[ Someday historians will want to know what politicians knew about the energy crisis and when they knew it, probably to blame them for doing nothing, even though there’s not much they can do. I’ve read what I can find in the United States congressional record and from what I’ve seen so far, it Australia has gone much further in exploring the issues of Peak Oil – though perhaps similar research is buried in secret Homeland Security or Closed Session hearings. Since I can’t keep up with U.S. energy policy, I never got around to reviewing the other 7 hearings. Alice Friedemann ]
2006 Summary of two of nine Australian Senate hearings on Peak Oil
11 APRIL 2006 PERTH COMMONWEALTH OF AUSTRALIA
Official Committee Hansard
Senate Rural & Regional Affairs & Transport References Committee
Australia’s future oil supply and alternative transport fuels
Australia’s future oil supply and alternative transport fuels, with particular reference to:m projections of oil production and demand in Australia and globally and the implications for availability and pricing of transport fuels in Australia; potential of new sources of oil and alternative transport fuels to meet a significant share of Australia’s fuel demands, taking into account technological developments and environmental and economic costs; flow-on economic and social impacts in Australia from continuing rises in the price of transport fuel and potential reductions in oil supply; andoptions for reducing Australia’s transport fuel demands.
BENNETT, Dr David, Founder, Sustainable Transport Coalition BEVERIDGE, Mr Andrew, Project Manager, Commercialisation, Office of Industry and Innovation, University of Western Australia
BOWRAN, Dr David, Grains Industry Development Director, Department of Agriculture and Food, Western Australia
FLEAY, Mr Brian Jesse, Private capacity.
HARRIES, Professor David, Director, Research Institute for Sustainable Energy.
HEAD, Mr Glen Michael, Director, Perth Fuel Cell Bus Trial and Transport Sustainability,
Department for Planning and Infrastructure, Western Australia
IRESON, Mr Gary, Director, Gas and Power, Wesfarmers Energy, and President, LPG Australia
RICE, Mr David, Principal Network Planning Office, Department for Planning and Infrastructure
ROBINSON, Mr Bruce, Convenor, ASPO Australia
ROSSER, Mr Matthew, Chair, Sustainable Energy Association, Western Australia
UPTON, Mr Michael Leslie, Manager, Vehicle Policy, Royal Automobile Club, Western Australia
WOOLERSON, Mr Tim, Bus Fleet Manager, Public Transport Authority
WORTH, Dr David John, Convenor, Sustainable Transport Coalition
Mr. Robinson – There are large numbers of solutions as to how we can do things better—taking your second point about how to do it better. The clearly sensible thing to do is to put up the fuel tax, which I hope we come to later. The clearly sensible thing to do as a politician is to avoid mentioning that. The only way we can do that is to engage the community. We had petrol rationing during the war. If people understand the situation then, firstly, they will think of a lot of ways that they can lower their own oil vulnerability. They can do their own risk assessment. There will be a whole growth industry of consultants who can go around and help people go through that—and ASPO Australia is hoping to be part of that, because no-one else is. Also if people understand they can look at things as people have done in wartime and other times to change the situation.
It starts at a sensible, professional level—not just saying that $3 a liter is unacceptable, which we heard a community service organization say. We have to accept the scenario that these things might happen and we have to have a plan B. We might have something like the hurricane that hit New Orleans, and at federal, state and local levels the US was shown worldwide to be completely bloody useless. They had rows of buses sitting in a lake when there was no transport to take people out from nursing homes. We are going down that road but if, from this Senate inquiry, we can engage the community there are all sorts of plan Bs from oil vulnerability assessments. That is crucial. We cannot just go back to talking about whether we do biodiesel or fish and chip shop oil.
Mr Head—I would like to respond to both senators’ questions about market and market failure and then lead into a potential government response to that. One of the concerns is that there is massive investment at the moment in the status quo. We have our transport companies investing in their production plant for 10 to 15 years out and airline companies investing 20 years out. We know that any societal change to a new technology has very long lead times. We have discussed natural gas for vehicles, LNG and CNG, and these lead times are significant and substantial. That means that the companies and the markets that the economists are relying on to take the lead are going to play out their existing hand of cards for as long as they possibly can. I respectfully suggest that they might not want to look at a different set of cards until retail prices have doubled or tripled.
As a taxpayer, I would like someone in the political sphere to stand up and say, ‘This is the future that is coming—whether it is today, whether it is tomorrow, it is coming.’ We can deal with that when it arises, at the point where we will be paying $1 billion per year every single year, or we can perhaps invest a few billion dollars up front and make sure that never happens. You will only get a rational analysis of that from the taxpayers and the voters if they are informed.
This brings it back to the points that have already been raised about oil vulnerability maps and the level of public engagement we need. We need this like we have never needed it before. We have to be innovative. We have to not go to people with information but engage them in an intellectual way and also at an emotional level. People have to understand the consequences. For all those reasons we cannot rely on the markets. The government does need to take a strong lead.
Prof. Harries—I liken our current situation with oil to the situation we were in with electricity going back many decades. We had monopoly providers and there was very little planning. We virtually said: ‘What did we do before? Let us build another coal-fired power station.’ Oil has been a far greater problem because we have relied on very large monopoly oil producers from overseas and we have felt (a) that we had very little capacity to anything and (b) there is very little need. One of the things that have exacerbated that problem is that at the state government policy level there is actually very little in terms of transport policy. No-one owns the transport policy agenda in this state, like they do stationary energy. There is no office for sustainable transport policy.
We are facing massive uncertainty. I am personally very reluctant to look at crystal balls and guess what fuel prices are going to be. I think we have to accept that we have got huge uncertainty. We are behind the eight ball in that we have not had the planning systems in place to help us deal with that. The sensible strategy—and I have heard some of them around the table— is to start putting ourselves in a position where we can start planning. That means not just informing the public and working with groups. It also means—and this is very dear to my heart—understanding what we are going to need to have a very flexible approach to be able to deal with that uncertainty. That is going to go right across the board. How can we help companies develop the liquefied natural gas infrastructure they need? What training are we going to need? What skills are we going to need? What information are we going to need to be able to help us move when we need to move?
My plea is that we are going to have to look at our information needs and how we can address them. As politicians you have a very unenviable task because of that uncertainty and because of the limited planning capability we have. It is going to be very hard for you to engage the public—‘Hey, we have a problem; let’s do something.’ I think we are going to have to take it step by step. We need to look at what we are missing—what are the gaps. We need to do a real SWOT planning analysis of what we need to know.
Mr Rice—We are working on producing oil vulnerability maps for Sydney, Melbourne, and Perth. Are they vulnerable because they do not have access to public transport? In which case, we can start long-term strategic planning.
Mr Fleay—There is some real landmark guidance as to how to go. The first thing I want to deal with is how in all of the discussion here people have come up with problems and things that need to be done. The problem with all of those things is that they impact on all people and all businesses in different ways and on different time scales. There is an inherent complexity in them and all sorts of feedback loops and the like, such that you cannot use a top-down management approach. The very nature of such systems is that no one person can fully understand them. This is some of the modern thinking that arises from the so-called chaos theory. That means that you need a process whereby you can engage all the stakeholders and the public in this process to deal with those things. It was done successfully with the Network City plan, which was quite a significant effort. It has also been done on smaller scales. Basically it involves getting various stakeholders with their different viewpoints to state their case—people giving an overview of things and the like. With the Network City planning, there were 140 tables with eight people each, each with a computer. This enabled good, close dialogue between the people on a table which could then be fed into the whole group. All sorts of solutions emerge from that.
I was also involved in a similar thing on a smaller scale at Geraldton when there was a conflict between road trains and residents. At the end of that meeting, even though there were strong differences, we looked at what it would be like if we continued the way we were and what it would be like if we went down a different pathway. At various stages in the process each side had to argue the other’s case. It reached a point at the end where everybody, all of the 70 people involved, agreed that we could not carry on as we were and that we had to change, and there was a perspective on doing so. This is the way forward. What governments have to do is not manage and come up with solutions but give leadership of this kind in order to get an informed population and to unleash the creativity of people to find solutions. We cannot do it any other way. This is the way forward.
It has to be a continuing process. The essence of it is, I think, that it combines in one process people cooperating and competing at the same time. The two are not mutually exclusive; they are complementary. It is finding that mix that is absolutely essential to seeing the way forward here. We cannot move forward before that, particularly if we start bringing the peak oil into it. If we start to say, ‘It looks as though we’ve got to reduce our use of oil by this amount,’ it puts a perspective on it that enables us to make the change. You have the potential in that for everybody to see that everybody is making adjustments and to see it as just and equitable. That is critical.
In connection with the question of trade, coming back to the theories of economists and economics the so-called law of competitive advantage, which dates back to the early 19th century, is based on the premise that rather than being self-sufficient countries should specialize on what they can do best and trade, which of course means increased transport. That is the basis of all free trade and even interstate trade—if you think of each state in this country as being a bit like a country. Ever since the early 19th century, the cost of transport has been diminishing. Initially it was coal fired, then oil came in in the early 20th century. Oil was significantly superior as a transport fuel, especially with the very cheap oil from the giant oil fields which dominated in that period. My view is that that period has come to an end, and therefore we have to start thinking of a focus on being more self-sufficient as a strategy into the 21st century. The old view is losing its validity. However, that is a very complex question because of the great deal of interdependence that occurs around the world. Just to give you an indication, Japan was nearly self-sufficient in grain in 1950, but as a consequence of its industrial development it now imports about 70 per cent of its grain. A similar thing applies to South Korea and so on.
