessary expenditure to maintain our desired lifestyle, yet many of us find ways to avoid other service/product expenses that are creating jobs for our unemployed folk.

Analysts / the government even use vehicle trips as a measurement of financial activity, and look to maximise this. An increase in the number of trucks on the road must be caused by an increase of goods being transported, and this can be a good economic sign particularly if the goods are being exported (to help pay for that fuel we all love to use so much). Surely, this is also a sign that business is being carried out inefficiently.

Of course, much of our industry does require oil to operate, but for the good of our economy, cost cuttings in areas that require overseas input should be maximised before local cost cutting.

Now, time to sit back and see if this post:
1: Is Ignored
2: Results in me being abused and called a commie/greenie
3: Turns into a meaningful debate
4: Becomes a general shit fight.
ape
Member for: 13 years 5 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby Farm on Sat 30/Aug/14 10:18am

I'm not too sure which of your 4 options I'm taking with my reply but here goes.
I work in manufacturing and we export ~80% of our volume. The product is realatively low weight/volume but fairly high value. We ship/air freight in the cold chain to over 50 countries but freight makes up less than 3% of our total overhead.

Once you factor in the logistics, storage, regulatory component of that; fuel is a very low input to our product. Of course we also pay freight to import raw material but the fuel component is similarly low.

It is still higher than plants closer to the major markets have to pay obviously.

I often drive past the pile of unprocessed logs at the Wellington port and wonder what the profit margin is on those. I imagine fuel makes up a much larger percentage of the cost of that product than a value added, manufacutured item.

Surely our economy would benefit more if we were shipping flat pack furniture and reams of lined A4 paper or something?

I'm not an economist but I think to get the best return on our fuel spend we should be adding as much value as possible to our exports.

Internal freight will reduce a bit with the continued migration of business and people to Auckland. Meat, wool, milk, trees will always need to be freighted from places in the wops.

Avoiding personal use of fuel with greater cycling/public transport/walking will help but a tiny economy on the bottom of the planet is always going to struggle.

Anyway,I'm not entirely sure I made a point but it gave me something to think about while drinking coffee in the sun.

Edit: I said "I'm not an economist" because I could be completely wrong. On re -reading I realised it could be interpreted as thinking my point was entirely obvious and one didn't need to be an economist to see how good my idea was.
Farm
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby znomit on Sat 30/Aug/14 11:28am

ape wrote:Analysts / the government even use vehicle trips as a measurement of financial activity, and look to maximise this.

The best example I know is NZ marino wool, shipped to asia to be spun into yarn, which is shipped back to NZ to be woven into fabric, which is shipped back to asia to be made into clothes, which are shipped back to NZ to be sold. :blink:
Wow, look at all the trade that happened. Thats must be good for everyones economy.

Speaking of apes' and trucks, we need more of these
Image
znomit
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby slidecontrol on Sat 30/Aug/14 11:55am

znomit wrote:The best example I know is NZ marino wool, shipped to asia to be spun into yarn, which is shipped back to NZ to be woven into fabric, which is shipped back to asia to be made into clothes, which are shipped back to NZ to be sold. :blink:
Wow, look at all the trade that happened. Thats must be good for everyones economy.


that makes as much sense as this ( reposted for teh lulz )
Image
slidecontrol
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"YOLO = carpe diem for idiots"
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby ape on Sat 30/Aug/14 10:10pm

Farm wrote:I'm not too sure which of your 4 options I'm taking with my reply but here goes.
I work in manufacturing and we export ~80% of our volume. The product is realatively low weight/volume but fairly high value. We ship/air freight in the cold chain to over 50 countries but freight makes up less than 3% of our total overhead.


Sounds like you're in the kind of business that we need more of in this country. (of course this is a completely uninformed opinion)


Farm wrote:Internal freight will reduce a bit with the continued migration of business and people to Auckland. Meat, wool, milk, trees will always need to be freighted from places in the wops.

Avoiding personal use of fuel with greater cycling/public transport/walking will help but a tiny economy on the bottom of the planet is always going to struggle.


Not so sure If I agree with those points. Given the sprawling nature of Auckland, and the way we just love roads, the more people that live in the city, the further away you have to go to grow food.

