New Zealand has time to prepare for a future energy crisis due to escalating oil prices, Energy Minister Pete Hodgson said today.

The Government today launched a discussion document on sustainable energy which it said was the starting point for future policy development.

Written by the Ministry of Economic Development, it sets out New Zealand's current situation and considers ways to improve existing sustainable energy sources and develop new ones.

Green co-leader Jeanette Fitzsimons welcomed the report but said it lacked a sense of urgency about dealing with future problems and current oil prices.

Ms Fitzsimons was particularly concerned about a concept known as "peak oil".

Peak oil describes a scenario where global oil production peaks and due to continuing demand prices escalate to a point where current uses are not sustainable.

The Government had accepted forecasts that many experts believed were too optimistic.

"The International Energy Agency's mid-range prediction that cheap oil will end near the middle of this century is accepted as the likely scenario, which will comfort most people," Ms Fitzsimons said.

"The contrary forecast that peak oil will happen as soon as 2010 is described as 'extreme', but there is growing support for this view among geological and market experts, with some even bringing it forward to 2006."

Mr Hodgson said the discussion document had deliberately steered away from extreme positions, though it acknowledged the world and New Zealand faced serious problems.

"We have been careful to neither deny nor catastrophise...we have two very substantial problems as big as problems get, you could argue," Mr Hodgson said.

Oil production would peak and climate change would become a reality over the next century.

Some predictions of oil production peaking were too extreme and it was more likely to be some decades away.

"On the other hand it is very clear it is going to happen this century and more likely to be the first half of the century, not the second," Mr Hodgson said.

Both the future of oil and climate change meant New Zealand's current energy habits were unsustainable, he said.

"We are not powerless in the face of these challenges. Humankind has changed its energy system radically in the past and can do so again."

The discussion document looks at New Zealand's energy supply and use as well as trends for the future.

Mr Hodgson said New Zealand needed to do more energy focused research.

There also needed to be more emphasis on controlling demand instead of the past focus on increasing supply, he said.

The document, titled Creating a Sustainable Energy System, says New Zealand has lagged behind other developed countries in taking steps to improve the efficiency of its energy use.

Most commercial energy comes from fossil fuels, and most of the oil used is imported.

Natural gas supplies are declining, and global climate change is a long-term threat to economic, social and environmental interests.

"New Zealand needs to be a fast follower of international developments, but can also generate innovation by playing to its strengths and focusing effort," the document says.

"With challenges come opportunities to exploit alternatives to oil, find or import more natural gas, and increase the electricity system's diversity and flexibility."

Future energy sources explained in the document range from wind and solar power to hydrogen-powered vehicles.

The document is available on the Ministry of Economic Development's website - www.med.govt.nz

Energy supply and use in New Zealand

oil - 48 per cent
electricity - 26 per cent
coal - 9 per cent
gas - 8 per cent
other renewable energy - 6 per cent
geothermal - 3 per cent.

hydro - 61 per cent
gas - 22 per cent
coal - 7 per cent
geothermal - 6 per cent
others 4 per cent.

oil - 44 per cent
electricity - 16 per cent
gas - 16 per cent
combustible renewables and waste - 14 per cent
coal - 7 per cent
geothermal, solar, wind, tidal and wave - 3 per cent.

commercial - 26 per cent
transport - 11 per cent
residential - 12.5 per cent
industrial - 6 per cent.