So a huge period of readjustment has to take place, but nobody is giving much thought to that at the moment. I mention in my submission that it is something we need to start thinking about, and we need to start a dialogue with the economists about the deficiencies in their theories regarding the way they handle energy. That must be a part of this. I also mention that it raises the question of the current dependence of food production and the whole food chain to households on fossil fuel energy—mainly petroleum. I also throw in that modern industrial agriculture has been described as a way of using land to convert petroleum into food. I deal with that in my submission. We need to know important information about where all the embodied energy in all these steps is so that we can have a clear picture of which things are the critical ones to tackle first and so we can create a long-term strategy. My view is that the most important use for the remaining oil—the first priority—is that food supply and food chain, for obvious reasons.
Dr. Bennett – I want to move on to alternative fuels. I take a particular interest in biofuels. We recently had a conference, at which Senator Milne spoke, on bioenergy and biofuels. At that conference, the speaker from BP Australia stated that BP would not touch palm oil. This is one of the moral hazards of biofuels. The fact is that the increasing demand for biofuels is now a significant hazard in the preservation of biodiversity and tropical rainforests around the world. Similar activities are taking place in relation to tropical rainforests and sugar cane plantations. It amounts to the fact that the more we make demands on the plant kingdom of this earth in terms of both food and fuel, the more we are going to do damage to it. The situation is that one rates human food first, animal food second and fuel third. It is disturbing to see the diversion of human and animal food into fuel. It seems to me that one of the actions that government can take is to make no more concessions and no more subsidies for the production of biofuels.
Mr Rice—We have a problem with obesity—why not turn that into transport, particularly walking and cycling. Again, do not overlook those for personal transport. About half of our trips in Perth—and Perth is a very spread out city—are less than five kilometers long. We could save a huge amount of fuel, we could have big health benefits and we could have social benefits with more eyes on the streets for a relatively little cost. We are talking about the ‘no regrets’ option. We are talking about how you as politicians are going to get some of these things in place. It is not going to be by just saying nasty things like, ‘You’ll have to cope with a high increase in fuel.’ It is going to be by saying some useful things as well, like how this is going to benefit people.
If we look at social changes, it is now commonplace to wear seatbelts and it is not commonplace anymore for thinking people to smoke. It may be not commonplace in the future for thinking people to drive V8s unless they absolutely have to. There is an encouragement thing. There is a health thing. There are a lot of pluses in this, particularly if you adopt that broader overall sustainability view of what government is all about. If you do not govern for sustainability, why are you governing at all?
Senator MILNE—I wanted to follow up on the issue of China, because it is very difficult to even contemplate the scale of the global impacts of China and India combined but China primarily. Lester Brown in his book Plan B basically says that at its rate of growth China will absorb virtually all the cereal and grain crops of the whole planet. What else is anyone else going to eat? Plus, they are in the black—America is in the red—and they can afford to buy up as much food-producing land as is necessary… His conclusion is that the current economic model does not work for China and that, as it does not work for China, it does not work for the rest of the world. It is pretty profound to try and take in the scale of the impact. On this question of liquid natural gas, I have seen all the stuff in recent times about Australia touting its liquid natural gas to the US, to China and to anyone who will buy it. I am interested in the collective view here on whether it is appropriate for Australia to be selling—and I understand the WTO rules; let us just put those aside—liquid natural gas?
Mr Ireson—In response to whether it is appropriate to be exporting the LNG that we have: I think the reality is that, without the export income, these kinds of investments would not be undertaken in the first place. The scale of investment that is required to develop these resources is very hard to get your head around. For a country like Australia, without the interest from the oil majors and their seeing this is a country that they want to develop because it has free trade and certainty in terms of taxation treatment and the like, we would not have the developments. Without the developments, we would not have the domestic access to the natural gas that I was talking about earlier that in fact now gives us a competitive advantage against imported diesel. So I think we have to be very careful that we do not isolate ourselves. At the end of the day, it is business on a global scale that we are talking about and it is very hard to be isolated from that.
Mr Head—I am going to be a bit controversial, and Gary may wish to come back on this one. According to data from our Department of Industry and Resources—don’t get hung up on the figures; it is the magnitudes we are looking at here—we have 80 to 130 years worth of natural gas supplies. That is at current levels of use, which we know is not going to happen: demand is going to increase. If we were to translate a significant proportion of our transport task to natural gas, that duration, that window of opportunity, would reduce right back down to between 20 and 50 years, notwithstanding that the peak is going to occur somewhere halfway along that period. With the time lags for introducing new technologies and getting societies to make that transition, it will take us 20 years to get to the point where we are all using natural gas. And then what do we do? We say: ‘Shit, natural gas is running out; we’ll have to do something. We’ll have to introduce the new technology now so it’ll be ready in 20 years time.’ So it kind of makes you think that it might be worthwhile leapfrogging some technologies which we have a pretty good idea are problematic from the point of view of a long-term solution to supply and which also have the greenhouse gas and climate implications. Gary’s point about developing export markets and local markets for it—I cannot see a justification for that.
Mr Fleay—I dealt with this question of alternative fuel in one part of my submission. I finished up with a chart showing the energy-profit ratio on a vertical axis and increasing economic effectiveness on a horizontal axis. The energy-profit ratio is the energy content of the fuel divided by the energy used to get it. The higher that figure, the more useful the fuel. There is a difference in effectiveness. We are never going to see a coal-fired airplane, for example. It is that sort of picture. This chart gives a picture on the basis of the information I have available.
What comes out in that picture is that the petroleum products that have been taken from giant oil fields stand out above everything else. Nothing else can match them. It would be useful to look at that. But we do need a lot more information in this country. A lot of work needs to be done to find out what the energy-profit ratios of our various fuels are to update that figure. This is an important task so that we are able to sort the wheat from the chaff, know what you can and cannot do and know what can be used for a transition to help us to get to one point. In this sense, everything that everybody says has some role somewhere in it, including using natural gas as a bridging fuel for transport while we make a lot of other changes. This is the essential point.
Hydrogen is not an energy source—it is an energy carrier. You have to manufacture it. When you look at that aspect of it—and you obviously cannot in the long term think of using a fossil fuel to manufacture it—you find that, with the problems of storing it and the energy needed to compress it and so forth, the prospect of hydrogen being a successful transport fuel is quite remote. You have to have the right approach to make the right sort of analysis. This is important to develop.
Mr. Robinson — There is a book called The Hype About Hydrogen which echoes Brian’s point that we need a source for hydrogen, whether we make it from coal or gas or nuclear power. There is no foreseeable source of hydrogen. So we cannot talk about the transition to a hydrogen economy. The hardest thing is not storing the hydrogen but finding it or getting it or making it first. As to the biofuel thing that we were talking about, for instance, if we took all of Australia’s wheat crop, which is on average 20 million tonnes per annum, and turned all of that into ethanol, we would get some nine per cent or 10 per cent of Australia’s oil usage. There would be no bickies in the parliamentary tea rooms and no bread in Woolies. We would not be exporting any wheat around the world. So biofuels have very serious scale limitations. In terms of alternative fuels, I think it is quite clear that conservation is the best alternative fuel—that is, not using it rather than replacing it.
Dr Bennett—In my personal submission I make the point that, for defense reasons, Australia has to do something about its long-term oil resources. I am not quite sure that natural gas is the thing but, if you think back through the wars of the 20th century, they were all essentially about oil. Hitler was stopped on his way to the Caspian Sea in Stalingrad and on his way to the Middle East at El Alamein. China is already pumping oil into the ground as a strategic resource. As far as we could gather from the appropriate government committee, Australia is bound by some international regulation that we have to have 90 days of supply, and most of that has been in the Bass Strait oil pipelines rather than in a standard resource. It seems to me that we have to start thinking very quickly about having a resource. Whether we have that resource as an untapped oilfield, or as an oilfield that has been refilled with oil which has been purchased on the world market, is not up to me to say.
Mr Rosser—I just want to pick up a couple of points on the previous topic. I was at the Farmers Federation conference two weeks ago. The conference was entitled ‘Fuelling the future’. The farmers were very keen to stand up and say that they had no moral obligation to supply foods, that they would sell to the highest bidder and if the highest bidder was going to be fuel then so be it, because, when grain hits low record levels, no-one feels a moral obligation to pay them a fair price for their product. They were as one; there was unanimous consensus in that room. I suppose it is something you could only understand by being a primary producer.
Mr Upton—I would like to issue a word of caution about imposing extra taxes and so on. They are obviously a way of changing responses but, no matter how much tax you put on something, you cannot make it happen if the research, the knowledge or the will is not there. I am thinking about what happened in California towards the end of the nineties. They tried to push the introduction of battery electric cars by a whole range of incentives, but the technology was not ready. While manufacturers made electric cars and some people used electric cars, it did not go any further than that because the technology was not at a point where it was usable. I am cautioning that, before taxation is used to change things, you have to do the research to make sure that what you are trying to make happen can happen.
