May 27, 2008
The atmospherics around the politics of petrol prices in Australia is increasing by the day as the realization dawns that cheap oil, which was arguably, the most important driver of prosperity in the industrial world during the 20th century, is coming to an end. Expensive energy will be the only significant driver of the economic development in the 21st century.
Hovering in the background is the date when global production of oil peaks. How would we know? One possibility being canvassed is 2017. Others argue that oil production and supplies will steadily decline by 2 percent annually for the time being. However, it is hard to take the political debate about cutting excise on petrol seriously:
Worst Wing
A key factor is the growth in demand in emerging markets such as China and India. This implies that worldwide demand for oil will out pace worldwide production of oil by a significant margin. As a result, the price will continue to increase.
What we do know is that to a large extent it depends on the Saudi’s. Political peaking it occurs if they decide to no longer increase production. Geological peaking occurs when they cannot increase production.
Ingram Pinn
Martin Wolf in the Financial Times says that it would be a mistake to focus in shock only on the short-term jump in prices since the bigger issues are longer term:
Here are three facts about oil: it is a finite resource; it drives the global transport system; and if emerging economies consumed oil as Europeans do, world consumption would jump by 150 per cent. What is happening today is an early warning of this stark reality. It is tempting to blame the prices on speculators and big bad oil companies. The reality is different.
It looks increasingly hard to expand supply by the annual amount of about 1.4m barrels a day needed to meet demand. This means an extra Saudi Arabia every seven years. What is sobering is that we cannot burn oil that does not exist. We are no longer living in an age of abundant natural resources.
What we have in Australia is a debased standards political debate concerned with the petty point-scoring between the Opposition and the Government about easing the burden of petrol prices. This political debate seems to have reached a new low, one pushed down by the road lobbyists. Would the Rudd Government cut the GST on petrol while continuing to impose the GST on rail, tram and bus fares?
The Rudd Government is not set up for this kind of policy. 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. This is not long term policy thinking. That would begin with a shift in the funding for roads to be reallocated to include all transport, with half going towards public transport. This should support the installation of high quality, high-speed passenger rail links between the major centres in a city.
|
Gary
--you say it is hard to take the politcal debate seriously. We have the Opposition moving a censure motion against Kevin Rudd for letting down Australians by "quitting" over the rising cost of petrol.Then we had Rudd launched a counter-attack, mending the censure motion to force the Opposition to vote on whether they supported the Fuel Watch scheme.