So, the world is facing the biggest oil price crisis since the 1970s, and possibly the beginning of the end of oil altogether. One of the critical parameters of our entire economy, a key factor in our lifestyle and a major contributor to global warming, is fundamentally changing.

What’s the response of most of our political class? A debate about cutting the price of petrol by five cents a litre versus cutting it by two cents. And that’s before we started having the debate about the debate.

As Christine Milne correctly observed last week in Crikey, this isn’t a problem that’s going to be solved by the same thinking that created it. There are alternative approaches.

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One of the key myths being peddled about petrol usage is that it’s price-inelastic. If it’s so inelastic, the NSW Government wouldn’t be looking to buy 150 new buses to meet growing demand for public transport use, which has grown by 74 services since January in Sydney. Tram, train and bus usage wouldn’t be up significantly in Melbourne. The rising price is forcing people who have access to public transport to switch to it.

The emerging problem, and the inelasticity, is in communities that have no alternative to motor vehicles, particularly in urban fringe suburbs where commuting distances are massive, and which are likely to have lower incomes and are therefore have less discretionary expenditure to re-direct to petrol. Two or five cents a litre reduction in petrol prices is likely to provide about two days’ relief for such people at the moment.

Yesterday, Crikey spoke with Senator Milne, who put forward a far more coherent proposal to address this than we’ve heard in this debate from either major party.

“We’re facing a situation where people may reach the point where they can’t afford to go to work,” she said.

“And the increase in petrol price is likely to swallow up all of the Liberals’ 5c and Kevin Rudd’s 2c reduction in a week. We need to identify spare bus capacity and get it into areas unserved or underserved by public transport as quickly as possible. Then we can focus on the longer-term task of switching the Government’s announced road funding away from more freeways and toward mass transit. There are also simple changes that can be made now to shift incentives, like removing the fringe benefits tax concession for motor vehicles and taking GST off public transport.”

Not that we should hold out too much hope for long-term thinking from the Government or Opposition. At the moment, the Government’s longer-term focus probably extends to the end of next week’s sittings. Brendan Nelson is probably focussed all the way out to the Gippsland by-election in late June.

The benefits of a reduction in the price of petrol from reducing excise or greater price monitoring will primarily flow to motorists other than low-income earners who need it most. This is one of the things that makes Brendan Nelson’s Emo Man act so absurd. If there are low-income families spending Tuesday nights lining up in massive queues while clutching their wheelchairs and processed sausages, it’s far better to target assistance to them through the welfare or tax system, rather than handing out a brief petrol price reduction to everyone. Not to mention that the previous Government had plenty of opportunities to address rising petrol prices itself.

Two weeks ago, the Government committed in the Budget to $3.2b worth of transport infrastructure projects. Of that, $192m was going to rail – primarily rail freight. The rest was for roads. It did also announce $75m for a joint Commonwealth-State process to study projects to relieve urban congestion, although a number of those are roads projects.

Talk about the same thinking that created the problem in the first place.

If even the Iemma Government can start responding to this problem, surely the Rudd Government – and some smarter people in the Opposition than Brendan Nelson – can see where we are going wrong?

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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