Mr Fleay—To reinforce again what I said about the failure of top-down management processes in these circumstances: imposing taxes and a lot of things of that kind have that character about them because they impact on all sorts of people in different ways. In fact, I agree with Mike Upton. That is why this approach is the key to going forward: to learn something from the lessons that the Department of Planning and Infrastructure have applied here, not because they are perfect but because of their potential if we go down that path. I noticed Senator Sterle said he has a background with the Transport Workers Union. I cannot think of one area of workers who are going to be more seriously impacted in this area. The whole business about mass distance charging for trucks is a classic example of this. That is why you have to have this bottom-up approach where all the stakeholders are involved and you reach just outputs so that they see all the changes that everybody has to make and all the things they have to give up in order to gain something fair and equitable. With all the sorts of issues that we have here, that can only happen by bottom-up participation. Everything that everybody has said has a role to play in this. There is not anything that is totally wrong or totally right. Because of this complexity, you can only handle it in this way.
Mr. Head — [In answer to what the barriers were to more fuel-efficient cars]/ It is our role to support local Australian industries and we have local car makers who have committed to a six-cylinder vehicle platform for the foreseeable future—in other words, eight to 20 years. They are committed to rolling out models based on that power plant and that drive train. That leaves us at a point where we politically have to stick our hands up and say: ‘We’re not going to support local manufacturers. We’re going to import what we think are the right vehicles. Tough for you guys.’ So that is one of the barriers.
Mr Fleay—I assume that demand management in transport is part of the agenda for the topic we are discussing. I would like to say something here about the TravelSmart program and its potential. As a preface, I spent my life working in the water industry here, where we have been battling for 30 years to deal with the question of resource limitations. It is my view, in the context of what we are talking about, that the Water Corporation here now sets an example for all corporations insofar as its commercial advertising pleads with its customers to buy less of its product. For those senators who are not familiar with the TravelSmart program, which has an international reputation and has been copied around Australia, it uses a direct-marketing approach. People are approached individually in their houses to review the way they use their cars as opposed to the alternatives of public transport, walking and cycling. It is a dialogue to change their pattern. It is, at a modest level, a very positive result for the people who have participated in terms of reduced car use and increased use of public transport, walking and cycling. Not only that but the increased revenue from public transport alone has paid for the cost of the program in about 18 months or two years. It also has a very high cost-benefit ratio, which includes the health benefits of increased exercise.
This is the small beginning of transport management in the transport business which needs to reach the stage that the water industry has reached. However, if the question of future oil supplies were introduced into this, insofar as people go out, talk to others about what can and cannot be done and say, ‘Here is what you can do,’ there is enormous potential for empowering people as a part of this general process of getting understanding and creating the climate for the right sort of change. I do not think we should underestimate this. It is an area where the transport industry is way backward but where the water industry in this country, and particularly here, has created a change of culture due to the drastic impact of climate change.
Mr. Robinson — Andrew mentioned location specific fuel taxes. This was done in South Australia when the South Australian government had legislative control of what we call the fuel franchise levy. ASPO Australia is suggesting a smart card—a flexible, tradable, allocation pricing system which can handle emergencies and the location specific things. People who live near a train station and an urban city should get less of the low tax petrol. We are taking a model from the water industry in Perth. Domestic water, the amount for basic household necessities, is quite cheap. As you use more and more in a household, you pay more and more incrementally for the units. Those sorts of things can be done. A lot of those things can be done, rather than just going on with business as usual with the fringe benefits tax whereby everyone in Canberra is driving up and done freeways and lending their cars out so they get over the March rush, or whatever it is called, to get over 40,000 kilometers. Those things are just stupid and perverse and they are no more market distorting than putting the price of petrol up, particularly in an incremental way whereby people can see where it is going. It is going into the health system, it is going into defence, it is going into all these sorts of things that we need. We need to be following Dr Samsam Bakhtiari’s thing. We need to be building Noah’s ark, where people said, ‘There is probably something coming; we need to have the ark well planned and under construction.’ It is bloody hard to build an ark under water. If we wait until peak oil hits us, then we are not going to have the time or the resources to do this.
Mr Rice—Yes. Leach Highway is an issue to us—a huge one. First of all, within the time scale that we have been talking about, and in the time scale of political governments, 100 years or so is what we are really dealing in, so any guidance or direction we can get is really useful. For instance, if we are talking about a mixture of personal transport and freight transport, my logic says the trucks are going to get bigger because they will be more fuel efficient; the cars are going to get smaller because they will be more fuel efficient. There is a safety issue—does that impact on the way we design our roads, for instance? That is a fairly simple one. A more complex one is how we can save fuel in urban freight transport. The answer is not to put more on rail. That is a part of the answer and our government is trying to do that. We have a target of getting from about three per cent to 30 per cent of our containers coming from the Fremantle inner harbour from rail in the past to rail in the future. But that is going to make a small difference.
What they are also doing is looking at using our roads more sensibly and, implicitly, using our fuel more sensibly by booking the trucks that come in and out of the Fremantle terminal relative to the containers, because surveys have found that a lot of trucks are going in empty to pick up a container and bring it out and they are passing trucks that are doing exactly the opposite. Obviously, there are some improvements that can be made. How do you make those improvements? You need data and you need some level of control. The problems that we are getting with data relate to some extent to the free market forces where competition is good and then the data becomes commercial-in-confidence and we cannot get it. So there is a bigger issue there.
I believe that in an intelligent future the government as a whole—call it Big Brother if you like—is going to need to have some influence on the availability of data, whether it is for personal trips so that we can group more trips together or whether it is for the clumping of bits of freight so that we move away from lots of small, just-in-time deliveries to some efficient, medium sized deliveries. This is going to have an impact on warehousing because the central distribution systems that are the current rage, and are logistically reasonably efficient because we have got very cheap fuel, are going to have to change. I believe people are going to have to do more warehousing in their businesses again, like they used to. There are a lot of things that we can do but we have got to get the intelligence about it in order to be able to, and we have got to get some leadership.
There was a very interesting survey that I read some years ago about politicians and leadership and how far in front of the community they were. The thesis was that the politicians were in front of the community, therefore they modified their expectations in parliament and cut them back quite a lot. The survey found that, yes, that was true—but the bite was that the politicians were only a tiny little bit in front of the community and they thought they were a long way in front of the community. So I am saying: have courage, but also be realistic. We can all talk about these things and the greenhouse effect and so on, but if this inquiry is going to have any impact whatsoever you need to build upon some synergies to get through.
One of the synergies that you can build upon is COAG’s interest at the moment in urban congestion and congestion management. If we can better manage congestion we can better manage fuel. We did a survey in Perth recently—it was a statistically valid survey—in which we asked people: what kind of problems do you see coming from traffic in your area? To our surprise the answer was, clearly, congestion. You say if you come from Sydney or Melbourne that we do not have any congestion, but that was the current perception of the voters. So there is something in congestion management that can be combined with environmental improvement, better use of our roads, something that the community wants and fuel saving, all together. So look for those synergies and pick the low-hanging fruit first.
Dr Worth—I want to come back to my hobbyhorse about government involvement. A lot of what we have heard in the last period on this topic has been about what things government can do and the need for that. A lot of it comes back to market failure, that there is just not enough information for markets to operate efficiently. The point I want to make about why governments need to get involved is around the speed of change. Markets take a long time to move. It took us 17 years to move the car fleet in Australia from leaded fuel to unleaded. The price of oil has tripled in three or four years. I get a sense that people think that it will stop, but it could double in the next year or 18 months. That is a real reason for governments to get involved, to look at demand management as the simplest and cheapest way of cutting fuel use.
CHAIR—We will go around the room now with concluding statements. What is the key thing you would like us to go away from this hearing with today?
Prof. Harries—Underlying everything I have said is the need for us to get information to do research to be able to manage the uncertainty and, as David Worth has said, the problems. Markets do not happen overnight. You have got to actually help the system happen. What we are on about here is trying to make a smooth transition to alternative markets and alternative ways of doing things—and to do that we need information.
Mr Rice—Grab some inspiration. Govern for sustainability. Why else would you govern?
Mr Robinson—It is highly probable, as people have discussed, that there are lots of things we can do to adapt, particularly if we start thinking in advance. A lot of them are very positive for health and the economy. I would like to congratulate the Senate for starting the process. It is an enormous quantum leap in Australia. We should all be trying, particularly in the opportunity with the Senate, to engage the community and decision makers about peak oil.
Dr Bowran—I would like to see appropriate sectoral strategies so that you have actually got a framework to know which parts are going to go forward with particular types of innovations.
Mr Beveridge—First of all we need a national strategy—and that is where the government can play a really crucial part—but one that can be implemented locally, which is key. I see the government as a catalyst for change. It is clear today that we have got a lot of passion from the stakeholders, which is fantastic. We all ought to be congratulated for providing that passion, which is really good. That should be harnessed. We really need to take decisive action because the clock is ticking.
Mr Fleay—The central theme of your report should be issues I have been hammering about engagement of people, providing leadership and participation and avoiding top-down management approaches. That approach, which has shown some benefit here locally—but it is more a question of what it can potentially become than what it has been so far—is the key to pulling together all the points that people have made and being able to engage with people and to get change. If you can get it to a certain point, positive feedback will take place and it will gain its momentum.
Mr Upton—I would say, like others, that it is important to do get the information and do the research, to determine what is practical—you have to be pragmatic about these things—and to convince the public. Work with the credible stakeholders that can help you to convince the public what the real issues are and how we can all work together to solve those.
