Oil And The Economy

Tell It Like It Is
Ross Gittins doesn't really write like a hard guy. So you take notice when you read criticism like this article.

I think I've stumbled on a new law of politics: the harder life becomes in this capitalist economy, the more our supposed leaders soft-soap us. The harsher it gets, the harder they try to persuade us we're living in a Sunday school where no one plays for keeps.

Take the carry-on about petrol prices. Neither side of politics is prepared to speak the obvious truth about them.

Instead we have them endlessly doing their I-feel-your-pain routines (which, of course, they don't because they're on high incomes and, in any case, have most of their travel costs picked up by the taxpayer).

There's little the politicians could or should do to reduce petrol prices, but you simply can't get them to admit it. Instead they pretend there's something. Brendan Nelson would cut the excise on petrol by five cents a litre tomorrow - if only he were in government.

Kevin Rudd will consider cutting the goods and services tax on the petrol excise - worth almost four cents a litre - and he'll let us know his decision in about 18 months' time.

What neither side will admit is that, because small cuts in petrol taxes would cost a fortune in lost revenue, they'd simply shift the problem elsewhere. And with prices changing so often, the relief they offered motorists would be forgotten within days.

It gets better too. Towards the end he has this to say about a carbon emissions trading scheme and how it was likely to impact petrol prices further:

The basic principle of such schemes is brutally simple: they force up the prices of fossil fuels so as to discourage us from using them. That's what Swan was refusing to admit in that interview.

It's possible, of course, the Government will lack the courage to include petrol in the trading scheme. But that would mean the price of electricity rose even more than otherwise. No coward's way out there. The necessary response to the present global rise in the price of petrol and to future price rises engineered in the cause of fighting climate change is the same: not so much driving less as using less petrol.

The first thing that means is moving to a more fuel-efficient car. But it also means making more use of public transport, bicycles and even shanks's pony.

Until recently, however, we've been doing just the reverse. Even as the price of petrol has risen by 45 per cent over the past five years, the price of new cars has fallen by 7 per cent (after allowing for the extra tricks each new model does), so we've been buying more of them.

In 2007, sales of sports utility vehicles were up 16 per cent, with sales of other cars up more than 6 per cent. Gas-guzzling sports utilities now account for about a quarter of total car sales. Including commercial vehicles, annual sales topped a record one million.

According to the CommSec car affordability index, it takes a worker on the average wage just over 32 weeks to buy a new Ford Falcon, the lowest reading in 24 years.

Over the four years to March 2007, the number of registered cars in Australia grew at the average rate of 2.5 per cent a year, taking the total to 11.5 million. Average fuel consumption improved only fractionally to 11.4 litres per 100 kilometres, but we now have 1.4 cars per household.

All that while petrol prices have been rising and politicians have been too lily-livered to warn us they have further to go. Only since the start of this year have rising petrol prices and interest rates obliged people to pull back.

New car sales are now falling and the quantity of petrol bought in the first three months of the year fell by more than 5 per cent.

And now we discover that people are piling into over-stretched public transport, catching our all-caring leaders quite off-guard.

Great leadership, chaps.

Some time ago, I made the very conscious decision to buy a 1-litre engine car. It felt STUPID in the context of Sydney car-culture but I had my reasons. I just didn't see petrol prices as ever coming down and so I thought heck, if I can't afford a hybrid, I'll get a small engine. After all, all I ever did was move myself and my partner around town. It was rare that I actually *needed* a larger capacity. Today, petrol prices are nearly 50% up from when I bought my little car. It hurts me too, but I can easily imagine what it must be like to be filling a 60litre tank for a 2.4litre engine car. If you're one of those people, I feel your pain too... not.

What I don't get is how people don't try to scale back their own fuel consumption given that 90% of domestic car use is urban transport of one person. The vast majority of the time you're sitting in traffic, idling your Turbo 4 or V6 or V8, trying to get to work or back home. Most people in Australia have way "too much car" for what they're doing. Instead, it's this infantile complaint that somehow petrol prices should come down through government intervention into the market place. Not only is it ignorant of the problem, it's completely myopic and self-serving.

The reality is, there's going to be more demand than supply of oil. Going forwards, prices are going to go up further for more reasons. The reality is, the lifestyle of burning petroleum in bulk to get around, just cannot be sustained into the future. The reality is, the worst of it hasn't even begun to kick in yet.
The fact that we will come to a point where one can't afford this stuff any more is just a fact of life. Like aging, or losing stuff. If people don't make adjustments for that reality, they must have the IQ of a dinosaur or the dodo.

UPDATE:
As if to underscore my point, I found this picture on a news site this morning.



There was also an article somewhere about people getting caught driving on transit lanes with a blow-up doll in the passenger seat. You'd think if you're going to go that far, maybe you should get a new car.