Pricey petrol should fuel oil alternatives - Business - Business - smh.com.au

A peak motoring organisation says Australia should start looking at alternative sources of fuel as crude oil prices jump past $US72 ($97) a barrel.

The manager of government and corporate relations for Victoria-based RACV, David Cumming, said the record crude price was already flowing through to Australian pumps.

Mr Cumming said a four cent wholesale price increase tonight would lead to next week's peak price breaking the $1.40-a-litre mark, following a 139.9-cent peak this week.

"Unless the service stations decide to cut their margins in order to continue selling fuel, over $1.40 will shock a lot of people into changing the way they use their car," he said.

Mr Cumming said that, unless the Federal Government could be convinced to lower petrol taxes, Australia would never see prices return to $1 a litre because the Organisation of the Petroleum Exporting Countries (OPEC) would keep oil prices above $US60 a barrel.

That minimum price would take only 12 to 13 cents off the present pump prices, he said.

"We can't just wait for world prices to fall our way when that might never happen," he said.

Mr Cumming said Australia should immediately consider alternative fuels and look at resources available here.

He said that, while Australia had abundant natural gas supplies and 500 years of supply of brown coal in Victoria's La Trobe Valley, it should investigate new sources of energy, including technology that converts coal to liquid to run a combustion engine.

"I'm not sure what will need to be done [to convert cars], but the point is that, if this is going to be inflationary and take the edge off Australian goods and services, we've got to seriously look at alternatives," he said.

"Maybe our use of energy from the one source makes us too dependant on other people in the world, therefore are we vulnerable to security of supply."

Prime Minister John Howard today said the price of oil was linked to world availability. He expected oil prices to only "recede a little bit" in the near future.

He said Iran's defiance of its obligation over nuclear weapons was behind the latest spike.

Mr Cumming recommended motorists fill up early next week before the usual Wednesday peak.

Opposition Leader Kim Beazley said Australia had to reduce its growing dependency on Middle East oil to ease the burden of rising petrol prices on local motorists.

"There is now no substitute for going down the road of long-term effort to render ourselves less dependent on Middle East oil," Mr Beazley told ABC Radio in Adelaide.

"The situation in the Middle East, politically, is fraught, the situation with petrol supplies, in the long term, from the Middle East is fraught.

"We've got to go down the road now [of developing] ethanol, biodiesel and, above all, gas to liquid conversion."

But Mr Beazley offered little hope of a future Labor government cutting federal petrol excise to reduce petrol prices.

"If you ask me what are my priorities for taxation reform, it's not in that area of excise," he said.

"It is in the area of income tax reform."

AAP