Oil price rises and natural calamities threaten the global economy

It is interesting to note the effect of oil price rises and natural disasters on the global economy, and Western economies in particular.

Three recent examples are:

• The 2011 Australian floods
• Increased oil prices due to unrest and regime change in the Middle East and North Africa, particularly the civil war in Libya
• The devastating Japanese earthquake of 11 March 2011

Oil price rises put immediate pressure on items like:

• Retail expenditure - household disposable income drops when fuel prices rise and people stop spending
• Inflation - price rises effectively devalue the currency
• Increase transport costs - leading to an increase in business costs and price rises for many other good and products, including food.
• A negative impact on exporters

In summary, higher oil prices act as a brake on global economic growth.  This may not be a bad thing as unlimited growth is clearly not sustainable.

However, it seems that governments and policy makers are not dealing with the reality of peak oil, rising oil prices and transitioning to the low-oil and low-carbon economies we need to cope with depletion of fossil fuels and emission reductions to help combat climate change.

Petrol has reached around AUD $1.50 a litre in Australia.

What will the impacts be when it reaches $3.00, then $5.00, and eventually $10.00 a litre?  Very serious, it would appear.

Australia's oil and gas industry is worth $28 billion in the 2009-2010 year.  We would be better off spending a large proportion of this money on transitioning to sustainable transport and energy use.

The devastating Japanese earthquake of 11 March 2011 has caused jitters throughout the global economy.  While the earth quake is not associated with climate change, it demonstrates how disruptive natural calamities can be.

It is clear that we should reduce carbon emissions locally and globally to help reduce or prevent events linked by science to climate change such as floods, droughts and bushfires.

External links

• Petrol price just barrels along, The Age
• Japan quake causes market jitters , Herald Sun
• 2011 Australian floods - Greenlivingpedia 
• The end of the world as we know it, Greenlivingpedia

We need to reduce petrol use, not increase supply

Petrol prices in Australia have just hit all time record highs or around $1.70 per litre. This is having a big impact on people, particularly those who are dependant on cars for their work and/or commuting. I just filled my car up, a Mitubishi 4WD van with a long range tank, and put over $200.00 in it for about 130 litres. The car gets about 12l/100km which is much better than a "conventional" 4WD but a lot worse than fuel efficient diesels which get 5l/100km.

Unfortunately, the Rudd Government and the federal opposition, led my Brendan Nelson, both share the view that we need to increase supplies of fuel. Neither seem too interested in providing alternatives to using cars such as boosting public transport for bike paths and lanes.

Industry Minister Martin Ferguson is even in Saudi Arabia trying in vain to get OPEC to boost supplies in an effort to reduce the price [link] however:

The Federal Opposition says Energy Minister Martin Ferguson will most likely achieve little at the emergency meeting of energy powers in Saudi Arabia.

The world is running out of oil, so the price will continue to rise.

It is high time our political leaders stopped gazing at their navels and took some real action to reduce our dependency on fossil fuel, with the added benefit that this would lower carbon emissions and help us try to avoid dangerous climate change to.

They should also make diesel cheaper than petrol, as there is a greater supply and diesel motors are much more efficient than petrol motors so they emit less greenhouse gas per km travelled.

Currently the Australian government has a higher excise on diesel as they only seem to car about taxing it to the equivalent dollars travelled per km to petrol, rather than taking into account its environmental benefits.

However, diesels also emit fine particulates which are not good for human health, so they are not a long term sustainable transport option.

PS: Martin Ferguson came back from Saudia Arabia with his tail between his legs, having achieved absolutely nothing to reduce the price of petrol or oil.

External links

• Greening Australian Transport for information about greening transport
  

Petrol prices hit 162.9c per litre and still no action on public transport

Petrol prices have just hit a record high of $1.62 per litre in Australia, even though petrol is still cheaper in comparison to Europe ($2.25 in Italy, $2.28 in France, $2.33 in UK, $2.45 in Denmark).

