Sustainable Transport Coalition
www.STCwa.org.au
08-9420 7268
c/o Conservation Council of WA,
2 Delhi St, West Perth WA 6005
September 2004
Review of the Liquid Fuel Emergency Act
Submission on the discussion paper
The review is very timely, and the Department of Industry Tourism and Resources is to be
complemented on initiating the process. This discussion paper is well structured, and raises a
lot of interesting questions.
However, we feel there are several main aspects which are not discussed in appropriate depth,
if at all. Many of these points are detailed in the supporting documentation provided, but they
are summarised here.
WA's Planning and Infrastructure Minister, Alannah MacTiernan said about global oil
depletion, in opening the "Oil: Living with Less" conference in Perth in August 2004 "It is
also certain that the cost of preparing too early is nowhere near the cost of not being ready
on time".
A major part of the essential preparation is to have a fully informed market and a well
informed community, both conversant with the high probability of problems (short-term,
medium term and long-term) from our increasing oil vulnerability. A coordinated well
resourced briefing program about the growing risks of oil shortages is an essential first step, at
national, state and local levels.
1: Global oil depletion
There is now very good evidence that global oil production will start its final decline soon,
perhaps within a couple of years, or perhaps within some 10 years or so.
Demand
800 Oil Production
Past
600 Forecasts
and
400
Australia
Geoscience Australia
200
Bass Strait
0
1930
440
0
330
Gb pa 0
220
0
110
0
000
1930
1970
2010
IEA
World
2050
Shell
ASPO and others
Bauquis
Samsam Bakhtiari
Deffeyes
ASPO 2002
2003
10
1970
2010
2050
1 vulnerability
2
4
6
Figure 1: Australia’s
to oil depletion
is8shown10
in these12
diagrams of past
Australian and world oil production
1
1and future
1 decline
1 predictions.
1
1
The omission of this substantial additional risk factor biases the discussion paper towards an
unwarranted business-as-usual "no-worries" tenor.
Although Australia's indigenous
production decline is mentioned, the probability of imminent analogous global decline is not
raised.
Global decline (coupled with Australia's steeply declining domestic oil production) raises the
probability of liquid fuel emergencies occurring to a very substantial level. There seems no
sense of urgency in the discussion paper as would be justified by the global assessments.
Data for China's future consumption trends and production decline forecasts are provided to
illustrate that it is far from likely that Australia will be able to import all the oil required for
our current consumption trends on a global market with greatly increasing demand, and
probably decreasing production. China's only supergiant oilfield, Daqing, discovered in 1959,
is now in a serious decline phase, similar to the trend in the Bass Strait field shown in Figure
1.
Fig. 2 China: Production, consumption and
import/export levels.
Fig 3. China: Past oil discoveries, past
production and future production forecast
As another example, it is just reported that the UK has in July reverted from an oil exporter to
a net oil importer, due to the final decline in the North Sea oil province.
[See http://news.bbc.co.uk/2/hi/business/3641566.stm ].
Indonesia's first month as a net importer was April 2004. This is due in part to increasing
domestic oil consumption as well as decreasing production.
2. The effects of information about oil depletion being withheld from the community
The failure of governments to discuss the risks of global oil depletion withholds information
from the community, individuals, companies and organisations. For instance the Federal
Government's "Securing Australia's Energy Future" entirely fails to discuss oil depletion and
presents only the extreme-optimist International Energy Agency scenario, without mention of
the wealth of other conflicting evidence. The failure to provide information on global oil
forecasts means that the "market force" approach of the discussion paper is invalid, as it
assumes an informed market. This is clearly not the case. People, organisations and
businesses do not have reliable information on the current risk factors, so they can not make
intelligent informed preparations. It is crucial that effective warnings be given continually to
Australians about the likely level of our growing oil vulnerability. This is an essential first
step, and the revered market forces seem capable only of providing advertisements promoting
fuel-inefficient 4WDs.
3. Precautions needed prior to Liquid Fuel Emergencies
There is a great deal which can be done to reduce Australia's oil vulnerability, before the oilshocks or liquid-fuel emergencies hit us. There are failures of governments at all levels. The
Federal Government's refusal to provide hypothecated funding for sustainable transport
modes like cycleways and public transport is most short-sighted. It is particularly important
that the issue of minimising oil vulnerability be tackled seriously and urgently at all levels in
the community. The business as usual automobile dependence strategies will cost us very
dearly in future unless there are substantial changes soon.
