In 10 years, oil will sell for about $US80 a barrel and petrol will be $2.30 per litre at the pump, oil man Mike Bennetts predicts.
The oil and gas industry shifts quickly. Look at the money being poured into alternative energy projects when the global financial crisis hit, which is now tailing off, and the global energy ripples caused by the expansion in US shale gas production.
Talking to NBR ONLINE after a recent lecture at University of Auckland University's Business School, Mr Bennetts said the oil price will be lower but the petrol price at the pump will be higher, because roughly half the price of petrol is in taxes and there may be a carbon tax in place.
In 10 years, crude oil will be trading somewhere between $US60 and $US90 a barrel, he predicts, with his pick at about $US80.
Factoring in New Zealand’s exchange rate and taxes, he thinks petrol will be about $2.30 a litre at the pump.
He says it won't hit $3 a litre unless there’s some form of discontinuity, where carbon gets priced at a particularly aggressive level. "I think the underlying commodity price is likely to be in the $US60 to $US90 a barrel range.”
Z Energy has two high-profile alternative energy projects (read more in Friday's National Business Review print edition), but he told NBR ONLINE there will not be a material amount of alternative fuels in the petrol market.
Mr Bennetts is not yet convinced of the economics of alternative energy – and he thinks it will be 15 years before electric cars really find their feet, commercially.
But he says he believes climate change is influenced by human activities and vows Z Energy wants to help reduce New Zealand's reliance on fossil fuels – the very product Z sells – and make gains through improved margins.
Z has 12 pilot projects to reduce the fuel consumption of trucking firms, but for that service it will demand a premium price on what is sold.
Even if the trial is expanded and Z builds a $15 million biodiesel plant producing 20 million litres a year, that's a drop in the roughly 2.5 billion litres of transport fuel the company distributes and sells each year.
He's not a believer in peak oil – “I think there’s enough evidence that says things are fundamentally changing around the supply side” – and he sits on the sideline with fracking, saying:
“Personally, I don’t know enough about fracking and I feel really disappointed it’s not a well-informed debate."
Z by the numbers
Z Energy, originally Greenstone Energy, bought assets from Shell New Zealand in 2010, and 60% of the company was sold in August’s IPO, leaving 20% each for original shareholders Infratil and the New Zealand Superannuation Fund.
In the intervening period the company has had a slick rebrand and substantial investment in its service stations.
The company has a 17.1% stake in Refining NZ, which runs the country’s only oil refinery, a 25% stake in Loyalty New Zealand, which runs Fly Buys, it has 211 retail service stations and 94 truck stops, as well as pipelines, terminals and bulk storage infrastructure around the country.
Z distributes and sells about 2.5 billion litres of fuel a year.
At Friday’s market opening, Z shares (NZX: ZEL) were trading at $4.01, an increase of 14.6% since listing on August 19.
In the year ended March 31, its retail fuel volumes were down 7% on the previous year, on improved margins. Its market share on all products declined below 30%.
After-tax net profit slumped to $35 million, down $42 million on 2012.