The Limits to the Energy Transition: What Physics Means for New Zealand’s Economy - Whitepaper
Why the Hormuz crisis is a symptom, not the disease — and what it means for New Zealand
As I write this, the Strait of Hormuz is effectively closed to commercial shipping. Iran’s Revolutionary Guards are broadcasting warnings to all vessels. Hapag-Lloyd has halted traffic. Maersk is rerouting around the Cape of Good Hope. Maritime insurers are withdrawing cover.
This matters to New Zealand more than almost any other developed nation, because since the closure of the Marsden Point refinery in 2022, we import 100% of our refined fuel. Approximately 81% of it comes from South Korean and Singaporean refineries that process Middle Eastern crude - crude that reaches them through the Strait of Hormuz. Our minimum diesel stockholding provides roughly 21 days of cover. The increase to 28 days isn’t scheduled until July 2028.
Today, the Wise Response Society - which I chair - issued a press release calling on the government to be transparent about the severity of our exposure, to activate the National Fuel Plan, and to investigate equitable rationing frameworks before shortages arrive rather than after.
But this post isn’t about the crisis of the week. It’s about the crisis underneath it.
The whitepaper
Today I’m releasing a whitepaper: The Limits to the Energy Transition: What Physics Means for New Zealand’s Economy. It represents a summary of my current understanding synthesising the biophysical economics literature - Hall, Keen, Murphy, Garrett, Hagens, Smil, Delannoy and others - and applying it specifically to New Zealand’s situation.
The central argument is straightforward, even if the implications are not:
The global economy is not a financial system that happens to use energy. It is an energy system that happens to use money. When the net energy available to society contracts - as it is now doing, due to the rising energy cost of extracting what remains - the real economy must also contract. No monetary policy, no financial engineering, no amount of optimism can override this. The constraint is physical.
What the paper covers
The paper works through several connected arguments.
First, that the Energy Cost of Energy is rising. We harvested the best, most accessible fossil fuel reserves first. What remains is deeper, more dispersed, and more energy-intensive to extract. The net energy peak for oil - the energy actually available to society after extraction costs - likely occurred around 2025, even though gross production continues.
Second, that the proposed renewable replacement is constrained by mineral availability and energy density limits. Solar panels, wind turbines, and batteries are better described as “rebuildables” - they harvest renewable energy flows, but the stock of materials and fossil fuel energy required to build, install, maintain, and replace them is finite and substantial. The transition is being built by the very energy source it proposes to replace.
Third, that New Zealand sits in a uniquely exposed position: no domestic refining, 21 days of diesel reserves, complete dependence on maritime supply chains through contested chokepoints, and an agricultural export economy that runs on diesel from paddock to port.
The paper also steel-mans the rapid transition case - the solar cost revolution, emerging battery chemistries like sodium-ion, electrification efficiency gains. These are real, welcome developments. Solar should be deployed aggressively. Electrification of light transport and heating should be accelerated. But the claim that these developments can sustain current levels of economic complexity, let alone continued growth, is not supported by the physical evidence.
Why this matters now
The Hormuz crisis is not an anomaly. It is a preview. The conflicts over remaining fossil fuel resources - in the Middle East, Ukraine, the South China Sea - follow a well-documented pattern of major powers competing for control of the energy that underpins their economies. As the highest-quality reserves deplete, these contests intensify. New Zealand cannot control this. What it can control is its level of preparation.
The whitepaper concludes that the appropriate response is not to abandon the renewable transition - it is essential - but to plan honestly for a smaller, less energy-intensive economy alongside it. That means prioritising food security, water, and essential services. It means building resilience rather than optimising for efficiency. It means preparing equitable distribution mechanisms - like Tradable Energy Quotas - for deployment when supply disruptions materialise.
And it means honest communication. The most dangerous aspect of our current situation is not the physical constraints themselves. Managed early, they are navigable. The danger is the refusal to acknowledge them - every year of continued investment in a growth-dependent model that cannot be sustained is a year of misallocated capital, deferred adaptation, and increased fragility.
The physics is not negotiable. Our response to the physics is.
I’ve tried to write the whitepaper so that the arguments can be engaged with on their merits, with full references. Some of the conclusions are unwelcome. I ask only that you engage with the physics before reaching for the reassurance of conventional economic assumptions. Strategic descision making from this point forwards must take into account the world as it is, not as we’d like it to be.
If you’re a business owner, board member, or policymaker in New Zealand, the question is no longer whether these constraints will affect you. It’s whether you’ll have prepared, mentally, personally, and corporately for them when they do.
Nathan Surendran is the Principal Consultant at Schema Consulting Ltd and Chairperson of the Wise Response Society. He specialises in biophysical economics, energy systems engineering, and long-term resilience planning for New Zealand businesses and communities. He is based in Southland.
The full whitepaper — The Limits to the Energy Transition: What Physics Means for New Zealand’s Economy — is available here.
The Wise Response Society press release on New Zealand’s fuel supply exposure can be read here.
Bullseye. The real problem we face, now, is not political, structural or technological - it's a question of religion. We look askance at cults such as Gloriavale or the Moonies, but seldom question our own prevailing delusion - that endless GDP growth is both possible and our birthright.
Challenging this fantasy is seen as outrageous, unspeakable blasphemy. The corporate mindset simply can't contemplate any limits to growth. Nor can it accept that that money is merely a proxy for access to energy, and therefore nobody actually "makes money" we merely enable ourselves to sequester a chunk of Earth's limited resources during our lifetime.
It follows, inexorably, that people who sequester more resources than they could possibly need are neither role-models, 'captains of industry', or wealth 'creators'; they are parasites.
It also follows that competition (by industries or regions) for consumer spending is stupid. When cities try to get wealthier by building a convention centre, or hosting a major sporting event, all they are doing is extracting money from somewhere else. Looked at like that, the economy is a zero-sum game.
Fixing this will be impossible unless we can achieve a total rethink of societal priorities and values. Given the seductive appeal of wealth, and our Freudian attachment to status symbols such as powerful cars, big houses and fat wallets, is this even possible?
I hope so, because if not the laws of physics will take us down.
Nathan doing the Minister of Energy's work for him, which I suspect he will never read!
I can't think of one 'leader' in Aotearoa NZ with the gumption, intellect, integrity and honesty required to act on the conclusions in this paper.
The first and most obvious action we should do is stockpile diesel and grains on a national scale before regional war breaks out in West Asia, oh wait, too late!
The reason we won't prepare it is no one in a seat of power will risk their privilege by pointing out the system is irretrievably kaput! This is true across the full spectrum of parties in Aotearoa NZ.
To quote John Kenneth Galbraith: "People of privilege will always risk their complete destruction rather than surrender any material portion of their privilege".
To quote Upton Sinclair: "It is difficult to get a man to understand something when his salary depends on him not understanding it".
There are two options, managed decent or collapse, we are by default choosing collapse, lets reconsider that whilst we still can.
I've added this summary to my blog post on Joseph Tainter's work titled: The Myth of Human Progress and the Collapse of Complex Societies. Chris Hedges & Joseph Tainter.
https://kevinhester.live/2017/08/08/the-myth-of-human-progress-and-the-collapse-of-complex-societies-chris-hedges/