Howard's phoney petrol price 'relief' plan

Zoe Kenny
With the price of crude oil predicted to remain high, a voter backlash against record petrol prices and the predicted dire consequences of climate change would seem enough to motivate any government into breaking Australia's dependence on polluting and increasingly expensive fossil fuels.
With Australia’s petrol prices having soared by 63% over the last four years to an average of $1.40 per litre, oil companies are raking in huge profits.
On August 23, BHP Billiton, Australia’s and the world’s biggest mining company, announced a record $13.7 billion annual profit. The company, which in partnership with Esso (Exxon) produces most of Australia’s crude oil supplies from its Bass Strait oil-rigs, said that “strong” oil prices had contributed to its 61% profit increase.
On August 25, Caltex Australia, which operates two oil refineries representing 30% of Australian capacity, announced a 12.6% rise in its profits for the first half of 2006. Reuters reported that, “discounting on-off items”, Caltex’s net annual “profit came in at A$276.7 million, up from A$237.4 million a year ago”.
“Refiner margins are expected to remain robust for the remainder of 2006 as global and regional supply remains tight”, Caltex managing director Des King said in a statement.
The August 9 Bulletin weekly reported that fuel price monitor MotorMouth estimated that due to the higher petrol prices motorists driving six-cylinder cars will be forking out an extra $2000 a year, while drivers of smaller cars will be paying an extra $900.
The plan that PM John Howard announced on August 14 — ostensibly to ease the impact of high petrol prices on ordinary motorists — will instead further line the pockets of the big oil companies, including with a direct subsidy of $100 million for on- and off-shore oil and gas exploration.
In an August 14 media release, Greens energy and climate change spokesperson Senator Christine Milne said, “Howard's fuel plan is an attempt at a short-term fix when Australia needs a plan to reduce our dependence on oil while reducing greenhouse gas emissions”.
LPG con
The centrepiece of the plan is a $2000 bribe to encourage drivers to convert from one fossil fuel, petrol, to another, liquified petroleum gas (LPG) or to buy LPG-run cars. The payment, however, is limited to those who can afford to shell out $3500 for the LPG conversion and then wait for the government to reimburse them.
The Victorian and NSW state Labor governments have rejected Howard's call for them to top up the subsidy with another $1000, which would have almost covered the $3500 cost, citing a lack of consultation and budgetary constraints.
Critics have also queried whether the cost of converting to LPG is worth it. On August 15, the federal Labor Party released a July 13 letter sent from Liberal special minister of state Gary Nairn to NSW Labor MP Jennie George which gave his reasons for rejecting the conversion of the federal government's car fleet to LPG. Nairn cited LPG's lack of availability and the fact that “the savings only stack up for cars travelling over 50,000km”.
Furthermore, the government intends to close the gap between the price of LPG and petrol over the next five years. As the August 15 Australian noted: “This week, LPG was selling for 50.9c in Sydney, compared with 132.9c for the cheapest unleaded petrol. The gap will close in 2011 when the federal government introduces an excise on LPG, which will rise in annual increments of 2.5c a litre until 2015. Petrol attracts an excise of 38.1c a litre.”
Critics of Howard's plan say it does nothing to relieve working people of the strain of increased petrol prices, and argue this could be done by cutting the fuel excise tax.
The Royal Automobile Club of Victoria (RACV) has called on the government to cut excise tax by 10 cents per litre, a move that would reduce government revenue by about $3 billion.
In addition to the excise tax, consumers also pay a GST on petrol, which flows to state governments.
However, the federal government's budgetary reliance on the $13 billion a year it gets from the fuel excise means that a real cut in excise tax is unlikely. Similarly, the state governments are unlikely to push for removing the GST on petrol.
Australians have one of the highest rates of car ownership in the world. According to the Australian Bureau of Statistics, in 2003 there were 13.2 million registered vehicles (including motor cycles). In 1992, only 16% of all people living in capital cities used public transport on an average weekday compared to 71% who used a car.
Use of private vehicles is more based on necessity than preference. In 1998, the ABS found that one in five people had public transport options. Often public transport is not reliable, or fast enough, forcing working people to rely on cars to get to and from work, or to do their weekly grocery shopping.
Public transport
If the state and federal governments were serious about reducing transportation costs for working people, they would be funding major expansions of public transport systems, rather than pouring billions each year into building new roadways.
Since petrol prices have soared, more people are using public transport. According to the August 21 Sydney Daily Telegraph, an extra 60,000 people per day are using public transport in Sydney since February. However, Howard's plan makes no mention of long-term plans to decrease Australia's reliance on private vehicles.
The state and federal governments are not serious about extending public transport options because they do not want to lose the revenue from taxes on petrol.
Apart from serious government investment, better public transport would require state and federal governments to take a stand against the profit-making interests of the big oil and car-making companies, as well as the banks and other financial corporations that are making megabucks from the public-private partnerships in toll-roads.
Another aspect of the petrol-price squeeze on household budgets is that a majority of consumer goods are transported by road in Australia. A rise in petrol prices almost immediately sends up the prices of many basic items. Two interest rate hikes in recent months have also meant that loan repayments are also eating into disposable incomes.
Ethanol
Another major aspect of Howard plan is a range of incentives for petrol stations to supply and promote ethanol-blend petrol (known as E10). Petrol stations could receive up to $40,000 from the government for supplying, promoting and achieving sales targets for E10.
There is still a debate about the environmental impacts of using ethanol (ethyl alcohol). A September 2005 ABC Science Online report cited research results obtained by Dr Robert Niven of the University of New South Wales, who claims that ethanol may increase groundwater contamination and photochemical smog.
On the other hand, the Renewable Fuels Australia website claims that ethanol reduces carbon monoxide and other toxic emissions by up to 30%. Ethanol displaces toxic chemicals such as benzene which is carcinogenic. Ethanol is quickly biodegradable.
In 2003, ethanol usage in the US reduced greenhouse gas emissions by 5.7 million tonnes — the equivalent of taking around 800,000 petrol-driven cars off the road.
Ethanol production can also increase employment in rural areas.
Many other countries have thrown their support behind ethanol as an alternative, renewable, fuel source to petrol. Brazil has been using ethanol as an alternative to petrol for several decades as a result of strong government support for research and development.
About 40% of all fuel sold in Brazil is ethanol, derived mostly from fermenting sugar cane. All petrol there is blended with at least 24-25% ethanol, and almost all petrol stations in Brazil — 29,000 out of 31,000 — also offer the choice of 100% ethanol.
Brazil intends to power 80% of its transport fleet with ethanol within five years. Australia, on the other hand, is only aiming to replace 1% of the petrol it uses with ethanol by 2010.
Whatever the verdict on ethanol, it is clear that Howard's plan will do nothing to break the stranglehold of the big oil companies on the fuel market. Australia needs a serious plan of research and development into alternative, renewable fuels and the government should be prepared to mandate their production once they are conclusively shown to be viable.
In a June 20 media release, Senator Milne said: “The Swedish government has set a goal of being oil-free by 2020; so should the Australian government. We need to give top priority to government support for biofuels development, more public transport and rail freight, promotion of hybrid and electric cars as well as hydrogen fuel-cell development. That's the only way we'll get the oil import monkey off our backs.”
From Green Left Weekly, August 30, 2006. Visit the Green Left Weekly home page.