In one of the most egregious moments of last night’s debate, Mr Howard challenged his opponent to say what he’ll do to push petrol prices down. Mr Rudd, unsurprisingly, came back with the second most populist response of all – announce another inquiry into petrol company collusion.
With petrol prices looking almost certain to go up by 10c next week on the back of US$90 oil prices, you can bet that Mr Howard will trump that with the ultimate populist refrain, as advocated by Family First – reduce petrol taxes.
And they call themselves responsible economic managers and fiscal conservatives.
If you really want sound economic management, look to the Greens who want to invest the surplus not in tax cuts but in public transport, alternative fuels and fuel efficient vehicle manufacturing, making it mandatory for governments to use procurement of hybrids to upgrade the whole transport fleet over time. These investments, as well as abolishing the fringe benefits tax concession for motor vehicles and the GST on public transport, shifting tax to the carbon content of fuels, is really what needs to be done to protect the community from higher petrol prices.
For decades now, there have been consistent expert warnings that oil demand is outstripping supply. Compounded by geopolitics, such as Turkey’s threatened military intervention into Iraq, this leads to swiftly accelerating prices.
Meanwhile, ABARE is still projecting oil prices will be US$40 a barrel long-term, and Treasury add to the problem by never even bothering to include peak oil in their identified risks to the economy. Even George Bush understands the security implications of energy and is urging the US to get off its oil addiction, although his policies are still seriously lacking. Back home, both the Government and Opposition refuse to oil-proof Australia.
The only way to effectively deal with increased prices is to reduce demand by shifting people out of petrol guzzlers into public transport and more efficient cars. Attempting to cushion the blow by artificially reducing the price makes matter worse by locking low income earners into inefficient cars in suburbs without public transport. It means higher costs of living and higher emissions.
Of course, the Climate Fund Mr Howard announced last night does exactly the same thing – handing out relief cheques is no substitute for energy-proofing Australia houses, as the Greens EASI policy would do.
Hi Christine,
I think that there is a typo regarding the price of oil in your text above: “Meanwhile, ABARE is still projecting oil prices will be US$40 a barrel long-term, and Treasury add to the problem”
Thanks and keep up the good work
James
I wouldn’t personally characterise lowering petrol taxes as ’softening the blow’, but rather as delaying the inevitable, making the eventual impact all the more intense.
Even under a so-called ‘conservative’ market driven economy, higher prices should be contributing to sorting out the oil shortage by reducing demand. This is the basis on which economists dismissed the estimations of the geologists about how long the oil will last. The geologists were saying that, based on past and present consumption trends, we only have x number of years left of oil supplies. The economists disagreed, arguing that the further supply is restricted, the price increases, thus curbing demand.
Surely then, to artificially affect the oil price by removing long-standing taxes will alter the predictions, bringing the end of supplies further forward. Not to mention of course, the reduced market incentive to invest in renewables, more efficient, cleaner public transport, and energy efficiency in the first place.
I certainly think the Greens have again, got the right policy on this one. It isn’t popular, but governance shouldn’t be about making populist decisions; we all know this.
James, $US40/barrel is their long-term prediction. That’s the problem. until they, and the government, realise that these outrageously high oil prices are here to stay, they’re not likely to do anything for the long-term best interests of the economy or the public (the two do not necessarily coincide).
By the way, their long-term predictions are slowly going up every couple of years, but they’re still way behind the pace. In 2004 their prediction was $US25/barrel.
It reminds me of every year when the global warming predictions get reformulated and end up being much worse than ever expected. Yet those on the perpetually skeptic side of the debate see such inaccuracy, even if it’s always pointing in the same direction, as a refutation of the entire phenomenon.
I’m never really sure which reality ABARE is trying to model. They have similar problems with climate modelling.
Why are measures which change behaviour or alleviate “locked in” investments always criticised so harshly? If you look at inflation figures for Australian produced goods and services, they are way way outside the target range. The only thing keeping inflation in this target is deflation from foreign goods and services.
This is not a good situation to be in, especially if there is political problems in other countries. We are deliberately exposing ourselves to major risks, mainly for short term gains so governments can get re-elected.