In WA, Individualised Marketing has been shown to reduce car-kms travelled by 13% (in a
sample of 158,000 people). WA's TravelSmart, if introduced nationwide, would substantially
reduce our oil dependence.
There is a wide range of oil consumption reduction measures outlined by Denniss (2003), in
Robinson (2002) and (2003) and by the Sustainable Transport Coalition (2004). A crucial
first step would to review and remove the inequitable perverse subsidies which fund and
encourage excessive private motor vehicle use in our cities and towns.
"Perverse policies, that is policies which actually reduce the sustainability and efficiency of
the transport sector, continue to be implemented, and continue to receive the support of
various levels of government in Australia". (Denniss (2003))
These range from Federal, State and local government encouragements for car use, to the
inequity of major supermarket chains offering big discounts to heavy fuel users funded by
profits on the groceries bought by everyone.
4. Involvement of community groups in planning for Liquid Fuel Emergencies (LFEs).
Currently there is no representation from community groups on NOSEC. Membership of
NOSEC comprises solely Commonwealth and State/Territory Government officers and
petroleum industry representatives.
For instance the Sustainable Transport Coalition's attempt last year to offer input to NOSEC
was refused. At the State level, at least in WA, there is only oil and motor industry
representation on the fuel emergency planning committee, and no-one from the community
sector. The WA committee has a blanket of secrecy about its planning process for liquid fuel
emergencies, and requests for information are denied or sidestepped, even by the Royal
Automobile Club, which represents motorists but not the community as a whole. One result
of this is the grossly inequitable concept of allocating fuel based on vehicle numbers, rather
than need. This structure means that a family of five people with five cars will get five times
as much petrol under rationing as the same number of people with one car. The continuing
subsidy of the profligate at the expense of the frugal is not a sensible way to handle a scarce
resource and one which is likely to become more scarce.
5: Fuel demand management strategies for LFEs.
The discussion paper's coverage of mechanisms to reduce fuel demand in the event of an
emergency is very limited. There is a whole range of innovative, non-coercive solutions
available, if community input is allowed. Some "obvious" solutions are not practical. For
instance, in Australian cities, there is very little peak hour public transport capacity spare, and
it would take a very long time to acquire more buses, or more trains, even assuming that the
rail line capacity is there for increased train frequencies (not so in Melbourne and Sydney). In
the event of a global oil crisis, buses would be in short supply worldwide. The only
sustainable vehicular transport mode with substantial spare capacity in the event of a LFE is
bicycle transport. There are a very large number of unused or under-utilised bicycles
available in Australia. Road authorities should have well evaluated plans be able to allocate
one lane on multilane roads to buses and bicycles, leaving the cars to use the remaining lanes.
This would advantage the more sustainable and much more fuel-efficient modes. Reductions
in urban and rural speed limits are another proven mechanism for reducing fuel usage, and for
encouraging the use of more sustainable modes.
An emergency Individualised Marketing strategy should be developed, trialled, and be
waiting ready to be introduced. The faith in market forces to manage the supply of liquid fuel
is misplaced, especially in a grossly mis-informed market. The Darwinian "survival of the
wealthiest" option seems to run contrary to the Australian ethos of a "Fair Go". It is crucial
that a much broader range of options for demand management are discussed and evaluated.
Mandatory fuel economy labelling in all motor vehicle advertisements should be another
simple step, which is also required immediately on consumer equity grounds.
6. Funding reserves for LFE should be accumulated by a special-purpose charge on fuel
As mentioned in the discussion paper, there will be very considerable expenses for
Government in allocating funds for fuel purchase for essential services, like Meals on Wheels,
ambulances and Police, and for providing increased social security to cover additional fuel
costs. It is essential that a special fund be set up, with a surcharge of say 10c/litre to
accumulate funds for preparation for LFE, for the creation of a strategic fuel reserve and for
programs to reduce Australia's oil dependence. For instance, provision of cycleways and
improvement of public transport are both crucial strategies to reduce our rapidly growing oil
vulnerability. There are many other examples besides these where pre-emptive preventative
measures must be funded and implemented before the oil shocks hit, as time and resources
will not permit them being implemented after the oil shocks have started. Dr Samsam
Bakhtiari used the "Noah" analogy. "Noah built his ark before it started raining". It is
recommended we do not wait till the deluge to begin implementing countermeasures.