Dr Bennett—I would like to go back to a point that Brian Fleay made: agriculture these days is a process of converting oil to food. Some of the modelling activity by the department of agriculture indicates that in the eastern wheat belt, where there is a significant energy input, it is very likely that, as oil prices rise and climate change proceeds, there will be a process of overshoot and collapse, and that might be the case with a number of other parts of the economy. If you think that, on a world basis, the fact that the use of oil in agriculture has probably allowed the increase of the world population to go from two billion to six billion, then the prospect for the world human population as a consequence of what we are facing is dire.
12 APRIL 2006 PERTH COMMONWEALTH OF AUSTRALIA
Official Committee Hansard
Senate Rural & Regional Affairs & Transport References Committee
Australia’s future oil supply and alternative transport fuels
Australia’s future oil supply and alternative transport fuels, with particular reference to:
- projections of oil production and demand in Australia and globally and the implications for availability and pricing of transport fuels in Australia;
- potential of new sources of oil and alternative transport fuels to meet a significant share of Australia’s fuel demands, taking into account technological developments and environmental and economic costs;
- flow-on economic and social impacts in Australia from continuing rises in the price of transport fuel and potential reductions in oil supply; and
- options for reducing Australia’s transport fuel demands.
BENNETT, Dr David, Founder, Sustainable Transport Coalition
BEVERIDGE, Mr Andrew, Project Manager, Commercialisation, Office of Industry and Innovation, University of Western Australia
CREEMERS, Mr Alexander Henricus Maria, Private capacity
DeLANDGRAFFT, Mr Trevor Frederick, President, Western Australian Farmers Federation
FLEAY, Mr Brian Jesse, Private capacity
GRIFFITHS, Dr Cedric Mills, Theme Leader, Maintaining Australian Oil Self Sufficiency,
CSIRO Petroleum, Commonwealth Scientific and Industrial Research Organisation
HARDWICK, Mr Ross, Executive Officer, Western Australian Farmers Federation
HARRIES, Professor David, Director, Research Institute for Sustainable Energy, Murdoch University.
HEAD, Mr Glen Michael, Director, Perth Fuel Cell Bus Trial and Transport Sustainability, Department for Planning and Infrastructure, Western Australia
NEWMAN, Professor Peter William Geoffrey, Director, Institute for Sustainability and Technology Policy, Murdoch University
PYTTE, Mr Anthony Mark, Australia Country Manager, Sasol Chevron Consulting Ltd
RICE, Mr David, Principal Network Planning Officer, Department for Planning and Infrastructure, Western Australia
ROBINSON, Mr Bruce, Convenor, Australian Association for the Study of Peak Oil and Gas
RONALDS, Dr Beverley Frances, Chief, CSIRO Petroleum, Commonwealth Scientific and Industrial Research Organization
SAMNAKAY, Mr Iqbal, Policy Officer, Transport, Department for Planning and Infrastructure, Western Australia
SCHLAPFER, Dr August, Lecturer, Energy Studies, School of Science and Engineering, Murdoch University
SELWOOD, Mr Richard Neil, Chief Executive Officer, Natural Fuels Australia Ltd
WORTH, Dr David John, Convenor, Sustainable Transport Coalition
Robinson – We will not be in the majority in saying this, but we feel that the fuel price should go up, that there should be a fuel tax escalator along the lines of Margaret Thatcher’s, and that a smartcard, a tradeable fuel allocation system, should be ready in the event of sudden oil shortages. Also, there should be a sensible, rational allocation. I got here today by catching the train. I walked 200 or 300 metres across one road, caught a train here and walked across one or two more roads. Not everyone in the Australian community can do this. People in the farming community cannot do this. So the requirement for fuel varies. I refer to people working on nightshifts in hospitals, and people running farms and businesses. Not everyone can have all the fuel that they will need in the future, if there are fuel shortages—and, certainly, that is what we predict.
Fleay – I want to make one comment about biofuels. I am very concerned about some of the propositions that came up about using some microbiological product to take all the waste—to virtually strip the land bare of all so-called wastes—and convert it to ethanol as a way of getting resource. This has a disastrous impact on soil, because the organic content of the soil is extremely important in providing the environment for the great mass of invertebrate organisms and other things that are critical to soil fertility. This process is, in effect, mining the soil. I have put in a recommendation about having a rigorous approach to assessing these alternative fuels. This includes finding the energy input and energy output and, where you are doing it from crops, including the impact of the process on the soils. We cannot afford to diminish the property of our soils.
One of the problems that wasn’t dealt with yesterday is the process of funding of transport, federal-state relationships and the whole tax system. The fact that roads are funded from taxes is, in effect, a sort of subsidy, whereas funding for rail is through borrowed funds on which there is interest. This is a very lopsided thing; it is very unbalanced.
Studies done throughout history have found that over the last 2,000 years cities in general are about an hour wide—that is to say, people are prepared to spend about an hour each day traveling to and from work. If people were walking, that determined the size of the city and so forth.
Mr Robinson—I am concerned that the climate change people do not mention oil depletion and they have scenarios that are unrealistic for the amount of oil. I think it would be really useful if climate change and oil depletion matters for Australia and internationally were looked at together, because a lot of the mitigation and annotation are the same. There certainly should be energy taxes, but we should not tax just carbon, because carbon from oil and natural gas is more valuable than carbon from coal. It should not just be on an atom basis. In a climate change sense they are valuable but, in a resource depletion sense, carbon atoms in oil are much more valuable than carbon atoms in coal.
Mr Kilsby— My own background is in transport engineering and urban planning. I would like to highlight some submissions that the urban planning and transport group made to you. There are a couple of points on transport and a couple of points on urban planning that I would particularly like to draw to your attention. On transport the key points that we wanted to make are that while the oil position is a national issue it is in the cities where there are more possibilities of limiting or moderating the demand for oil than in rural and regional areas. Urban transport planning is an issue that the Commonwealth government ought to take rather more interest in it than it has to date, if only to make sure that as much oil as possible is available in rural and regional areas.
Another key point on transport, as you have just heard, is that the most vulnerable transport mode will be aviation because what alternatives to oil are there for fuel in planes? There is nothing on the horizon there and, by extension, the parts of the economy that rely on a thriving aviation sector—particularly the tourism industry—are also very vulnerable.
Road transport is quite vulnerable, although perhaps not to the same extent as aviation, because road vehicles require a portable, energy dense fuel. That is why petrol and diesel are the fuels of choice. It would take decades to establish the infrastructure and the vehicle fleet to take advantage of any
alternatives. And that is decades, as you have heard, that we have not got and alternatives that we have not really got either.
The other two main modes are rail transport and sea transport. They are possibly the least vulnerable because a railway locomotive is essentially a rolling power station on rails and a ship is a floating power station. In both cases there is a wider choice of energy sources available, mainly because the power plants are larger than for road vehicles or for aircraft.
On urban planning there are two points we want to highlight. One is that there are many people who have no option but to use their cars to get around. These people tend to live in the outer areas of our cities. The two gentlemen from Griffith University, who will follow me, I think, will make this abundantly clear. It seems to me that the provision of alternatives in such areas should be a priority for government. By that I mean the development of adequate public transport networks, of bicycle networks and of pedestrian networks. The second point on urban planning is that if we are faced with a physical decline of oil in the future—not just higher prices—then it is going to be necessary to establish clear priorities for the use of a more limited amount of oil. Put crudely, as you heard, this could involve a choice between feeding people and letting them drive to work. We will not have the energy resources to make drastic changes when it becomes evident that we have a problem. The sooner planning for a decline starts, the better.
We do not have time on our side, as I think Dr Bakhtiari amply showed.
On the committee’s specific terms of reference, going to oil availability, I would say that there will be less oil available in future and it will cost more. ASPO does not claim to have a crystal ball or that the future will unfold the way we expect it to, but we do say that this is a significant risk to urban transport and, hence, to the national economy. There are well-established risk management techniques which we think should be used. The risk of there being less oil is at least as significant as the risk of terrorist attack, for instance. There are no alternative fuels in sight that will completely replace oil for transport. There will be many flow-on economic and social impacts. I think the greatest community anger will arise from those places where alternatives to cars could have been provided but were not. Those are basically the outer areas of our cities.
Options for reducing fuel demand are mainly urban, possibly from technological development, but all the others—that is, the development of public transport and other policies that I would call business as usual, such as demand management techniques and economic measures—even though we would probably have to apply them in a different way to business as usual outcomes, would have effects in the cities rather than in the rural and regional areas. But, given that there is only a finite amount of oil to go around, applying them in the cities would ensure that there is in the areas where alternatives cannot be provided more oil to go around than there would otherwise be. I think that is as much as I wanted to say.
Mr Kilsby—I was living in the Netherlands when the first oil shock happened in 1973…the Netherlands scarcely missed a beat because they had an alternative in place. The alternative was mainly bicycle networks, which are very good in Holland. The Dutch enjoyed it so much that when the oil started flowing again they considered adopting the ‘carless Sunday’ as a feature of national life rather than an emergency measure, which was why it was introduced. That taught me that the more prepared you are and the more alternatives there are in place the better off you are likely to be when such a catastrophe occurs.
