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May 22, 2008

Time for the price of fuel to rise above politics

Kevin Rudd and Wayne Swan might have picked a seriously bad time to talk about keeping grocery and petrol prices down, writes Bernard Keane.


Let’s stop kidding ourselves. The price of oil may not definitely be headed over $200 a barrel, as per some of the more pessimistic claims made by analysts, but with 1.3 billion Chinese and 1 billion Indians eager for a western standard of living, demand for everything we consume, and particularly energy, is going to keep rising. We’re already seeing it with food prices. Sooner or later, it will significantly affect all commodities.

Which pretty much suggests prices are going to keep rising, for a long time. At least we can grow more food, if it rains. Last time I checked, they weren’t making new oil quite fast enough to replace what we’re pumping out of the ground.

On reflection, Kevin Rudd and Wayne Swan might conclude that they picked a seriously bad time to talk about keeping grocery and petrol prices down for the beloved worklies.

Don’t blame excise. Yes, sure, argue about the distortionary effects of taxing petrol differently to other goods and services, but based on 2007 figures, Australia has one of the lowest petrol taxation regimes in the world. Most European countries pay twice or thrice what we pay in excise. The Americans, of course, don’t. Virtually nothing interferes with their constitutional right to drive vehicles that, as Thomas Friedman noted, barely make it from one petrol station to the next on a tank of fuel. But even US drivers are jacking up about fuel costs.

Everyone wants to play politics with petrol prices – Oppositions particularly. Having been forced to watch Kevin Rudd effectively exploit rising prices last year in his run to the Lodge, you can’t much blame the Coalition for abandoning good sense and advocating an excise cut. Rudd and Swan, with their bullsh-t Petrol Commissioner and Fuelwatch initiatives, aren’t much better. Sooner or later some clown will suggest we go down the Third World route of having a petrol subsidy. Hell, it works for Mahmoud Ahmadinejad, doesn’t it?

The only really smart politics here is good policy. Many of us can moderate our petrol consumption. But many people, especially if they’ve been forced by housing prices to live in the outer suburbs of our major centres, can’t. Additional public transport is the only solution. It looks boring and earnestly greenie but until serious non-carbon fuel sources arrive, we’re stuck with it as the primary means of dealing with rocketing petrol prices.

The Federal Government’s historic Budget commitment to investing in urban public transport is a significant step forward. The Building Australia fund keeps being called a slush fund by critics, but that call overlooks the fact that any infrastructure expenditure in urban areas stands a far greater chance of yielding significant benefits than the sort of rural and regional boondoggles we’re used to getting from the Coalition. Having Infrastructure Australia involved in project facilitation and selection is also likely to reduce the ongoing problem of incompetent State Governments being unable to develop satisfactory public-private partnership models.

It doesn’t stop at infrastructure policy. Our car manufacturers seem hell bent on churning out big cars when rising petrol prices are driving demand for smaller vehicles. While the Government talks about investing in a local hybrid – partly, we suspect, as cover for protecting the local car industry – a switch to greater fuel efficiency is likely to yield a more quickly moderate the growth in fuel demand.

To say nothing of our housing policy, which seems driven by the twin and incompatible goals of ensuring house prices don’t fall too much, and making housing more affordable for market entrants.

If the Government wants to demonstrate it has real substance, it should stop catering to motorists’ conviction that they are entitled to cheap petrol and start explaining that one of the key parameters in the global economy is undergoing a significant, long-term and probably permanent change, and that we have to change with it. Malcolm Turnbull’s shameful statement yesterday that he wants to see petrol exempted from an emissions trading scheme suggests the Opposition won’t allow this to happen without trying to snare voters unwilling to accept the inevitability of change. But governments are elected to lead, not just manage, and this issue desperately needs leadership.

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20 thoughts on “Time for the price of fuel to rise above politics

  1. Trivalve

    I have to say that we now have the petrol prices we had to have (heresy, I know). I work in oil exploration and I was laid off, along with thousands of others, in 1998 when the price was $10. Brent crude went down to $6! Cheaper than bottled water! How on earth could we ever expect to conserve the resource and find the money to develop alternatives when oil was at that price? Crazy. The free market might be a wonderful thing at times but at others it’s effing stupid. There ought to be a component of the price which is fed directly to R&D on alternate energy sources. In 1998 an OPRC spokesman opined that they preferred to see the price under $25 because above that, alternatives became attractive. Hah! We’ve really seen the effect of that, haven’t we?