Increasing the price of fuel will provide essential funds for the lean years, and will also send a
crucially important message to consumers to plan for more fuel-efficient vehicles and more
sustainable transport patterns. This will be very valuable warning to the community of the
increased prices and shortages of liquid fuel which are sure to come sooner or later.
7: Accuracy of figures in discussion paper.
The discussion paper, 2.5, p17 says "self-sufficiency has declined to around 78%. APPEA in
a news release in September (in part below) says 70%; examination of ABARE's June Quarter
Australian Mineral Statistics shows a self-sufficiency of 66% for total crude, condensate and
LPG.
The current IEA estimate of 178 days cover of net oil imports will quickly decline as
production falls and imports rise, sharply, as predicted by APPEA and Geoscience Australia.
Hence it is misleading to quote the current figure and not provide the much more pessimistic
estimates of future stocks in terms of days of net imports.
"If we do nothing, in 10 years, Australia will be producing only 230 thousand barrels per day
(kbd) of petroleum liquids, at a time we will be consuming 1030 kbd," APPEA's Executive
Director, Barry Jones said. The demand/supply gap will be around 800 kbd. Over the next
decade, the cumulative shortfall will be 2550 million barrels of oil. The national selfsufficiency rate will be 22% compared to the current 70% and our 2001 sufficiency 'high' of
close to 90%.
8. Australian Strategic Reserve
It is crucial that Australia develops a strategic petroleum reserve, as the US and Japan have
done. By far the simplest way of achieving this would be to deliberately leave some oil
unproduced, presumably in Bass Strait, as it is far better protected than our North-West Shelf
oil fields. As the oil-fields are privately held, it is recommended that the LFE funding
surcharge on fuel be used by the Federal Government to purchase an appropriate oil-field,
which can be put on a care-and-maintenance basis to be brought back on line in the event of a
national emergency, for instance a LFE or a war situation.
9. Pricing in the event of a Liquid Fuel Emergency.
The discussion paper mentions windfall profits to oil companies, and costs to essential
services. In the event of a liquid fuel emergency where price is the rationing mechanism used,
it is essential that the Federal Government increase its excise duty component significantly to
offset the additional expenses (and foregone revenue) from the emergency. The additional
price increase will send an important signal to consumers to reduce their fuel usage (by the
innumerable TravelSmart techniques already available), and the proceeds will be essential for
increasing public transport services, and for funding essential services, such as Meals on
Wheels, and Aged Care services, that will not be able to cover the increase costs without
Government assistance.
10. Multi-Level Smart-Card Rationing System
It is essential that a multi-level tradable rights rationing system be developed and evaluated,
based on a Smart-Card, or on an existing card like Medicare. This should provide every
person with a basic allowance of fuel, for a relatively modest price (eg pre-emergency), and
successive increments of allowed fuel at increasing prices. This would mimic the model of
domestic water pricing used in Western Australia and elsewhere, where a modest allowance is
provided at a low price and those who use more are charged increasingly more per kilolitre.
WA domestic water prices, 2002/03
$1.50
/kl
$1.00
$0.50
$0.00
0
150
350
550
kl range
750
1150 1950
A graded-price tradable rationing system means those who are frugal with their fuel usage can
then trade entitlements to businesses and people who need more. This offers a substantial
incentive for innovation in fuel-saving strategies, like car-sharing, using bicycle transport or
just in rational trip planning.
The proposed system where those owning the most cars get the most fuel is firstly grossly
inequitable, and secondly merely encourages people to buy more cars so they have a greater
fuel allowance. This is not a rational way to deal with a fuel emergency.
*******************************************
The Sustainable Transport Coalition is a broad community-based group, with members from
transport organisations, local governments and individuals. Considerable further information
is available on our website, www.STCwa.org.au, including our "Oil: Living with Less" policy
document.
Attached.
Oil Depletion: The crucial factor in transport planning
Bruce Robinson and Sam Powrie
Proc Australian Transport Research Forum, 2004. Adelaide, September 2004
There are many relevant references and links in the attached background paper.