By offering transport alternatives, and energy generation alternatives we free ourselves from these pressures. In fact I’d have to think that Greens policy is probably the most low inflationary policy there is in this election. Mainly because it advocate demand management and behaviour shifting.
And why are the “Liberals” always forcing no-choice situations on the public? No choice for transport, no choice for local suppliers, little choice in voting “i.e. them or Labor”. For the party which has choice as a fundamental belief, they certainly don’t practice this belief.
A surprise that Howard gets away with talk abut lowering the price. It suggests two negatives about Labor and Liberal:
1. neither major party understands the issue
2. both major parties share a lack of respect for the general population. More people than ever can see that lowering the price is nothing more than a vote grab rather than a strategy.
-Gary
Good work, Christine.
To put this into perspective, over the entire 20th century, the oil price was never this high even in inflation-corrected terms — not even the early 1980s spike caused by the Iranian revolution and subsequent Iran-Iraw war which in today’s terms put oil at $85 per barrel. We have recently seen $90. Without a major conflict to cap production, we are seeing a price trend which (aside from some short-term influences) is most likely based on predicting increasing demand.
Even those who refuse to buy into peak oil can’t believe that supply can keep up with the sort of growth we are seeing in India and China.
The _only_ policy the major parties has relating to this new reality is Rudd’s pledge of $500-million to support building an Australian hybrid car. Nothing even about correcting the tax anomalies that encourage waste (lower import duties on SUVs than small cars; fringe benefit tax that encourages driving more).
Too little, too late. We need strong support for low-emission, low fossil-fuel transport at all levels, from a reasonable alternative to internal combustion engines in cars through public transport. And we need to stop perverse taxation policy that not only doesn’t make economic sense but is environmentally harmful.
Where is the plan to build a high-speed rail network, powered by geothermal electricity?
With technologies we have today, we have plausible low-emissions alternatives to everything except high-speed intercontinental travel. The planet can live with jet travel if we get rid of all the other areas of fossil fuel (and give us some breathing space to come up with an alternative before that too has to go). A good bit of R&D and government-funded infrastructure is needed to make most alternatives economically viable, but this will not happen by itself … the market will only respond when the fossil fuel alternatives are so expensive that the R&D and deployment costs of alternatives become competitive with business as usual, and there is no sign of that happening yet.
Dinosaurs didn’t have a policy on climate change either, but at least they didn’t cause it …
Christine,
Public transport is not a first level answer, it is not what people want, and it is not as practical as other solutions. One of the biggest impediments to rail public transport is Australia’s passion for wide gauge rail. This one decision made in the past dramatically increased the cost of underground rail installation. Busses are all diesel which are more efficient people movers but still belch out CO2. The number of added busses required to make them more user friendly (waiting times) would vastly reduce their overall efficiency. And then there is the cost of public transport from the users point of view. If suburban families used busses for most of their family travel the total cost would eat heavily into finely tuned family incomes. And if all of that was not enough there is the perception of security risk to family members with broad public exposure. In inner city areas public transport works well, but in broader suburbs PT is a poor option in today’s world.
The ethanol solution is the best interim solution. Electric vehicles are the better medium term solution. The ultimate long term solution is a mixture of all 3 with perhaps the inclusion of solutions not yet known. Philip M’s comment on high speed rail is very valid, too. But this with out a comprehensive and immediate remodelling of our power energy infrastructure, such an investement would be pointless.
Brazil’s Lula da Silva is proving to be the worlds most advanced performing leader on practical solutions to Global warming with his overtures to African States offering technical assistance to those states who want to look at producing biofuels for their own economies. Sweden’s deposed prime minister should also be recognised for his far reaching environmental policy, which unfortunately came too late in his prime ministership.
We are in the process of disposing of one environmentally dead head leader, it is important to prevent the installation of another. In 1980 New Zealand, the then left wing conservative prime minister, Robert Muldoon, held as policy a plan to have NZ vehicles fuelled on 30% ethanol by the middle of that decade. A 1984 change of government to a far right wing Labour government saw all of those plans swept away with policies guaranteed to heavily exacerbate rising CO2 levels. We must not allow the same to happen hear. Any policy focusing on coal in any form is no solution to the worlds accelerating atmospheric warming problem. Rudd must be allowed to win the election, because no other reasonable party can, but then all pressure must come to bear to force a substantive plan for Australia’s future performance as a non fossil fuel economy.