    Later generations will look at the prices of the late nineties and scratch their heads, trust me.

  2. gonginalong

    Nice work Bernard, but it’s not just public transport, its freight transport. This country desperately needs a massive and rapid investment in better rail routes and rolling stock. Not only are trucks destroying roads so that considerable money is wasted on constant repairs, but the fuel they use will as you have said significantly increases the cost of everything. This country needs fast and reliable freight links between its major east coast cities now, and its going to cost a lot.

  3. Neville Parker

    Bernard Keane makes a lot of sense, the sky may not be falling but it’s becoming very overcast.

  4. Marilyn

    NOt bad Bernard, but your problem is the same as Piers Akerman and Glenn Milne. You lie everytime you claim Swan and Rudd said they would or even could bring down food and petrol prices.

    They didn’t. Ever. Not once. I hope petrol goes up so high that we have to build more trains and so on.

  5. Jared

    There are plenty of solutions to guarantee Australia’s energy independence, the government just needs to develop a long-term coherent strategy. Option 1 – Start converting some of our coal to oil. It became profitable at $50 a barrel, though the process produces a lot of greenhouse gas, so that price could go up a lot if carbon taxes were introduced. Option 2 – Encourage the conversion of cars to natural gas. It’s cleaner than oil and we have some of the largest reserves in the world, so why not use them? It would largely insulate us from future oil shocks. Option 3 – Mandate the introduction of electric cars. General Motors (aka Holden) started producing them in the 90s when California introduced laws requiring auto-makers to produce them, but stopped after the laws were revoked. We have the technology to mass produce electric cars today and there are many benefits – 1) Moving the pollution away from cities to power plants in rural areas, which would reduce asthma and grime in our major population areas. 2) It’s far easier to capture carbon dioxide from a single coal power plant than from many thousands of cars. 3) As coal is replaced by renewables you kill two birds with one stone by cleaning up transport as well. 4) Electric cars would mostly recharge at night during off-peak consumption times, balancing out the load placed on power plants. 5) Electric cars could be used to make the power grid more efficient – plug your car in at work, and it can pump electricity back into the grid at peak times like midday.

    The current government talks about strategic long term planning to set up our infrastructure, and it’s no secret that our energy infrastructure is the most important piece in that puzzle. We need a smart power grid that takes advantage of broadband over power lines to communicate with small generators to draw energy out and feed it back in as necessary – people with solar panels, wind turbines, electric cars. We also need a national policy that speeds up the transition from combustion engine vehicles to electric vehicles, to bring about the inevitable convergence of transport with the national power grid.

  6. rafael

    convert the aussi fleet to gas and stuff the rest

  7. Embi

    Well said. Sure improving public transport won’t fix everything but it is a very important part of the solution. After petrol hit $1.38 in Melbourne, train patronage increased by 30%. The demand for decent reliable public transport is there and given the oil situation it won’t go away any time soon.

  8. Tom Conley

    Cheer up Bernard. This time may well be different but I doubt it. Recession will eventually save us from ever higher petrol prices, but then we’ll have something else to worry about.

    I wish I could share your belief (and that of the editorial/leader for today) that this could signal fundamental change in the growth / consumption model but capitalism (which deep down we all like – at least the social dem version of it ) needs two things to avoid crisis – continuing expansion and low inflation. At times and probably soon these two fundamentals get out of line. This is the real danger for the short to medium term

  9. Tony Papafilis

    What a non-surprise. Now that Labor have won and can’t deliver on their promises to ease the squeeze, it’s time to move beyond the “price of petrol” politics and other blatant hubris that the media promoted so hard to help Labor. Even the great infrastructure crisis appears to have vanished since we now have time to talk about it for another couple of years. Lucky for the left that they have their hatred (the left’s only real motivation) to keep them going in the face of all their obvious failings and their moral, philosophical and intellectual emptiness.

  10. rafael

    convert the aussi fleet to gas and stuff the rest

  11. bill

    Nice work Bernard, but it’s not just public transport, its agriculture and fisheries also. And that’s not building infrastructure alone its changing the way we eat.

  12. anon

    In this period of pricing turbulance one would think we’d be looking at ways to reduce our dependancy on foriegn oil. Truth is that will only happen when oil supply runs dangerously low and market prices force drastic change. What is intruiging is despite the continued whining about prices particularly petrol, the economy seems to be aborbing the shocks on the back of the commodities boom that caused it. Go figure!If this situation continues at current pace, the Citizens Electoral Party may actually end up winning at vote or two in 2010. Thats even more concerning than high prices!