As demand (mainly from China) increase and supply dwindles, this trend is set to continue quite rapidly, as I have noted previously.

Kevin Rudd said today that "unfortunately there is no silver bullet for petrol prices" on television tonight. I beg to differ. Fortunately, there are at least two silver bullets.

1.CNG conversions and refuelling infrastructure for cars, trucks and buses

While natural gas supplies are finite, it is a cleaner and cheaper fuel than petrol. We should be using it for transport now.

2. Improved public transport and more cycle paths

The impact of petrol and fuel price rises on household incomes will be reduced if people have practical alternatives to cars. Improved public transport and better cycle paths provide us with options for lower emissions and cheaper transport. Unfortunately, the federal budget provided no funding for either.

We need leadership and funding from federal and state governments for both these opportunities as we shift towards a carbon constrained economy.


Links

• Petrol pain ahead The Age
• No silver bullet for petrol, says Rudd, PerthNow
  
  
  

Record petrol prices, when do we hit $5 per litre?

Yesterday in Melbourne, petrol prices hit an all time high of $1.55 per litre, with some motoring groups voicing concerns that the price could reach $1.60 per litre and that "petrol stations were 'pushing the envelope too much' by charging such high prices" and that "new prices reflected the industry's agenda to keep pushing up fuel prices".

While there is some possibility that oil companies and petrol stations can raise their prices without warning in an opportunistic manner, I think it must now be obvious that the basic supply and demand law of economics is the real concern here.

The world demand for oil now exceeds supply, the phenomenon known as "peak oil". So the price is going up.

As oil supplies dwindle and demand continues to increase (e.g. from China, India and other growing economies) then the price will continue to rise.

How high? Well, I can imagine that $2.00 per litre could be reached by the end of 2009, and a $5.00 per litre is possible by 2012. When will it reach $10.00 a litre, perhaps by 2020.

In Europe (e.g. Norway and Italy), the price is over $2.20 per litre already. In the United States, where Hummers and 8 litre V8s are still bought, the price is currently $0.70 per litre.

Petrol 9(and other fossil fuel) price rises will have dramatic effect on our lifestyles and our economy. Fossil fuels such as petrol, diesel, LGP and CNG (which is more abundant) are used heavily for food growing, transport and distribution. Private cars using fossil fuels are used heavily for personal transport, often for simple commuting to and from work.

So the price of food and transport will rise dramatically in coming years unless governments take action to put policies in place to shift towards alternative renewable energy sources for food production and transport and indeed to fabric of our society.

Unfortunately the current state of play in Australia is not good, as per the following:

• Freeways and roads are being built rather than rail and cycling infrastructure
• CNG is being shipped overseas rather than used locally, and no effective CNG refuelling infrastructure is in place
• Many thousands of trucks (mostly diesel) are used daily for goods and food transport, including thousands doing routine trips such as along the Melbourne Sydney route
• Their is no significant low emissions and/or hybrid car manufacturing in Australia; the Ford and General Motors plants are still focussed on building six and eight cylinder cars (such as the new GM ute for export to the United States, and Governments are still buying them for their car fleets.
  

When will our politicians wake up from their fossil-fuel fugue? Hopefully before petrol reaches $5.00 per litre. They are elected to provide leadership on such matters, but currently they are not. Some, like Senator Kim Carr, are trying to get hybrids built in Australia, but he is a lone voice and he is not succeeding. And he drives a Ford Territory gas guzzler. Actions speak louder than words.

For the record, I drive a 1993 Mitusbishi 4WD van, which I bought as the 2.5 litre motor uses half the fuel of a comparable 6 cyclinder 4WD. I also ride my bike a lot.

Making green cars is a good option.

Links

• Fuel price record in Melbourne, The Age
• Petrol prices pumping motorists dry | Herald Sun
• Green cars, Greenlivingpedia