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Record oil price sparks call for petrol rationing
Posted by Big Gav on January 9, 2008 - 7:10am in The Oil Drum: Australia/New Zealand
Bruce Robinson from ASPO Australia has been quoted by The Age as calling for the introduction of petrol rationing.
AS CRUDE oil sits at record high prices and economists remain concerned about its economic impact, one group has proposed the war-time measure of rationing.
The Australian Association for the Study of Peak Oil and Gas (ASPO), a group that lobbies for sustainable transport options, is calling for the return of the petrol allocation system used in Australia during World War II.
Bruce Robinson, ASPO's national convener, said the idea was becoming "increasingly essential" with petrol prices hovering around $1.50 a litre and rising interest rates already hurting households. The impact on the economy of inaction would be "dire", he said.
But a leading economist labelled the proposal "ridiculous". AMP Capital Investors chief economist Shane Oliver said the market should be allowed to determine the price as the supply and demand curves drew closer together.
Mr Robinson has written to the Federal Government calling for an oil vulnerability taskforce that would determine the allocation of petrol rations. ASPO proposes that those with greatest need be given priority.
In October, a report by a similar taskforce established by the Queensland Government found "overwhelming evidence" that world oil production would peak in the next 10 years. It recommended a reduction in the use of liquid fossil fuels and further development of alternative fuels.
ASPO's suggestion comes the week after West Texas crude oil twice hit triple digits on the New York Mercantile Exchange. Early on Thursday, oil for February delivery hit a record $US100 a barrel; the next day it reached $US100.09 before slipping back to just more than $US99.
This week, as economists predicted, the price has fallen back. The futures were trading at just more than $US95 a barrel.
Dr Oliver said he expected oil to resume its upward trend around mid-year. He said the best way to reduce oil dependency was to make it more expensive. "I think you will see it will hit the $US120 (a barrel) level in the second half of the year but it is hard to put an exact price on it," he said. "We're seeing more hybrid cars on the market, I can buy ethanol-blended fuel at my local petrol station now, there are massive increases in demand for biofuels, so I think the way to solve the problem is to let the oil price rise."
High oil prices and the prospect of production peaking could lead to economic turmoil, according to Professor Jakob Madsen, of Monash University's department of economics. ...
I'm not sure what timeframe Bruce has in mind, as the article is vague on that point, but I sincerely hope this isn't a call for rationing beginning right now. Given that petrol is probably more affordable now for the average Australian than it was in the 1970's and there are no physical shortages of any kind, I'd imagine the level of support for this idea from the public would be less than 1%...
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If it ends up effectively rationing by wealth that is hardly equitable. The inner city executive may be able to afford $3/L petrol unlike the rural fringe suburb dweller who has to commute to a night shift minimum wage job in town.
I think tiered pricing combined with carbon smart cards could be the way to go. Thus you might be entitled to say 20L per week of mandated minimum price fuel, along with perhaps 10 kwh per day of electricity and 1000 km per year of air travel. Exceed those limits and face open slathered pricing.
We already have step pricing with reticulated water supply. It looks like home air conditioners will end up radio controlled by electricity retailers. We are now seeing the early days of rationing.
Sahne Oliver comes across as the ususal talking head public face of AMP's economic gnomes but in this case I think I have to agree. The price will have to rise until the hurt is felt and there is serious "demand destruction". Joe Sixpack will simply give up his low paid job cleaning Shanes toilet and Shane will have to do it himself. Joe will turn to petty larceny to feed his family and Shane will need to start thinking about how to protect his clients investments from marauding mobs.
I think Bruces heart is in the right place, it's just that we are no longer a bunch of shell shocked convicts, accustomed to relying on our mates to eke out aliving in this god forsaken land. Now we are no better than a bunch of greedy yeast and rationing of oil would not survive past the first election after its introduction. Strangely I could see KRudd introducing it if we get an extreme shock. The legislation is already in place i.e The Liquid Fuels Emergency Act. Quietly amended last year. But can you imagine the chorus of opposition MPs coming out to salm the government for piss poor preparation and promising to get a rocket under the oil explorers and just find more of good old Aussie oil. The punters will lick their boots. But they won't deliver.
My rant for the day......
Tell us what you really think :-)
I like Bruce but I partly agree with Shane (although he's wrong about biofuels in the long run).
At heart I'm a free market fundamentalist - rationing just gums up the works from my point of view - rising fuel prices are good - they make everyone salivate for alternatives. Once you get into the shrinking pie mentality things really will collapse quite easily.
KRudd and co are looking to fire up exploration already, in the form of big tax breaks for explorers - see the next Bullroarer...
The question will be how the industry responds. Just like negative gearing , at some point you want to make a net gain on the investment and tax breaks or not you still have to be reasonably sure of finding the stuff in big enough quantities. I would have thought that $100 bbl would have provided enough incentive. Am I missing something?
I also can't quite reconcile KRudds greenhouse chest thumping with a committment to make coal mining and delivery to China more efficient meaning more of the stuff even faster (the so-called infrastructure bottlenecks); this oil exploration tax deal and the $500M Aussie Hybrid car which will save exactly zero in GHG emissions and do nothing for overall oil consumption in this country.
I didn't mean to imply any meaningful difference will be achieved - just that the appropriate political contortions are underway to avoid later undeserved scapegoating by the opposition.
And I certainly don't have any sense that Labor is going to be much better about greenhouse emissions than Johnny was - at this point they are just making lots of good noises but with no real promise of follow through - its business as usual for the coal industry...
I suspect Bruce wasn't quoted in full in the article. He has clarified his position on the ASPO website:
As for Shane Oliver, I'm not sure what he is a 'Doctor' of, but it clearly isn't one of the sciences.
That sounds a lot more reasonable.
Shane Oliver is an economist - they see things a certain way - he is correct that high fuel prices encourage the market to find alternatives (biofuels aren't a great example though). If you go overboard with rationing (or even worse, price controls) you ruin the mechanism that will (eventually) get us out of the current mess.
Water is a little different - by and large there aren't any substitutes (except sea water) - all you can try and do is increase efficiency and expand supply.