Bilb, Natural Gas buses are being built and run in Brisbane and other major cities; Perth is trialling Hydrogen fuel cell buses. Narrow gauge light rail can be built either above ground as trams or below ground as a cheap underground alternative to heavy rail.
Public transport is generally pretty competitive with driving to work when you consider fuel and parking costs. The finely tuned household budget will be put under pressure by rising fuel costs and public transport will continue to become more attractive (if the various levels of government give it the required funding).
Sam,
Natural gas is a fossil fuel, creating Hydrogen takes coal or gas electricity to produce it in Australia. Narrow guage can be built but we have to have the will and the budgets to do it. For most of Australia that is starting from scratch. I personally would love to see a London style undergrounf in all of Australia’s cities. It is not going to happen in a hurry, so there is little point in talking about it unless there are the votes to drive it through.
The real solution to the commuting nightmare is proper strategic regional planning. More smaller cities gives everyone the best deal and the environment is better off. here is an excerpt from an article about a electoral battle in a small community north of Sydney to make the point”:
Dobell is home to a large proportion of sea-changers and retirees. It’s become an area that Sydneysiders have flocked to, to escape the rat race.
Some 35,000 people commute from the electorate every day for work in either Sydney or Newcastle, many travelling up to 200 kilometres every day.
Forty-five-year-old electrician David says it is difficult to make ends meet.
http://abc.net.au/news/stories/2007/10/23/2067379.htm
This is the cost of the monumental failure of all Australian governments, Labour and Liberal, to do any significant planning. It is a pitiful outcome. But that is the situation and those people, of whom there are millions, are not in a position to change to public transport simply because it would work for them.
Another example is the Sydney airport rail link which costs $10 each way each day, so airport staff (of whom there are thousands) do not use it. Whereas public transport sounds good when you examine some very specific possibilities it soes not work for a majority of Australians as we are today.
Public transport will work better in the future for an increasing number of people, but that is not transitional time that we have available if GW correctional time frames are to be attempted. Ethanol production can be ramped up very quickly by comparison, and that is what should happen. As Australians rearrange their life styles around the new reality then the need for local consumption of ethanol may diminish, and that fuel can then be diverted to other countries that do not have the capacity to manufacture their own fuel.
If properly managed then all options will be undertaken in parallel. Public transport will be promoted and used increasingly, busses will move to hybrides or full electric, cars will run on an increasing amount of ethanol, trucks and aircraft will be using an increasing amount of biodiesel, concentrating solar and geothermal power capacity will be steadilly increasing along with wind and photovoltaic, there will be some reduction in power consumption through more efficient useage but elctric cars will soak up that spare capacity, solar panels on houses will become more popular and that will help to compensate for the increased use of airconditioning as the weather becomes more extreme, and eventually coal consumption for electricity will decrease at an accelerating rate……..in other words it will be all hands to the pumps. The is no single solution. There are, whoever, things that can be achieved sooner than others.
that was “it would not work for them”
Bilb,
Even natural gas powered buses would be a massive improvement, given that it produces from memory 20 or 30% of C02 compared to diesel/petrol, so if you combine that with the number of cars you could take off the road, it would still be a significant improvement on the situation in all Australian capital cities. Of course they can also relatively easily be powered by biodiesel or be electric which makes sense where green energy is available.
Other cities around the world are also using ‘walking buses’, ie buses that can move between rail and road, tailored routes to meet inner city and suburban demands, reinstating electric tram routes, and revamping light rail, which is an option still for some of Australia’s major cities, notably Melbourne. There are a vast plethora of options beyond even underground etc. So I don’t feel that your posts really represent the range of choices and innovation available for public transport.
Equally there have also been some excellent innovations in how to design the fee structure to ensure maximum participation. One area where I’d minorly disagree with for eg the NSW Greens is that making public transport free doesn’t actually make people use it more, going by overseas experience, although a trial here in our context still has some merit. But generally public transport does best where there is some fee but it is ensured it is reliable, efficient and more cost-effective than taking your car.
