Lyn Allison (Victoria, Australian Democrats) Share this | Hansard source

I rise to speak about petrol prices and Australia’s reliance on oil. What has become very clear to us over the last few years, through the very public debate on petrol prices, is the fact that this government has neither the foresight nor the political courage or leadership to deal with a problem which can only get worse. We can all argue about the level of excise on petrol—it is currently 38c a litre, where it has been frozen since 2001.

Mr David Trebeck, chair of the 2002 inquiry into fuel tax, said yesterday that there is no economically rational framework guiding government policy—and, of course, there is not. Mr Trebeck’s report recommended getting back to twice yearly indexation of petrol and diesel excise, which of course was promptly ignored by government. Now, as the excise becomes a smaller and smaller component of fuel, he asks whether it should be taxed at all. Mr Trebeck is an economist who, it seems to me, is more interested in economics than in greenhouse issues, air pollution or indeed the dire forecasts about peak oil and predictions that petrol prices will steadily rise in this country. Many say that will cause enormous damage to the economies of developed countries that are already heavily dependent on oil. However, I agree that radical change needs at this point to be debated. In fact it should have been debated years ago.

The future of transport energy has to be planned carefully—and with greenhouse emissions, energy security, our vehicle manufacturing industry, our commuting habits, the design of our cities and our public transport systems all in mind. But rather than do this, the Howard government has ignored reports and leapt from one knee-jerk reaction to another—the latest, of course, being the LPG conversion grant. This will at best, if only new cars are converted, relieve the cost of fuel for just 700,000 families. Given that there are almost 11 million passenger vehicles on the road and the scheme will only assist about four per cent of those, the scheme should really be considered a failure. Family First’s call to cut excise by 10c a litre is, as we would expect, populist and misses the bigger picture. For a start, the benefits would be quickly eaten up by further oil price rises that are inevitable. It does not address climate change. It does not address the fact that oil is finite and will soon be in short supply. We say that the government would be better off using the $3 billion that that 10c a litre reduction would deliver to invest in solutions which have a far greater impact in the long term.

This year President Bush admitted that ‘America is addicted to oil’ and that ‘keeping America competitive requires affordable energy’. There are a number of reasons why Australia should this time listen to George Bush. Firstly, oil is a major contributor to greenhouse gas emissions and climate change. Transport accounted for 13 per cent of Australia’s greenhouse gas emissions. Our transport emissions have increased by 23 per cent since 1990. Secondly, oil is a finite resource. Since 1980 the gap between oil demand and oil supply—once considerable—has steadily narrowed; and today it is almost negligible. Since 1965 the amount of oil discovered each year has plunged, despite all of our advances in technology. Because of the lack of access to accurate data, there is no certainty as to when oil production will peak and then decline. What we do know is that the United States hit peak oil in 1971; the UK, with its North Sea oil, peaked in 1999; and Australia peaked in 2000. The Middle East remains one of the only areas that has not reached peak oil—if we believe OPEC claims. Whatever the case, the growth of demand in China and India will act to bring that peak forward significantly. The impact on the wellbeing of Australians—particularly in outer suburbs that hinge on two-car families and people commuting long distances by car to go to work, to school, and to supermarkets—will be disastrous. People need to realise that oil production is not just about transport and the cost of getting to work; it is also about manufacturing, about farming and about the availability and cost of everyday products and food. Oil decline will have a huge impact on world food production. Thirdly, rising costs are making it unaffordable for many families and adding inflationary pressures to the economy.

The Prime Minister’s primary solution has been to find more oil. In July the PM announced that Australia would be an ‘energy superpower’ and would invest billions in oil exploration. However, it is highly unlikely that large amounts of oil will be found again. Whatever small remaining reserves of oil might be found will be costly and more difficult to extract. Mining shale oil is dirty and energy intensive. It would add very considerably to Australia’s greenhouse emissions. So Australia needs to, first and foremost, reduce its reliance on oil. However, the government’s record of doing so has been abysmal. On coming to office in 1996, the government scrapped the ethanol development organisation and its $25 million in funding. In 1998 it proposed to massively cut excise on diesel, which would have made LPG and other alternative fuels unviable. In that instance the Democrats were able to negotiate compensatory grants to maintain price relativity, but the government introduced excise on ethanol in 2002 and on biodiesel in 2003 to take effect from 2012. Again, the Democrats had to step in and push for the excise to be halved and to delay the start-up by three years. I must say that was a massive exercise, both by the biofuels industry and on our own part, in getting the government to see sense.