Senator MILNE—Thank you for your submission. It certainly flows on from a lot of other submissions we have had from various local governments on the whole issue of a rapid transition to public transport. One of the big issues for Australian cities is that the most vulnerable live the greater distance from the centre of the city and that there has been a lack of planning for that. My next question relates particularly to the tourism industry and the agricultural sector, both of which are going to be severely adversely impacted upon by rising prices and oil depletion. What about the aviation sector? At the moment air fares do not reflect the real cost of flying anyone anywhere. Have you done any predictive modeling on the point at which that cannot continue?
Mr Kilsby—No, I have not.
Senator MILNE—Do you have any thoughts about impacts on tourism generally? Have you modeled that or looked at that around the country?
Mr Kilsby—I am currently doing some work in Cairns, for instance, in Far North Queensland. I think it would be hard to find an Australian town that is more dependent on the tourism economy and on people arriving by plane.
Senator MILNE—Can you spell that out a bit more? What we heard this morning was that the new generation of huge global aircraft, the A380s, is unlikely to ever be economic because of the fuel costs. When you say that people will not arrive in Australia by air, do you want to expand on your thinking about that?
Mr Kilsby—My thinking is very much governed by what I am currently doing in Cairns. Most fuel in Cairns—because it is a long way from the refinery, which is in Brisbane—has to be imported by ship, and they currently import more oil for the airport than they import petrol and diesel product for the whole of Far North Queensland. It struck me that the airport is really much like a coaling station, in the days when ships used to run on coal. There are no local fuel resources at all. It all has to be refined in Brisbane and brought up to Cairns by ship. If that becomes less possible in future, then a large part of the economy of that city is going to collapse, because it is geared around servicing tourists. The tourists either drive—and it is a long, long way from anywhere else to get up there—or they come in by plane from Asia, because that is one of the first stops that they make.
Senator MILNE—Do you know of any other work, apart from that which you are doing, where tourism hubs that are more remote and dependent on air travel for their viability are looking at these projections? It would be good to have some specific examples of regional economies that are going to be significantly affected in the short term because of aviation fuel prices and availability.
Mr Kilsby—I am not aware that the aviation industry is even contemplating a shortage of fuel at the moment.
Mr Kilsby—The growth of corn and so on that you need to produce the ethanol and biodiesel requires energy of its own, and it requires land as well. I suspect that the conflict between the land and the energy that you need to supply the additives to petrol and the need for alternative uses of those lands [i.e. food] and energy will be something that you have to consider.
Senator WEBBER—I want to pursue what Senator Joyce was talking about. All of our state economies are very different. I am from Western Australia, and we have the same issue of getting fuel from Perth into the north-west, only then the fuel is used to exploit our resource sector. I am not sure that biodiesels or anything else is an alternative for large haul packs in iron ore mines and what have you. And we do not have a large tourism sector there; it is purely a resource sector. I do not know of many tourists who go to Port Hedland. So that is an issue: all state economies are different, as is what confronts them.
You said in your opening remarks that you felt the need for more Commonwealth government interest in the development of urban transport. Has your organization given any thought to how you think that can be developed? I know that every time we talk about the Commonwealth government spending more money on any particular part of our state economies, there is usually a fight afterwards and then an ad hoc arrangement over the shared responsibilities of state and federal governments. Obviously we need an overall plan, so do you have any other views about how we can organize that?
Mr Kilsby—It seems to me that climate change presents quite a good model for that. The Australian Greenhouse Office is a national office that tried to collect expertise in one place, and the fuel crisis that we are heading for is probably of similar magnitude. So something like an Australian fuel office in central government would probably be the way to go as far as we can see.
Senator WEBBER-There is another issue that I want to pursue. We have had a discussion today about the fact that one of the issues we need to look at is increased use of public transport and the incentives we need to ensure people do that. There has been discussion about the free public transport network that we have in the CBD of Perth. There are other discussions about subsidising public transport. What do you think we need to do to make it more attractive? We have discussed this at previous hearings, overdevelopment and maintaining modern infrastructure to make sure it is reliable and that sort of stuff. What do you think? And if it is about subsidising the use of public transport, then who should pay, as it is seen as a state government responsibility?
Mr Kilsby—In terms of making it more attractive, there are probably three transport sectors. There are private and public sectors, but they both require motors, and there is also the unmotorized sector, which, at the moment, would not make much of a dent in the oil requirement because it only affects the shorter spectrum of trip making. It seems to me that with good urban planning we could perhaps do things to shorten the trip length, and then the third element would become more attractive as well. It is in those outer areas that transport is most difficult to provide. Sydney is clearly the largest Australian city and it is a long way to the CBD from where we are putting people in new houses now. There are probably two million people living out in Western Sydney at the moment, and the only public transport that is being provided of any significance is trains to bring them into the CBD. I think that the Department of Planning in the New South Wales government has an excellent idea in the metropolitan strategy where they are trying to introduce regional cities within Sydney to reduce the amount of trip making that goes on in terms of person kilometers.
Senator STERLE—I refer to page 4 of your submission and the recommendation that states: ‘7. That taxation and fiscal policy instruments should encourage sustainable transport.’ Could you explain that?
Mr Kilsby—At the moment, I think the taxation instruments actually encourage the opposite to sustainable transport with the FBT arrangements and so on. I know that in Canada they have recently introduced a system whereby travel to work by public transport is allowable as a tax expense. It is really that sort of thing that we had in mind.
Senator STERLE—I have had a lot of conversation with the pro-rail lobby. I do not want to talk about freight on trains because I do not think we will ever get common ground on that; I want to talk about public transport on trains. I cannot speak for Sydney, but I can speak for where I come from. We are just putting in a brand new railway 70 kilometers down to Mandurah. It is going to be wonderful—it really will be—but we have had a wonderful train system in Western Australia for a number of years to the northern suburbs and out to the east and to the west. But I still cannot find anything that says we have it right. How can we attract patronage onto public transport? I hear the pro-rail lobby say, ‘Throw a heap of money at us and give us the infrastructure,’ and I have seen some great planning for future suburbs. But we have rail and people are not using it. Why do you think that is? I know you have mentioned costings and all that. Are you suggesting that if we offer free transport people would get on the trains?
Mr Kilsby—No, I am not suggesting that. What I am suggesting is that we concentrate more on local transport, especially in the outer areas because at the moment we are offering people the alternative of traveling quite long distances to central areas, which is where activity tends to be concentrated in our cities, and I think, certainly in Sydney, that we have grown beyond that point. The rail network that Sydney has is probably the most extensive in Australia, but it is very old and you cannot fight your way onto a train at peak times; they are completely crowded, and they are going quite a long way into the CBD. It strikes me that we have to think a little beyond the niche market of getting people traveling to the CBD and start thinking about the more dispersed travel that happens in outer areas of our cities.
Senator STERLE—This is where I get confused. Do you mean putting in extra railway lines to service other suburbs?
Mr Kilsby—That would certainly help, but it probably takes 10 years to get a new railway line implemented and I suspect that is time we do not have. There are alternatives in producing alternatives to cars, and we already have some of these in Sydney. We have a busway that is about to open from the north-west growth area, which is about 40 kilometres from the CBD, to take people down to Parramatta, which is a lot closer than the CBD. We propose to build a railway line from there, starting in 2017, which is a long way away at the moment.
Senator STERLE—I am a bit confused: are you talking about integrating both forms of public transport—rail and bus?
Senator STERLE—I just had this vision that we were talking about railway lines and spurs and branching into the suburbs where the housing is already—that sort of stuff.
Mr Kilsby—No, I do not see that that would help very much.
Senator STERLE—But is it realistic?
Senator JOYCE—You talked about the development of railway lines. Do you have any comments on the fact that in some places in New South Wales they are actually ripping up railway lines and sealing the roads so that they can put all the heavy transport back on the road? Surely that is completely counterintuitive to where it is all heading at the moment—for instance, with the branch lines out in the regional areas that move such things as the wheat crop. I can quote you one example: the Baradine to Gwabegar line. They are closing that line down and transport of all the grain produce will go back on the roads. Surely this is completely against the whole inclination. Do you feel that the government—especially the state government—is lacking in capacity to effectively organize itself to make the moving of heavy goods on rail possible? Are people giving up on it? Do you have any views on that?
Mr Kilsby—That is mainly a freight problem. Australia’s rail infrastructure for freight probably falls into two classes. On the one hand, there are some world-class facilities for the bulk export lines and for interstate containerized traffic. On the other hand, things like the grain lines that you mentioned are in a pretty woeful state. I would like to see these developed further.
Senator JOYCE—Once people get something on a truck, they keep it on a truck, and that exacerbates the problem. It is the ability for rail to organize the collection of produce and things like that that are at the crux of the issue. Do you have any views on how rail could better organize itself to be an effective competitor in the transport industry rather than just being there?
Mr Kilsby—I think that would boil down to the economics of particular cases.
Senator JOYCE—Why is rail so ineffective in the transport market in New South Wales and Queensland?
Mr Kilsby—Because they concentrate on particular markets where they do have a competitive advantage. One of those is the long-distance containerized market. Certainly in urban areas there is virtually no freight that moves by rail. It goes from Melbourne to Sydney by rail, but there is very little that moves around within Sydney by rail.
Senator MILNE—We have a national obesity crisis and a national diabetes crisis and we have people paying huge amounts of money to go to gyms. We have the potential to move people by bicycle, but we have very little in the way of safe bicycle facilities. Everywhere we have been, people have said to us that safety is a big disincentive to their riding. The other thing is a bit like gas: you need a transitional fuel from cars to bikes. One of those is electricity. We have seen huge bureaucratic resistance to electric bikes and small electric cars, like the Riva and so on. Can you give any insight into why you think the bureaucracies are so reluctant to license electric bikes and small electric cars in Australia?