There's no reason our economy ought to struggle. Unlike many countries, we don't need to import anything to survive (except arguably selenium), our imports are either luxuries, or commercial endevours
ape
Member for: 13 years 5 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby Fraser on Sun 31/Aug/14 5:45pm

Odd when you look at NZ you would think that the freight would be factored into it alot more. But then what happens in theory and the reality of some businesses.
I live in Finland and recently thanks to willy waving of Mr Putin things got very interesting. Bear in mind a year ago there were trucks in a 5km long cue to get across the border to Russia the demand was so high, now there is a ban on it.
Apart from cheap cheese destined for the Russian market being in the supermarket things are not that bad, especially when you consider that a quarter of the dairy exports go to Russia from Finland.

With New Zealand the links with China are quite scary.
The example that stood out for me was when I showed my Dad the bottle recycling reverse dispensers they have here. All of the bottles have a 20-40c deposit. These are located at supermarkets or dairies as they are the main source of waste material. The unrecycled products act to buffer the processing of the material. There are no broken bottles on the pavements or road, the other rubbish that is burnable is used in Powerstations, we can't make enough and we are importing rubbish from other countries who are paying us to take it.
Then he explained what happens in NZ.
The bottlers do their own thing, the supermarkets do their own thing, the local councils spend money collecting the bins on specific days in coloured bins which you pay for and then more money on collecting broken glass and litter off the streets. This recyclable waste is then shipped raw overseas to be processed which you pay for. Now even with the most Green tinted glasses this process is a crock of shit.

While I am sure that alot of people are making money off the Chinese export market and them off you, it would be prudent to look at the Russian self inflicted isolation which has thrown a spanner into the works of his economy and those tied closely with it, but being shrugged off by other countries who have options.
The question is when China runs into problems how NZ will cope in what is essentially the economic equivalent of a reach around?
Fraser
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby phunk on Sun 31/Aug/14 6:04pm

ape wrote:Of course, much of our industry does require oil to operate, but for the good of our economy, cost cuttings in areas that require overseas input should be maximised before local cost cutting.
.


Why?

Your error is assuming it matters if we get fuel from overseas or not.
phunk
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Member for: 13 years 9 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby ape on Sun 31/Aug/14 6:46pm

phunk wrote:
ape wrote:Of course, much of our industry does require oil to operate, but for the good of our economy, cost cuttings in areas that require overseas input should be maximised before local cost cutting.
.


Why?

Your error is assuming it matters if we get fuel from overseas or not.


Every expense paid overseas has to be funded by exporting something, or relinquishing something owned in this country. Or, in a worse case, funded by borrowing money from overseas entities who then will receive money for doing nothing (apart from having the money to lend in the first place.) and the long and short of it is that we, as a community, have to make various sacrifices (time, quality of life, environment, etc.) to produce this income.
ape
Member for: 13 years 5 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby phunk on Sun 31/Aug/14 7:35pm

ape wrote:
phunk wrote:
ape wrote:Of course, much of our industry does require oil to operate, but for the good of our economy, cost cuttings in areas that require overseas input should be maximised before local cost cutting.
.


Why?

Your error is assuming it matters if we get fuel from overseas or not.


Every expense paid overseas has to be funded by exporting something, or relinquishing something owned in this country. Or, in a worse case, funded by borrowing money from overseas entities who then will receive money for doing nothing (apart from having the money to lend in the first place.) and the long and short of it is that we, as a community, have to make various sacrifices (time, quality of life, environment, etc.) to produce this income.


So. Everyone has to produce in order to consume.

Doesnt matter if you draw an arbitrary line around the country and count what goes in and out, draw the same line between you and your supermarket, you buy heaps from them and they buy nothing from you in return. Does this matter? Not a jot.

You have a fundamental misunderstanding of an economy.
phunk
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Member for: 13 years 9 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby neels on Sun 31/Aug/14 8:13pm

I work an industry that relies almost entirely on the burning of fuel, and the second largest earning industry for this country relies on it for their income.

I wonder what the fuel cost content is for the largest earning industry in this country, given the number of trucks they have on the road pretty much 24/7.

If we stop using fuel, will the decreased outgoing cost for fuel offset the lost income from overseas from New Zealand's 2 largest overseas income earners?
neels
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"I've got opinions, that don't make any sense"
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby philstar on Mon 1/Sep/14 4:49pm

phunk wrote:So. Everyone has to produce in order to consume.

Doesnt matter if you draw an arbitrary line around the country and count what goes in and out, draw the same line between you and your supermarket, you buy heaps from them and they buy nothing from you in return. Does this matter? Not a jot.

You have a fundamental misunderstanding of an economy.