In short the options are there, and they are affordable, we just need governments willing to commit.
Bilb, could you enlighted us on why wide gauge rail is such an impediment compared to narrow gauge, I must be missing something.
I could understand an argument for electric trains powered from below verses powered from above, no need for the support gantry for overhead wires, tunnels could be slightly shorter, overhead bridges could be lower, etc etc. Narrow or wide gauge the train carriages are the same width. Narrow gauge has an advantage in tight cornering, but that’s more a concern for mountainous and hilly areas than our relatively flat cities.
The main problem with public transport is that not all destinations can be reached with it, so even if you are well served by public transport you still “need” a car to reach some destinations. Then if you have a car, the tendency is to use it. For public transport to significantly curb car usage the reach of public transport has to be sufficiently wide that people no longer feel the need for a car. Frequency of service, hours of operation, the time efficiency of routes, and cost are also factors in the patronage of public transport. Work starts each morning at Sydney airport before the rail network is up and running, even if workers wanted to use public transport to get to work, many couldn’t.
Warrawee, Sydney, is on a rail line with a service frequency of around 15 mins, and on the pacific highway, the area is “garden suburb” residential, in fact it is so residential that there is only one “business” in the suburb, a funeral parlour. There’s a private school, a primary school, a kindergarten, a lawn bowls club, and a couple of work from home businesses like physiotherapists and accountants, that’s it, there’s not even a newsagent kiosk at the station. Apart from students attending the private school there is virtually no reason for anyone to get off at the station (the dead don’t do much rail travel) . The state government has sidelined the local cancel and taken over planning control for the rail/highway transport corridor, and approved many blocks of multi storey units (up to 6 storeys, there used to be nothing above 2 and a half) to reward their developer mates (amazing what the funding of political parties will do). Lots more housing, but still diddly squat with regard to any businesses served by the station. I see this as a planning disaster, surely the aim should be to make public transport serve as both a source and a destination for travel.
Might be a good time to recall a quote from John Howard, defending record high oil prices (then only $78 a barrel) in August 1st, 2006:
“I mean if anybody says there’s some magical solution to the high price of petrol in Australia, will you please ring the Lodge and I’ll spend an hour all-ears listening to them.”
Exactly three months later, the oil price had fallen a massive 20 percent. Why? Because of the US mid-term elections.
I charted exactly what happened, when and why. More here.
One must remember that certain people are extremely happy to see the price of oil soaring to ever new record highs.
Zoltar,
It is very simple. The hole that needs to be dug to accomodate the wider rail (and hence the much larger carriages) involves the removal of 2 to 3 times the amount of rock for the same distance achieved. I did not realise this until I used the London tube recently. The British were very clever with their design, it is a masterpiece. As a result they have a system that covers all of London taking passengers within walking distance of most London locations, and we in Sydney have a small city circuit with a couple of flyoffs. It is all about cost. The trains that run in the tunnels are also smaller and cheaper to build.
The English country lines (above ground) are wide gauge.
Moonwise,
What public transport needs mostly is a people who are willing to commit (people = government = people). I doubt that Australians are prepared to do that above 15% even with inducements. But when you realise that this major shift has to be achieved in 10 years or less I do not think that public transport can adapt that quickly. I hold fast to the view that it will be the mixture of options that will work most effectively, but every improvement is important.
Since this is slightly off topic I’ve further developed my argument on high-speed trains at
http://groups.google.com.au/group/green-values-brisbane/web/the-train-alternative
My costings could be out and I could have missed some big issues, but isn’t this the sort of debate we should be having, not who gets $10 a week when?
What a pity so few people actually get to see a site like this…
Phillip, you might be interested in this study by DOTARS.
Your numbers are likely an underestimate.
Public transport is a priority - ahead of roads.
ABARE’s longterm oil price of $40 a barrel is the opportunity cost of coal to liquids without geo-sequestration of CO2. This was clearly stated by Dr. Fisher during the hearings of the Senate Inquiry on oil supplies.
Janice
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