Mr Kilsby—I would support the introduction of a low-energy sector. I think that it is one thing that we in Australia are lacking. There is nothing between a bicycle and a car, effectively, whereas if you go overseas—certainly to Europe or developing countries—you see that most people move around on some sort of moped or light motorbike, which we do not have. I cannot really comment on why the bureaucracy are so hostile to that, other than to say that they are probably following their charters or their terms of reference, which say that they have to manage the road system in the interests of the people who are on it at the moment.
Senator MILNE—That is true to some extent, although there is an attempt to have the Riva car registered in Australia and that is being resisted furiously by the bureaucracy on safety grounds. Yet these vehicles are in the EU, in London and all over the place. Apparently they do not meet our safety standards, even though we have an MOU with the EU. As far as I can tell, what we are seeing everywhere is a huge bureaucratic resistance. Some would argue it is political; maybe it is. It is something I want to pursue. We have a chicken and egg situation. We do need safe bicycle lanes, but we also need to have some form of transition in terms of electric bikes. Anyway, I will leave it there.
DODSON, Dr Jago, Research Fellow, Urban Research Program, Griffith University
SIPE, Dr Neil Gavin, Head of School, School of Environmental Planning, Griffith University
Dr Dodson—We have made a written submission to the inquiry, which was effectively a covering letter describing some research that we at the Urban Research Program at Griffith University in Brisbane have been undertaking regarding the potential distribution of adverse impacts arising from the socioeconomic costs of rising fuel prices. This report was sent to the committee. I do not know whether you have all seen it; perhaps you have.
CHAIR—Yes, we have. I must say that a number of people also have been quoting your research to us. Dr Dodson—Since that came out in December 2005, we have received quite a lot of media coverage of it, so we suspect that a few people have read it. We will run very quickly through that. Since you have all read it, we will not dwell too extensively on it. We have just recently completed another research paper which examines specifically the impact of rising fuel prices on households with mortgages, and we will also report to you today briefly some outcomes of that.
We believe our original paper Oil vulnerability in the Australian city was the first attempt in Australia to really comprehend on a very close spatial neighborhood scale the likely distribution of urban impacts of rising fuel prices. This research builds to some extent on research interests that both Dr Sipe and I have had over many years in terms of the distribution of socioeconomic opportunity in Australian cities and the connections between socioeconomic status and access to transport services. This is a continuation of research we have had a longstanding interest in.
The first study we undertook was an attempt to understand the distribution of the socioeconomic impacts of rising fuel costs. We became aware that there were very few data sets that were able to illuminate the issue at a very fine level of spatial detail. Therefore we decided to create an oil vulnerability index, as we term it, based on ABS census data. That is not ideal data to use for this kind of research; however, we feel that as a first cut piece of investigation by academics in Australia, it is worthy of some attention by the committee. Subsequently we have also submitted it to a refereed international urban research journal. The referees were unanimous in agreeing that it should be published and reported to the scholarly community, so we feel confident that our approach has some validity.
In our index, effectively we combined what we describe as an indexed indicator of car dependence, which is the variable within the census of the mode of travel used for the journey to work, with the proportion of households within a given locality that have two cars or more. We decided that together those two variables were a good indicator of the level of car dependence experienced by households. We then combined that with the ABS socioeconomic index for areas, which is the measure the ABS uses to describe socioeconomic status. So together we felt that car dependence and socioeconomic status were useful markers of the likely vulnerability experienced by localities to rising fuel costs on the basis that, if you have high levels of car dependence, your fuel costs are going up and you are of modest or low socioeconomic status, then your capacity to absorb that rising price relative to your income is probably far reduced.
Moving to the results, our initial study investigated Brisbane, Sydney and Melbourne. The choice of cities was largely due to time constraints in our own research schedules. We have focused solely on the major cities in Australia, using the definition of the urban areas for these cities provided by the ABS. I have just outlined the way the ratings are done. On these diagrams, the areas in red and yellow are the most vulnerable; those in green and dark green are the least vulnerable. On the image that you see before you, the inner city areas tend to be less vulnerable in our measure to rising fuel prices and it is the outer suburban areas, particularly those in the growth corridors of Brisbane, which are most vulnerable. If we look at Sydney next, a comparable effect is seen in Sydney, although there is some centralization within the western suburbs. But you can see high vulnerability areas extending along the north-west and south-west growth corridors with lower oil vulnerability concentrated within the CBD and, to some extent, the areas immediately around the CBD and on the North Shore.
In Melbourne there is a comparable effect, particularly with the growth corridors in former industrial areas or areas that have had a high concentration of industrial employment which has since been heavily restructured over recent decades. They have structural unemployment in some of those localities to the west, north and south-east of Melbourne but also with relatively poor provision of public transport in those localities. So combined, you have high car dependence and relatively low socioeconomic status, which contributes to the patterns of oil vulnerability we have presented. As with the other cities, the inner city and middle suburban areas appear to be exhibiting the lower levels of vulnerability to rising fuel costs.
In our first study, we attempted to chart the population numbers within these different categories by oil vulnerability rating: the higher on the scale, the more vulnerable they are. This slide shows Brisbane. If we go to Sydney, there is a similar distribution, and in Melbourne too. You can see there is some variation in the distribution of oil vulnerabilities between these cities.
We have just counted those in the highest vulnerability categories in numbers of population. These people are likely to be experiencing the worst socioeconomic impacts of rising fuel costs. There are, however, a large number in the moderate vulnerability areas who may also be highly impacted.
In our next study, which came out about a week ago, on mortgage and oil vulnerability in the Australian city, we used a similar method of indexing. But, in this study, we have combined ABS census data on car dependence with data on the proportion of households with mortgages and on income this time around. We decided that, for assessing the impact of rising fuel prices on these households, income was a better measure than socioeconomic status—largely because those at the very lowest end of the socioeconomic spectrum were less likely to be homeowners.
The reason we chose to specifically investigate mortgage vulnerability is that it is apparent that the Reserve Bank of Australia is now conceiving of the inflationary impacts of rising fuel costs as a key issue that it needs to address through its control of the interest rate settings. The recent rate rise that came through, I think, in early June was indicative of this perceived relationship that the Reserve Bank sees and is now seeking to address. We felt that there is potential for not only rising fuel costs to impact on households but also rising mortgage costs as interest rates go up. We see this as a twin vulnerability, particularly given that there may be some inflexibility in the labor market in terms of the ability of incomes to rise commensurate to the increases in transport and interest rate costs.
This is our index, called a VAMPIRE—vulnerability assessment for mortgages, petrol, interest rate expenditure. Again, similar to the patterns of vulnerability shown in the socioeconomic oil vulnerability in the size that we showed previously, this study shows a much more widespread distribution of vulnerability in many more areas that have higher vulnerability status. We have done five cities this time. It is primarily those in the outer growth corridors of Brisbane. It is the western suburbs of the Gold Coast, away from the coastline. In Sydney, again, it is in the outer western suburbs along the growth corridors. By comparison, the inner city, the North Shore and inner south-east are relatively less vulnerable. In Melbourne, it is far more distributed in a broad arc right around the outside of Melbourne, compared to the previous assessment of socioeconomic vulnerability, which was fairly tightly concentrated. This is far more general. In Perth, again, you see that phenomenon of a lower vulnerability in a city with a much higher vulnerability arc around the outer and middle suburbs.
The reasons we see these patterns in Australian cities, we feel, are primarily related to the operation of housing markets which tend to provide the cheaper and newer housing in outer suburban and fringe localities. Households seeking to purchase a home for the first time are more likely to locate in those areas, and those on modest and lower incomes who are seeking home ownership are also more likely to locate in those areas because of the way that the housing market is structured.
However, this means that they run into the problem of the relatively poor provision of public transport services in fringe and outer suburban areas compared to the inner-city localities. This is a problem of historic government underinvestment in public transport infrastructure and services in the outer suburbs. This dates back to the shift in Australian transport planning practice that occurred after the Second World War, when planners began to move away from the previous Australian model of largely transit oriented development based around the existing rail and tramway lines to modes of urban development based on the private motor car and the provision of roads and major freeways.
The result is that public transport services have not kept up with growth. The highest quality public transport services are situated within the inner cities. Those on the fringe experience a far lower quality of service in terms of the frequency of services, the hours of operation, the days of operation and, importantly, the connectivity between not only individual modes but also between modes.
In the best public transport services in the world you find a high level of integration between modes, with central planning to ensure that, for example, buses connect to rail stations that give passengers time enough to transfer. The heavy rail system will convey them at high speed to another connection point and then transfer them to another local bus service to take them to where they want to go. In large part that type of public transport service does not exist in Australian cities. It does exist in some localities, but to a large extent the outer and fringe suburbs are poorly served by public transport. We see that as the key point of vulnerability in the context of the rising fuel prices in Australian cities.
In terms of our suggestions or recommendations regarding improvements to public transport, we think there needs to be dedicated public transport statutory type authorities within each state government that stand alone and are independent from the immediate departmental control of state bureaucracies. We also feel there should be strong federal government interest and involvement in public transport planning, coordination and funding. There is some opportunity for partnership arrangements between the federal government and the states. I will leave that to you to contemplate.
