rosetta moon

The Rudd government is being tested by the Opposition and Industry on its strategy to focus attention at the ‘margins’ of the fuel price issue.

Fuelwatch as a strategy is very much at the margins if we look at the most basic cause and effect. A fuel pricing situation in any country does not arise overnight…the supply constraints upon any form of energy for transport must be under deep consideration by the government. It would appear that the FuelWatch strategy per se does not work but more importantly its not focusing policy strategy or public awareness in a positive direction.

Martin Ferguson raised one of the long term issues on the 7.30 Report, the Future of Oil. The issue he raised was the allocation of our finite resources between major export projects and proposals including the North West Shelf and other exploration projects. The question on everyones lips is why are we exporting a large percentage of our natural gas resources but failing to consider the full extent of natural transport opportunities available here. The strategy underlying current trends must be acknowledged by the current government as not only high risk but debilitating to ambitions for a sound economy not shaken by uncertainty in the fulfilment of local requirements for energy for industrial, commercial and domestic use.

The management of the money pot comes under the responsibility of Treasury and its big ticket item to play with is the levy of excise in accordance with policy settings and budgetary requirements which determine the viability and availability of different fuels on the street. As well as shaping the current and future fuel mix Treasury is also playing a key role in other key areas of the government including Energy, Resources, Climate change, Transport and Health. Every aspect of government has an interest in Australia getting its national energy and transport strategy right. The current shape of the policy must be seen in terms of current revenue collection from excise and revenue forgone in the application of discounts and rebates used as policy measures to channel the direction of the fuel mix, hopefully in a manner which makes economic and environmental sense.

Following is the proposed excise strategy in relation to alternative fuels, effectively tax free until 1 July 2011 when fuel tax will be applied. The rates will increase annually until the final rates are reached on 1 July 2015 as shown in the following table.

The table tells a story about the treatment of various fuels as proposed into the future. How the government interprets this proposal in the drafting will have the most profound effect on fuel availability and pricing into the future. Discounting of LPG and ethanol and methanol more favourably than CNG reveals a glitch in current supply reality. The economic lesson being learned is the need to apply an energy use strategy based upon an independant appraisal of the current supply and acknowledge the long term needs of the future. Science and experience needs to be applied to decision making to ensure that the outcome is desirable beyond the boardrooms of the energy interests and the retail supply market that has sprung up around it.

So then the excise proposal outlined above needs to be measured in terms of the current excise application of conventional fuels and their corresponding treatment as described in the chart above. The following table from Research Note no. 9 2006–07 is more useful in showing the comparative position and then further price changes that result from the discount:

The tables above suggest that each fuel is being treated in a certain way based on current excise taxation policy, but there is ample room here to project a target for alternative fuels, based upon their calorific energy value and the net costs and benefits to the economy, the environment and human health. As for the compromising of revenue there is need for an adjustment strategy that meets the budgetary obligations of government while at the same time providing a simple message to companies or individuals that wish to manage their investment to minimise risk.

There is no simple answer to Australia’s transport fuel situation as it has emerged out of taxation and transport policy which has been geared primarily to the petroleum and related sectors. As the requirements of the country change in response to energy scarcity and environment, its an opportune time for the government to provide the direction and the policy initiatives to get the entire transport sector back on its feet.

Therefore, what they are embracing, as we are seeking … here is a series of long-term responses which deal with supply factors, demand factors, alternatives fuel, fuel-efficient cars, public transport and also specific ways to help the family budget…That was the advice upon which the Government acted, but, of itself, this competition policy measure doesn’t add up to the total response to the challenges of fuel…

Kevin Rudd – 2008 Rudd: Liberals are against motorists – Herald Sun – May 30 2008:

It is questionable whether FuelWatch meets the criteria of ‘policy’ in relation to transport fuel management and it raises the question of when the real policy measures will be announced.

Image sourced: Vintage Petrol Pumps

Further Reading:

A Crude Diet Might Lead to Gas – Noel Child – Centre For Policy Development -21st September, 2005:

… In 1970, when our largest indigenous oil fields came on stream, the benchmark international crude oil price was US$2 per barrel. It now sits at US$70 per barrel. The key question now is where that price will go in the future. Let’s assume for a moment that US$70 per barrel is not in fact an aberrant peak in an otherwise benign supply/price cycle, but a warning sign of ominous things to come…

Noel Child – 2001

ABC Stateline Canberra – Gordon Taylor – Action Buses, asks a pertinent question:

So why is there little up take of a fuel source that is both cheap and clean? For LPG conversions, car owners get a $2,000 Federal Government rebate, a rebate not available for CNG conversions….Canberra’s buses prove the fuel’s credentials. Action has 54 natural gas powered buses with a further 16 soon to arrive.

New Law in El Salvador Promotes Vehicle Conversions To Natural Gas

A new law, passed by the Legislative Assembly of El Salvador, will expand energy sources enabling a reduction of costs in energy production, promotion of vehicle conversion to natural gas, and support domestic supply. The legislation, which consists of 76 articles, aims to “regulate and govern the receipt, storage, regasification, transportation and marketing” of the fluid. The law is reported to include the application of techniques through international codes and standards published by international organizations like the American Petroleum Institute (API ) and the National Association of Fire Protection (NFPA), and opens the way for international investment.

Fuel price debate ignores real issue – Kenneth Davidson- the Age – May 30, 2008

Getup has some fun at Fuelwatch’s expense – see short video clip