This analogy is erroneous, as ape was not suggesting that we worry about how much we spend at the supermarket (or one particular country) but the difference between what we spend and what we earn, but I agree that the suggestion that it matters what particular consumed commodity we buy at the global supermarket is irreverent.
philstar
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby EoinC on Tue 2/Sep/14 9:37am

Ahhh, the wonderful intrigue of interdependent economies. In the World of over-banal analogies, Countries are a bit like different families in a village, each with slightly different rules applying to their castle. The families 'need' each other, as they don't all produce what they consume.

There are families that isolate themselves to a large extent, and live off bountiful orange Juche, and others that, quite naturally, put in place "my house first", whereby they pay their children more than they would a neighbouring trades-person to carry out a job. This sometimes leads to lower standards, as young Johnny doesn't have to compete with the other villagers' skillsets. At other times, young Johnny does a fine job, it's just that Mum and Dad had to work a bit harder at selling their pottery to the next door neighbours to pay for the child-tariff they imposed.

If Mum and Dad don't sell enough pottery to pay for young Johnny's wonderful patio construction, they may have to lower the families living standard just a bit, in order to make sure there's a good feed of Macca's on the table.

Alternatively, Mum and Dad may focus on getting a greater return on their pottery, by buying more electrickery from another neighbour's backyard hydro-scheme, allowing them to spin their potting wheels at blinding speeds, whilst they throw lumps of clay bought off another neighbour, who has a large hole in his back yard.

Fuel is a commodity, which is traded in a very competitive market (check the changes in spot pricing from the likes of Bunkerworld). It is up to the end-user to decide what they use it for, be that in order to gain more value from something they produce, or as a fun way of satisfying pyromaniac urges. The appetite for increases in fuel prices is indicative of an economy's (family's) tolerance for impacting its standard of living. In Indonesia, petrol is heavily subsidised (theoretically in order to promote the domestic economy), which has lead consumption to overtake production (resulting in Indonesian being ousted from being a member of OPEC). When the Indonesian government went to remove the subsidy, it brought the people out on the Jalans, as it was seen as impacting their standard of living beyond tolerance. They did eventually drop the subsidy, causing fuel prices to rise by 44%. Petrol in Indonesia is currently around USD $0.96 / litre. Petrol in the UK is around USD $2.12 / litre, indicating that the UK consumer (business or pleasure) has a higher tolerance for spending on this particular commodity. That, in turn, is because the UK family has more dosh in their pocket (or the cost of petrol is offset against something else).

By the way, it was 5:00am over here when I wrote this so, if it is more diveliscious than usual, that's because I'm still operating in a semi-comatose state (Well, more comatose than my normal semi-comatose state).

When you isolate a single commodity and focus on some form of 'correction' (as happens with taxes, duties, and tariffs), you are playing with the balance (eg more income tax used to offset more services). Sometimes that is effective, and sometimes it is counter-productive. To make an effective decision, you need to consider all of the facts (which is not an easy task). In general terms, does that imported fuel allow for greater value creation across the economy of the NZ family?
EoinC
Member for: 7 years 3 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby phunk on Tue 2/Sep/14 1:07pm

philstar wrote:
phunk wrote:So. Everyone has to produce in order to consume.

Doesnt matter if you draw an arbitrary line around the country and count what goes in and out, draw the same line between you and your supermarket, you buy heaps from them and they buy nothing from you in return. Does this matter? Not a jot.

You have a fundamental misunderstanding of an economy.


This analogy is erroneous, as ape was not suggesting that we worry about how much we spend at the supermarket (or one particular country) but the difference between what we spend and what we earn, but I agree that the suggestion that it matters what particular consumed commodity we buy at the global supermarket is irreverent.


The jist of the argument seemed to me to be about using inputs from overseas, which is irrelevant.

So we can all agree, using fuel is not bad for the economy.
phunk
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Member for: 13 years 9 months

Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby RHR_Rob on Tue 2/Sep/14 1:19pm

Well oil will run out eventually so i am having my share right now.
But i have just bought a new truck which is much more economical so that make me feel nice and green :-)
RHR_Rob
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Re: Using Fuel Is Bad For The Economy - Thoughts/general Rant

Postby phunk on Tue 2/Sep/14 1:30pm

RHR_Rob wrote:Well oil will run out eventually so i am having my share right now.
But i have just bought a new truck which is much more economical so that make me feel nice and green :-)


Unlikely, its just that the last few drops will be really really expensive if we still have a use for it by then.
phunk
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Member for: 13 years 9 months

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