In particular, suburban public transport and circumferential public transport routes is required. The majority of public transport heavy rail and bus services in Australian cities are radially focused—that is, they travel from the outer suburbs into the CBD. There is a paucity of public transport services that travel around the outer suburbs that provide the quality of service found within inner and radial areas. We see some scope for expansion of rail services to new fringe estates, particularly in the growth corridor areas of Brisbane, Sydney and Melbourne. For example, Rowville in Melbourne’s outer south-east was promised a train line in 1969. They have been waiting almost 40 years for that to materialize. They are still waiting. Now they are facing rising fuel prices. We see some scope for those rail lines that have been planned for many decades in a lot of instances but have not materialized to be introduced and completed.
There was some discussion in the earlier presentation about how one might finance public transport. If you look at the total transport budget that state governments currently expend, there is actually multiple billions of dollars available for transport. The trouble is that most of it is currently dedicated to providing major road infrastructure such as freeways and tunnels. If you add in tollways, the sums are in the multiple billions. If those projects were postponed—they do not need to be cancelled; they can just be postponed in the budgetary process—that money could be transferred to the funding of specifically local scale public transport services to make sure that the outer suburbs have as high a quality of service as those in the inner city.
We feel that there would then be a high level of amelioration of the oil vulnerability and the mortgage vulnerability that we have described. Should oil prices decline in the future then it would be possible to still revisit further road construction and road projects. However, if it did turn out that a peak oil scenario did happen then Australian cities would be protected, at least partly, in terms of the personal-private cost of transport by provision of improved public transport services.
Finally, we perceive a need to improve local-scale amenity in terms of walking and cycling and access to local shopping trips so that households, in responding to rising fuel prices, are able, even if they do not make all their trips by public transport, to start to cut out a few of those minor local trips that might save them money over time. Those primarily involve walking to the local shops and to employment and other services.
Senator WEBBER—That raises a lot of questions actually. Dr Dodson, you spoke about road expenditure versus provision of local public transport. I am from Perth, so I was very pleased to see that there was something about that.
Dr Dodson—Perth is somewhat of an exception to this general rule.
Senator WEBBER—Absolutely, and we will get to our train line in a minute. In fact, that is what I wanted to say. In Perth, we have got fast-developing suburban corridors. It is relatively cheap to build roads because of our sand base, as opposed to a lot of the other challenges around on this side of the country. What do you mean by the provision of local public transport in terms of that swap from developing roads to developing local public transport? It is much cheaper for me to build a major road or extend the freeway to allow people to get into the city to work than it is to build the train line. It is quicker. Surely, it is not necessarily an either/or, if I am going to allow the city to keep developing. It has to be both. I cannot leave them out there not being able to get anywhere.
Dr Dodson—That is certainly the case. However, given the concern that has been expressed to this committee about rising fuel prices, there is strong potential that there will be less demand for those radial roads that provide access to the CBD. In the future, people will be making fewer trips; therefore, the existing road space potentially would have less traffic on it and there would be greater demand for public transport if fuel prices continue to rise. The problem at the moment is that Australian cities do not have particularly good public transport services in those outer suburban areas, so there is a lack of good examples or models with which to expand upon.
However, there is enormous scope, we believe, for provision of local bus services within local suburban areas that would connect to higher frequency arterial bus services and to rail services, where they exist, with timed connections. They would be timed to arrive a few minutes before the train departs so passengers have time to transfer and get ready for the train and then passengers offloading from the train have time to get onto the bus that ferries them to their local area. We feel those kinds of services would be critical in a scenario where fuel prices were markedly higher than they currently are in order to provide metropolitan access to households, particularly in the outer suburbs.
Dr Sipe—I would just add that we are not really talking about not spending money on roads; we are talking about having more of a balance. In south-east Queensland with the latest regional plan, basically about 20 per cent of the transport funds are spent for public transport and 80 per cent is for roads. Some of those roads are not necessarily to service newly developing areas.
They are trying to move traffic faster through the city by spending $3 billion on a tunnel. We would really question whether, in 10 years, there is going to be anybody who can afford to pay the toll and the fuel to use the tunnel. It is really that issue of bringing things a little bit more into balance, because clearly at this point in time the roads lobby is in charge.
Dr Dodson—It is worth noting that, in Australian cities where public transport is provided at a high level of service quality and interconnectivity, people will use it. In our research report we mention the member for Wentworth, Malcolm Turnbull, who has recently achieved the ability to use his parliamentary vehicle allowance to purchase a yearly public transport ticket. We found it curious that, while Mr Turnbull is one of Australia’s richest citizens, he would deliberately choose to use public transport. The reason he is able to make that choice is that the high-quality services are there. He can get around inner city Sydney easily and efficiently. The newspaper quoted him saying that it is more efficient to use public transport in Sydney. He has that choice because he lives in an electorate where those services exist. Households in the outer areas of Sydney, where that level of quality does not exist, do not have that choice.
Senator WEBBER—That brings me to another point, which is the socioeconomic argument around that. We were having a discussion before about the incentives we need to give people to use public transport. Some people in Victoria and other places have talked about perhaps making it free. It seems to me that, if you accept what you say about the current infrastructure—and it is absolutely right—you are therefore subsidizing the rich.
If you are going to make it free—and most of the infrastructure is in the inner city, where people are fairly affluent—you are not really helping those in the northern suburbs in my home town or in the western suburbs here.
Dr Dodson—I might respond to that by suggesting that there is a subtlety to that observation in the sense that the processes of housing market restructuring in Australian cities over the last two or three decades have resulted in the gentrification of the inner city. Wealthier households have returned to the inner city, after a couple of decades in the 1950s, the 1960s and the early 1970s when they began to depart the inner city. If you look at it in the sense of a subsidy, it is based on a combination of existing infrastructure, housing market change and labor market change. As we point out in our paper, there is a serious inequity when you have your lowest and most modest income households in localities on the fringe, where now they are facing high transport costs. That is a serious social equity issue that we feel that governments should address through their transport policies.
Senator WEBBER—I notice one of your recommendations was to encourage more local access to employment services. Given the urban and suburban sprawl that we have, how do we do that? I do not know of many outer metropolitan areas that want an industrial estate next to them. To make this work, you need large-scale employment. The corner shop cannot employ that many people.
Dr Dodson—You can provide access to industrial areas through the provision of high-quality public transport. That is how industrial areas serviced their labor needs historically until the development of the private motor car. In terms of local services, the postwar period in Australian cities saw a shift away from high streets and local shopping strips towards regional, car based shopping malls. In conditions of rising fuel prices, we would suggest that there may be greater opportunities for providers of services and retailers on the local scale, where they previously would not have been particularly competitive relative to the regional shopping malls. Now that the costs of travel to those regional services are increasing, as fuel prices rise, the relative competitiveness of those local services may increase.
We see that there is an opportunity to support that kind of travel behavior through making local trips by walking and cycling far more pleasant than they typically are for those living in outer suburban estates—where there may not be cycle facilities, where the footpaths may be poorly developed or where there may be limited shading. All of those local amenities that encourage people or support walking and cycling need to be considered and provided in areas where they are insufficient.
Dr Sipe—With development over the past couple of decades, developers in new housing estates have not been providing local retail. There may be a shopping mall but local retail is missing. In Western Sydney in a lot of these areas governments have allowed people to set up shops out of their homes because this need is basically not being provided. In the US it has gone to the extreme where developers are now subsidizing corner shops and local retail rather than putting in a golf course, because they view it as something that is lacking. They support it even though the money is not there in the initial years of a new development to make it financially viable.
Senator WEBBER—I accept a great deal of what you have to say, but where does that leave people in regional Australia? There are lots of towns in my home state where there is not a lot of local employment and people basically live on some form of social security. There is no public transport and they are paying $1.75 a liter for petrol. What do we do to address those kinds of social problems?
Dr Dodson—That is a question we have not undertaken an enormous amount of research into. However, we have recently submitted a grant application to a federal government agency to examine that issue. I think that issue needs to be contemplated within the much larger issue of the impact of rising fuel prices on productive and socioeconomic structures within rural and regional Australia. I see the transition from relatively cheap motor fuel that can drive truck based freight haulage to a greater emphasis on rail as a likely outcome. Although we have not done the research to demonstrate it, we see that as a likely scenario where fuel prices continue to rise or stay at high levels. Therefore the socioeconomic impact on individuals and households needs to be understood within that broader context. There is a possibility that transport systems and settlement patterns in regional and rural areas may undergo significant restructuring in order to better align settlement patterns with the rail infrastructure. That is a potentially stark or extreme depiction, but I think in a forum like this there needs to be debate about what is going to happen with rising fuel prices. I cannot offer any specific solution in that regard, however.
Senator MILNE—Congratulations on this work. It is long overdue. It is great to have something of this kind in the public arena. It is terrific. I have a couple of issues. The first one is the spatial expansion of cities. The frustration I have in this argument is that we can talk about the need to provide public transport, we can talk about the need for transport around the circumference of suburbs but, the minute you put that in, developers and local government see the opportunity to expand another 10 kilometers or 15 kilometers beyond that. That is our problem. Every time we try and anticipate need, people then see it as potential to develop further. Where is there any emphasis in the country on containment of the physical size of cities so that we can start providing adequate transport and adequate services into the future, given the carbon constraints and the oil price and depletion issues we are facing?