  13. Stuart

    For an example of the sort of leadership that Bernard is talking about, see Queensland Sustainability Minister Andrew McNamara’s interviews in this new Australian Documentary “Australia Pumping Empty” – http://www.aquilaproductions.com.au/index.php?option=com_content&task=view&id=13&Itemid=27

  14. Jake

    I agree with the sentiments expressed in Bernard Keane’s article, with the one exception.

    His comment “Rudd and Swan, with their bullsh-t Petrol Commissioner and Fuelwatch initiatives, aren’t much better.”

    I have been using the WA Fuelwatch site since its inception and have saved myself hundreds of dollars by being able to pick the cheapest source of Premium Unleaded Petrol in my neck of the woods, the East/Hills district of Perth.

    Just last week I saved 14 cents per litre by making a slight detour, less than one kilometre, on my weekly shopping trip. This difference was between the least expensive supplier and the next cheapest servo on the list.

    Fuelwatch enables us to make a rational decision about where to get the best deal today, or tomorrow if checking after 4 PM.

    Generally speaking it is the independents who offer the lowest prices, except when they are undercut by Woolworths or Coles servos using fuel discount dockets and then it is usually such a small margin that it is not worth the detour.

    Give the Fuelwatch site a go and you may save a few bucks as well without having to drive around looking for the best price.

    It is definitely not a “bullsh*t” facility!

  15. Robert

    In a so-called democracy why do we lionise ‘leadership’ so much? We aren’t sheep and don’t need to be led, we need to be told the truth, given the truth and – above all – listened to. It’s not politicians who are ahead of the population on climate change/peak oil (and so many other issues), it’s the other way around. We need less ‘leadership’ and more real democracy.

  16. Chris

    It’s been a long time since anyone called it as it is. Keane has elevated national economic debate to focus on ‘the neighbourhood issues’. Neither of the major parties has the nouse or fortitude to deal with the real global influences washing over our economy because social and economic well-being starts at the grass roots level. Whole of government decisions have never been harnessed as local, state and federal forces dither with faction, party or locality agendas. Government is far from united in this nation, no singular plan to keep Australia growing from small to mediocre, regional to metro markets and communities. Stuck on an antiquated two-party treadmill, we’re heading down the same path as the US and the UK. Neither economy reflecting where any of us want to be. Parliamentary reform is what’s so badly needed and no one is game to make the call.

  17. Leah

    Re: Time for the price of fuel to rise above politics
    Bernard Keane was very much on the money when he wrote this article. He is stepping beyond commentary journalism and suggesting actual alternatives. Alternatives that may be plain and clear to many of us, but are not discussed. He has found his feet with this piece by stepping beyond the mainstream tabloid press (lazy stories on what ever everyone else is talking about on the day) and offering something more unique- this is why I subscribe to crikey.

  18. JamesK

    Our dependence on fossil fuels needs to be reduced in a planned manner as Mr. Keane suggests. If a government was serious about, and indeed actually demonstrated, leadership rather than public relations, a carrot and stick would be used. One carrot had just been removed by Rudd (although he spent an unecessary $500,000 plus more fossil fuels flying to sign the Kyoto Protocol when it could have been signed in Canberra) when they removed the support for conversion to solar energy in homes. Rudd seems more intent on image than substance. That is not leadership. Whilst the coalition seem intent on removing the stick…..hmmmm.

  19. Jonathan

    Yes, public transport is a critical solution. But it isn’t “the” solution, it’s “one of” the many solutions which we need to urgently adopt. Another is localisation of food and other production, and we need to find creative ways of reducing aviation and other forms of transport.
    We are living in a global food crisis, and we need to stop thinking about everything from the “national interest” and start thinking from the “global interest”.

    But it is possible to make these changes, absolutely!

  20. Greg Mott

    Not one person at the recent gabfest 2020 summitt mentioned electric cars to replace gas guzzlers. They had the technology for electric cars 100 years ago for gods sake – all pollies should watch the documentary ” who killed the electric car” – we have the batteries for extended car range – the photo panels to recharge from a ready source of free power – the sun! – bugger the ethanol replacements for fuel ( pollies will want us to clear some more land ,to plant sugar cane or corn ( USA ) which at the most will only replace 10% of fuel – LETS ALL GO ELECTRTIC POWERED BY THE SUN!

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