Research Report 357 Managing transport challenges when oil prices rise
Published: August 2008
Sustainable land transport
Research & reports
This report provides practical guidance to central, regional, and local government agencies on how to manage the transport challenges associated with rising oil prices. The three main sections of the report are:
- Modelling prices for transport fuels – several oil price forecasts are combined to develop a view on future oil prices. This shows annual average oil prices staying around $110 USD/barrel in 2008, before accelerating rapidly to reach approximately $150 USD/barrel in 2012. After this point prices may stabilise or even decline. Retail prices for petrol and diesel are expected to peak at approximately $2.80 and $2.50 NZD/litre respectively in 2011. Upside and downside risks to these price forecasts exist, particularly in relation to economic growth.
- Modelling future travel demands – travel demand elasticities and cross-elasticities are used to model future travel demands. This considered the effects of fuel prices, economic growth, vehicle ownership, workforce participation, and disposable income on vehicle kilometres travelled (VKT). Under the average fuel price scenario total VKT falls below current levels until approximately 2016, after which the combined effects of economic growth, increases in income, and population growth become dominant.
- Responses to rising oil prices – a range of responses are identified in the areas of land use management, direct and efficient pricing, infrastructure management, behaviour change and education, and freight management. These responses are cumulatively expected to shift travel demands from passenger vehicles to alternative modes, such that total VKT remains at or below current levels. It is recommended that the focus of infrastructure investment shift from peak hour capacity expansion and instead prioritise investment in road network maintenance and alternative transport modes. Both these measures are likely to deliver a transport system that is more energy efficient, as well as realising a range of wider economic benefits.