Dr Dodson—The issue of urban expansion in terms of infrastructure has been of great concern to governments for the last 30 years—since the original oil shocks in the 1970s. Many state governments have put in place urban consolidation policies to encourage higher density development within existing urban areas, although those have been fairly uneven and partially applied. There has been extensive urbanization in greenfield sites since that period.
Dr Sipe—I guess the most recent example is in south-east Queensland, where, with the regional planning effort over the past couple of years, they have established an urban footprint. I guess we will have to see to what extent—
Senator MILNE—They adhere to it.
Dr Sipe—Right. There were a few areas that had not been decided on and some of those have flipped from nondevelopment into the development realm. We are hoping that this provides some containment on that issue of expansion.
Senator MILNE—The other big issue, and you mention it in your submission, is this. If we were to persuade the federal government to work in a cooperative way with the states and to start seriously investing in public transport provision as a way of dealing with this issue, with the productivity of cities, with congestion, with health issues, with climate change et cetera, financing would become the major issue. If people pick up the argument they are then going to ask, ‘How do you propose we pay for this?’ Have you looked at any financing models that would fit with the fact that we are a federation of states and that local government has the planning provisions and opportunities as well? How far advanced are you on that? That is the key question. If we can get to the persuasion, which I think we are going to have to get to because the circumstances are upon us, how do we pay for it?
Dr Dodson—Our suggestion, as we have outlined today, would be to shift the balance in existing states funding from roads towards public transport, walking and cycling. There is probably some scope for that to occur at the federal level as well. Around $7 billion to $8 billion is spent in federal road funding. A lot of that goes to rural and regional areas, so it would probably not be appropriate to transfer that to public transport provision—although perhaps some sort of regional public transport coach or train network assistance might be worth contemplating. However, I think there would be some significant scope for the use of some of those federal road funds in partnering arrangements or co-financing arrangements with states to identify areas of high public transport need within Australian cities and to plan and coordinate the rollout of new, high-quality services to those localities. As we suggested, it would probably require a dedicated federal government agency to undertake the research, analysis and planning to determine what measures would be the most appropriate in any given locality or circumstance.
Dr Sipe—The only thing I would add is this. As you can tell, I am not from these parts. I come from America. There seems to be a reluctance on the part of both the Commonwealth and the state and local governments to incur any debt in providing public facilities. I see that this is an untapped resource. A lot of these facilities should not be paid for by existing taxpayers. There is an intergenerational issue. They should be paid for over the 20 or 30 years of the life of the project. It seems that governments want to be debt free, and I am not sure that that is necessarily a good thing. Maybe the US is not the best example, having gone to the other extreme, but I think there is some middle ground there in financing projects over a period of time using revenues from public transport or toll roads. I think that is a much better way of doing things than these public-private partnerships that we have seen around Australia.
Senator JOYCE—I want to follow up on one question that Senator Milne put to you. Do you have any idea of the ideal size for a city? As an outsider, as someone who does not live in a city, I came down here the other day and I saw a bus driving around with nobody in it. I thought, ‘Well, that just goes to show that you can have cheap transport that nobody uses.’ What we see as investment in transport infrastructure might just exacerbate the problems that are already there. In your study, do you talk about an ideal size for a city or can cities just get as big as they like?
Dr Dodson—The question of an ideal size of a city is one that exercised the minds of a number of urban researchers in Australia in the 1960s and 1970s; I am not sure that it was ever resolved. The result was the decentralization program under the Whitlam government, which sought to shift population to regional areas such as, I believe, Bathurst-Orange in New South Wales, Albury-Wodonga and parts of Victoria. I am not sure whether they had a program in Queensland or other states. I would not wish to comment too much on the success of those programs. I do not think they are perceived as having had a dramatic impact on changing the rate of growth of Australian capital cities. There may be some scope in the future to revisit questions of decentralization of urban populations to rural and regional centers. We certainly have not done
any analysis or investigation of that type of policy. The problems would be in providing employment and other services in such localities to make it feasible.
Senator JOYCE—I will put the question on its head, then. Do you feel that, with unplanned transport infrastructure in place, there is the potential to exacerbate transport problems for an area and create more red areas? I am thinking about the south-east corner of Queensland, obviously. Wouldn’t an ad hoc growth to an area basically exacerbate problems that are going to be almost impossible to fix because there would be houses where you wanted to put transport infrastructure?
Dr Dodson—That comes down to a question of good planning. Until the postwar period, housing development occurred effectively in unison with rail and tramways. It was after the postwar period that the private motor car gave households and individuals the capacity to travel almost anywhere at will within the city, and that enabled the extensive, often low-density, development you see in, for example, the North Beaudesert shire area of south-east Queensland. Our view would be that well-coordinated and well-planned development with a strong public transport component to it can ameliorate those problems, but it will not necessarily solve them universally and provide some utopian type of urbanization.
Senator JOYCE—What is the cost of fixing the problem that is already there? The houses are already there; the roads are already there. If you want to put in a rail infrastructure, you are going to have to start moving houses and roads and changing everything around. Have you done any costing of your potential loss because the planning process was not proper and in place at the start? A lot of this is a nirvana; it is never going to happen because the cost of putting in new rail networks will be prohibitive.
Dr Dodson—Perhaps yes and perhaps no. I note that the Queensland government is currently expending large sums of money in putting road tunnels through the centre of Brisbane. It is building a number of bus lanes that go through existing inner city localities, many of which have far higher real estate values than those out on the fringe. In terms of the cost of providing new fixed route infrastructure for public or even road transport, I am not sure that the cost of purchasing the corridors and lines for that is necessarily prohibitive. It does not seem to be at the moment.
CHAIR—There are also other forms of public transport, too, like light rail. I understand that that is much less disruptive and you can move a lot of people. Have those things been factored into your equation?
Dr Dodson—In some areas there are opportunities for upgrading underutilized rail infrastructures. There are a couple of train lines in south-east Queensland that are underutilized that could potentially be upgraded. But also simply providing bus services that operate in a coordinated way across outer suburban areas would, in many cases, provide a sufficient level of service that would match or be comparable to a rail service if it were planned, well coordinated and operated efficiently.
Senator JOYCE—What are you going to use as motivation? Once someone jumps in their car to drive to the train station, how are you going to encourage them to get out? It is the same issue that people have in regional areas where, once they put stuff on a truck to get it to a railhead, they say, ‘Don’t bother stopping; keep going.’ It is the same idea with the car: once they jump in the car to drive to the train station and they have the radio going, how are you going to encourage them to get out?
Dr Dodson—The way to do it is to provide the highest possible quality of service that you can so it makes it easy and efficient for them to do it. That level of service exists in many instances in the inner areas of Australian cities, and a high proportion of households and individuals use it. It is the lack of service and the poor quality of service in the outer-suburban areas that prevent people from using public transport, in my opinion. The rising price of motor vehicle travel will be a strong motivational element in encouraging people to use public transport. But the trouble is that it needs to be there and it needs to be of high quality so that they can use it.
Senator JOYCE—I was interested that you were looking at Brisbane. Brisbane is a unique town in that it is hilly and therefore you will need tunnels or bridges in order to get around the place. Because houses are parked on the sides of hills in places like Waterworks Road, there will be an immense capital cost in trying to set up the infrastructure—unless you move the roads, because the roads follow the accessible paths in the lower areas of the topography. Is there a sense that the cost of this is going to be astronomical, as opposed to better planning and getting people to live in areas where the cost of this infrastructure would not be so great?
Dr Sipe—That is what they are trying to do with the regional plan.
Senator JOYCE—Yes, they are moving them but they are just moving them down the street. They are moving them to Ipswich when they should be moving them over the hill and far away.
Dr Dodson—There does not seem to be an immense topographical constraint to the provision of existing public transport services. Buses could easily run along the large arterial roads and the major roads that already exist throughout south-east Queensland. The trouble is that existing government planning is focused on not impeding motor vehicle traffic. In the case of the eastern suburbs of Brisbane, we have Old Cleveland Road, which is a major arterial road, yet the government is now planning to tunnel a busway to provide public transport under that road for approximately 25 kilometers out to the eastern suburb of Capalaba. From my perspective, you can always use existing road space for buses. So there is a question about the opportunity cost of using tunneling, which is going to cost billions of dollars, to provide that service when you could use the existing road service and coordinate services with the regional rail network, and then have plenty of money left over to provide very high-quality local suburban bus services for those in the outer suburbs who are going to be most affected by rising fuel prices. I am not particularly concerned about topography being an impediment to improving public transport.
Dr Sipe—There have been a number of questions about getting people to use public transport. The evidence we have been able to put together over the last six to nine months suggests that that is not going to be a problem, that the price of fuel will take care of that. The real question is: are the public transport companies and authorities planning for this? For example, in Brisbane they basically now publish how many buses go past the bus stop because they are full. The problem is not getting people on; it is providing the capacity. That is what we see as the real problem. Who is building buses? What happens if every city in the world decides it needs 100 more buses?
CHAIR—We are not going to have enough carriages on the Perth trains. Come peak hour now, we are packed in like sardines because we do not have enough carriages on our trains.
Dr Sipe—So who is looking out for this? Somebody should be thinking, ‘If all the cities in Australia are facing this problem, what about all the cities in other parts of the world?’ I have not read that General Motors is going to give up building Hummers and begin to build train carriages and buses.