In 2003 the government forced onerous and costly testing on small biodiesel producers, thereby discouraging production. Just eight weeks ago the government, backed by Labor, cut excise on petrodiesel for some on- and all off-road use, making biodiesel in those applications unviable. The government has refused to mandate biofuels and instead accepted a commitment by the industry to reach a voluntary biofuel target. The problem here is that the industry has so far failed to meet their stated targets, and the government has buried the report because it would be a very public admission that it has no workable alternative fuels policy. It seems that few of these companies—perhaps with the exception of BP—intend to make available to motorists anywhere near the amount of biofuels that is needed to reach the target. These are oil companies with a vested interest in supplying high-priced petrol. Peter Anderton, the Chief Executive of Australian Ethanol Ltd, said he believed that the ethanol industry could meet the demand created by a mandated use of 10 per cent ethanol blend. Australia has the capacity to produce 110 million litres of ethanol a year but the major oil companies have only purchased 25.1 million litres, less than a quarter of the current capacity. The Democrats say it is time that we mandated ethanol and forced the major oil companies to purchase and supply it to consumers. The Democrats have been pushing for an ethanol mandate for 10 years and we are pleased to see the Queensland and New South Wales state governments arguing for a mandate in their states.

While the government has jumped on the LPG quick-fix bandwagon, it has ignored compressed natural gas. This is unfathomable. Australia has a good supply of gas and we should regard it as a transition fuel. It is readily available. It is piped to most people’s houses for their gas stoves, and it could be tapped into for a transport fuel. Compressed natural gas has the advantage of being 20 per cent lower than petrol in greenhouse emissions. It is readily available, as I said. It is cheap, it is stable and it is not linked to world parity in oil prices.

But, as we saw with the diesel excise debate in 1998, it is chicken and egg. You do not get motorists converting to compressed natural gas and you do not get car manufacturers making vehicles capable of running on natural gas if you do not have refuelling opportunities for people. It is a stand-off. It is a chicken-and-egg situation. The government should intervene and provide incentives both for conversion and for refuelling. As the situation stands, there is a grant system available for compressed natural gas conversions but this runs out within 12 months. Why the announcement about LPG did not include CNG is beyond understanding.

The government should be keeping excise off alternative fuels, phasing in that mandate of 10 per cent ethanol blends in fuels and funding compressed natural gas equipment. We do not say they should be separate refuelling stations; there is no reason they cannot be alongside LPG, petrol and diesel in service stations. But, as I said earlier, the oil companies are not going to want to do that off their own bat.

I am not arguing that these solutions that I have mentioned today are long term or that they do not have their own shortcomings. LPG is a by-product of oil and gas production and is therefore a limited resource. It also contributes to greenhouse gas emissions—although less than petrol—and not all cars can be converted to LPG. Compressed natural gas is still a fossil fuel but it has great potential as a transition fuel to hydrogen in the longer term. Incentives need to be given to assist motorists to convert or to get auto manufacturers to put them on the production line.

Biofuels are renewable but not likely to be able to completely replace the current level of petrol consumption. Using agricultural based products such as sugar and wheat to produce fuel at present consumption rates would almost certainly divert land from food production. This is something that needs to be very carefully studied. Biofuels can certainly play an important part in replacing a percentage of petrol. LPG, compressed natural gas and biofuels should be seen in the context of a mix of measures needed as a viable interim measure until new technologies and fuels are found. Perhaps we will find one day that a car can be run on water, but we are certainly not there yet.

The government should also develop car fuel efficiency standards, as Europe and Japan have. By 2015 average fuel consumption of a car fleet, including most four-wheel drives, should be five litres per 100 kilometres and, for the SUV and light truck fleet, 6.5 litres per 100 kilometres—an overall 50 per cent decrease in fuel consumption. Petrol and diesel-electric hybrid technology already achieves this. My electorate car is a Toyota Prius, and I think it is currently running at 4.6 litres per 100 kilometres—enormously fuel efficient, but still not made in this country and still with very few on the road.

Fuel-efficient standards should be coupled with incentives to motorists and auto manufacturers to take up fuel-efficient vehicles. We have provided billions of dollars in handouts to the auto industry without leveraging any fuel efficiency. The car industry is one of the most heavily subsidised in the country, supported by a 15-year, $7 billion government assistance package until 2050. The Productivity Commission found in April that the car industry picked up 29 per cent of $1.9 billion worth of tax concessions given nationally in 2004-05—more than the total tax concessions given to encouraging spending on research and development.

There is a precedent for government to tie funds to desirable outcomes. Just this year, $57 million was handed to Ford by the Prime Minister, who demanded that Ford and other car makers do all they can to support component manufacturers by awarding businesses locally. The government should reform FBT to reward and encourage public transport use and car pooling and invest in better public transport, bikeways, walkways and freight rail. The government has also monumentally failed in shifting freight from road to rail. In the 2006-07 budget the government provided $2.27 billion for road upgrades and a mere $270 million for rail—a pittance compared with the $3 billion recommended by the Neville committee in 1998. The government refused to exclude GST from public transport and claims that public transport is a state responsibility—the usual drivel. This is despite the Whitlam, Fraser, Hawke and Keating governments all providing substantial public transport funds. You cannot have a national approach to transport, as AusLink claims, and ignore public transport.

There are, of course, no quick-fix solutions, but there are a range of measures that can and should have already been put in place to start reducing our reliance on oil. The government can and should be doing more to prepare Australia for rising petrol costs rather than being a sop to the oil majors and pinning our hopes on absurdly optimistic, irresponsible, short-term assumptions.