Australia: Fuel price debate ignores real issue

Even by the debased standards of political debate in this country, the petty point-scoring between the Opposition and the Government on easing the burden of petrol prices has achieved a new low.

Both sides of politics have done their homework. Their focus groups obviously show that the issue is uppermost in voters’ minds. The question is how to show the most phoney concern for the motorist.


Spare us. This issue is high on perception and virtually zero in terms of substance. Over the past 18 years the “private motoring” component of the CPI has risen at an annual rate of 2.7%, the same as the “all groups” index, according to Centre for Policy Development fellow Ian McAuley. In other words, the real (inflation-adjusted) price of private motoring remains unchanged.

How come? According to McAuley, although the price of petrol has increased by 4.7% a year, in real terms the price of cars is now 40% cheaper than 18 years ago. Furthermore, modern cars last longer and are more reliable. This suggests that governments should save their concern for public transport users. Over the same 18 years, public transport fares have risen 4.7% – the same as for petrol. Governments can’t do much about crude oil prices, and higher prices for petrol will help motorists adjust to peak oil. Lower public transport fares will also help smooth the adjustment to peak oil. Given the prospect that global oil prices could increase to $200 a barrel within the next decade, it is hard to imagine a more perverse set of market signals.

The Age