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How will WA cope with a serious disruption to oil?
June 2004
As this edition of TransScan was being prepared for print, oil prices reach their highest level since futures trading in the fuel began 21 years ago. One commentator in Saudi Arabia was speculating whether prices could double in coming months and the Perth-based Sustainable Transport Coalition was presenting a scenario where local fuel prices could top $10 a litre.
That level of "fuel shock" would not just cripple transport but send the local and global economy down on a very steep slide. The link between oil prices and the health of the global economy was spelt out in a report released at the beginning of May by the International Energy Agency. It said there was now evidence that the higher oil prices of the past two to three years have held back global growth by at least half a percentage point.
There is already speculation in the US that soaring prices at the petrol pump might just end America's love affair with "gas-guzzling" four-wheel drive vehicles. On May 16th (2004) it was costing an American $US36.08 to fill a SUV with 20 gallons of gasoline. The same time last year was $US27.40.
Western Australia's "SUV" owners are feeling the pinch too and certainly will do if, as the Sustainable Transport Coalition predicts, prices reach $10 per litre "within 10 years."
The latest oil price shock is occurring at a time when Australia's own domestic supplies of oil are dwindling and could drop below 40% self-sufficiency by 2010.
In fact it is now apparent that not only has Australia's oil production peaked (it did so in 2002) but that world demand may be reaching the world's production capacity.
In a recent paper, Bruce Robinson of the Sustainable Transport Coalition pointed out that from now on Australia will find itself increasingly vulnerable to any overseas disruption in supplies. Western Australia itself would be "very vulnerable".
For example, in the short term (a month to a year) any political uncertainties in the Middle East that led to an oil embargo could see oil imports to the WA refinery stop.
"WA's local reserves of petrol and diesel would be exhausted within a fortnight or two without drastic action to curtail demand," Mr Robinson says.
In the medium term (a year to a decade) he suggests there could be a "substantial change to the ground rules of oil pricing". This would come as the production of North Sea oil declined and once more nations of the Organisation of Petroleum Exporting Countries (OPEC) would take majority control of the world market. This could mean a "controlled but relatively rapid" increase in oil prices.
In the long term (one to two decades) the point will be reached when total demand will exceed world supply. Then oil prices will simply soar.
Mr Robinson argues that there is much that WA could do to prepare for a future "oil shock".
"WA's existing supplies of domestic gas and petroleum coupled with local understanding of oil vulnerability and demand management (especially in water use efficiency and TravelSmart) provide an encouraging opportunity for the State to both forecast and to weather the coming storms better than many other regions," he says.
"It is particularly important that the issues be tackled seriously and urgently." He says there is not "magic bullet" solution. One of the first aims should be to reduce the State's "very high levels of automobile dependency".
He says there are alternatives fuels that could be used to replace petrol but it would be "very risky" to rely on unproven technologies. It took two decades to switch from leaded to unleaded petrol and a very much simpler technology was involved than say converting to a fuel-cell car.
He believes WA should take up a suggestion once made by BP and encourage greater fuel efficiency.
"Australia's light-vehicle fleet fuel consumption has not improved since the late 1980s," said Mr Robinson. "Vehicles are getting heavier, more powerful and the possible fuel economy advances are not appearing in the overall fleet.
"Mandatory standards for fleet average fuel consumption, and economic incentives such as sliding scale registration fees to favour fuel-efficient vehicles and penalise gas guzzlers are policy options."
At the same time he believes TravelSmart should be given the mandate to introduce and enlarged Perth-wide program to encourage a switch from cars to other modes of transport. In fact he advocates setting a target for 20% of all trips within Perth being undertaken by bicycle within two decades.
Meanwhile he suggests transport fuel drawn from WA's natural gas fields is the "obvious" alternative to oil.
