Post on 16-Dec-2015
Reducing vulnerability to the rising cost of transport fuels
Some thoughts on a framework for future action
Premier’s Fuel Summit
Launceston, Tasmania
4 September 2008
Global oil prices have been steadily increasing for more than a decade
Source: Thomson Financial, AMP Capital Investors
1.50 90
$A/litre $US/barrel
0.60
0.70
0.80
0.90
1.00
1.10
1.20
1.30
1.40
98 99 00 01 02 03 04 05 06
0
10
20
30
40
50
60
70
80
Australian retailpetrol price (LHS)
World oil price (RHS)
+ 50%
yet global economic confidence remains steady, raising questionsabout demand elasticity and the real-world viability of alternatives
Annual change in underlying inflation
0
1
2
3
4
5
6
7
90 92 94 96 98 00 02 04 06
US
Europe
Japan
Australia
-1
US
Source: Datastream, AMP Capital Investors
% p
.a.
...and (b) non-OPEC production – which is contrary toclassical economic theory of supply versus demand
Production up
Price up
The risk of continued upward movement in oil prices is more likelythan not (and is unlikely to be resolved by tweaking of petrol taxes)
Oil price currently at US$110
NYMEX at US$115/bbl (Dec 2012)Annual price increase of 22 cpl (or 18%)
2006 price forecasts
US$37/bbl by 2015 ABARE, May 2006
US$47/bbl by 2014 US EIA, 2006
US$64/bbl in December 2012 NYMEX Oil futures, September 2006
US$380/bbl by 2015 IXIS-CIB, April 2006
The CPRS will also (rightly) place upward pressure on conventionalfuel prices in the near future – not just at the point of introduction
Increase of $0.03 cpl for every $10 increment in CO2e
The potential impacts of sustained high fuel prices on an economy
Congestioncosts
Higherinput costs
Reduced competitiveness of business & industry
Increased costof goods & services
for households
High transportInfrastructure costs Economic
Urban air pollution
Traffic noiseLoss of urban public space
Greenhouseemissions
Loss ofurban amenity
Environmental
Humanhealth costs
Inequitable levels of
transport access
Disconnected communities
Reduced volunteerism
Inequitable Financial impacts
on households
SocialCommunity costsof road transport
Indicates community costs that are exacerbated by rising fuel prices
Congestioncosts
Higherinput costs
Reduced competitiveness of business & industry
Increased costof goods & services
for households Inequitable levels of
transport access
Disconnected communities
Reduced volunteerism
Inequitable Financial impacts
on households
While we can do little about global oil prices, we can develop and implement strategies that reduce our future vulnerability to these rises
There is a compelling case for reducing the future vulnerability of
the Tasmanian community to the rising economic, social and
environmental costs of conventional transport fuels
Reducing this vulnerability will require coordinated actionon three interconnected strategies over the next 20-30 years
Strategic objective
Reduce the vulnerability
of the community to the
rising costs of conventional
transport fuels in the future
Improvement strategies
Human settlement & transport infrastructure
+
Vehicle & fuel technologies
+
Transport consumer behaviours
Human settlement & transport infrastructure actionsAnalysis of past actions
Constitute some of the most significant opportunities for reducing wholesale reliance on conventional fuels in the medium to long term.
Opportunities are typically costly and complex with significant time lags to full realisation of benefits.
The nature of trip making in contemporary Australian communities is not easily accommodated by traditional public transport systems.
Our cities and towns have proven highly resilient to measures ‘imported’ from other international economies.
Investment in road freight infrastructure constitutes an apparent ‘blind spot’
The historical development of our cities and towns has created a legacy of transport disadvantage that needs to be redressed in the future
Spatial inequities in transport choice and accessibility in Sydney
The design of new urban sub-divisions has also reduced opportunitiesfor adoption of sustainable transport practices in our local communities
Curvilinear sub-division layoutTraditional grid layout
Road freight represents a rapidly increasing areas of vulnerability for businessand industry with little historical focus on urban and inter-urban freight infrastructure
The Australian road freight task is forecast to more than double between 2000 and 2020 (BTRE 2002), signaling a likely doubling in annual fuel demand for heavy vehicles.
Vehicle class
% of Australian fleet *
Passenger vehicles 77.9% 60%
Commercial vehicles 18.0% 38%
Other 4.1% 2%
* ABS 2006b † AGO 2006b
GHG contribution to road transport emissions
†
Human settlement and transport infrastructurePotential future actions
Seek to realign existing public transport systems with the modern needs of transport consumers in terms of on-demand services and real-time information services.
Promote investment in freight transport and freight infrastructure to support more efficient movement of freight.
Improve the levels of employment containment in the outer regions of our cities via a renewed focus on the design and development of urban and local centres.
Adoption of ‘compact cities’ planning philosophies with respect to new residential land developments
Move away from curvilinear subdivision design and return to traditionalgrid layouts in new urban areas
Vehicle and fuel technologiesAnalysis of past actions
Impose the least social and economic cost on the wider community in generaland are therefore relatively easy to implement
Easy gains in this area have largely been secured
Future gains in this area are likely to be harder owing to high costs and a significant level of performance uncertainty
Analysis of remaining options suggests that no one technology will deliver the total solution
The technical nature of these actions and the vested interests of specific technology advocates (both fuels and drive trains) make it increasingly difficult for policy makers to separate ‘fact from folklore’
Continued operation of older vehicles is creating a significant drag on the realisation of emission benefits and improved fuel economy of the state fleet
Vehicle class Average age in Tasmania (2006)*
Heavy rigid trucks 17.1 years 15.9 years
Articulated trucks 10.1 years 11.2 years
Urban bus fleet 15.1 years 11.0 years
Light rigid trucks 15.2 years 11.2 years
Passenger vehicles 11.5 years 9.8 years
* ABS 2006b
Average age in Australia (2006)*
None of the popular alternative fuels/vehicle technologies is likely to be available as wholesale substitutes for conventional fuels in the near future
Entry level Start-up Market ready Indigenous Abundance Price Economic Environmental(US$ / barrel) costs vehicles fuel stability performance performance
LPG $45-50
NATURAL GAS above $50
SYNTHETICS (GTL) above $40*
BIOFUELS $45-80
SOLAR ?
HYDROGEN ?
ELECTRIC ?
FUEL CELLS ?
* Refers to long-term average(min. 20 year investment period)
Promoting the purchase of smaller vehicles will gradually lower theaverage consumption rate for the state fleet (and reduce GHG emissions)
Typical GHG emissions (25,000 km car and 250,000 km truck per year)
Hybrid (3 tonnes/year)
Articulated truck
(450 tonnes/year)
Small sedan
(5 tonnes/year)
Four wheel drive
(9-11 tonnes/year)
Family sedan
(8 tonnes/year)
Vehicle and fuel technologiesPotential future actions
1. Counter fleet procurement practices and legislative practices that ‘reward’ the purchase of vehicles with relatively high fuel consumption
2. Introduce incentives targeting accelerated replacement of older vehicles within the state fleet
3. Investigate opportunities for the implementation of progressive (but mandatory) fuel consumption targets for new vehicles sold in Australia
4. Promote accelerated take-up of commercially available cleaner technologies such as hybrid vehicles as far as practical
5. Promote alternative fuels where these fuel deliver demonstrable commercial, economic and environmental benefits, including some biofuels (use caution) and natural gas.
Transport consumer behavioursAnalysis of past actions
To date, these strategies have been singularly ineffective in curbing growth in road travel.
Past actions have been advanced without due respect to the high degree of inelasticity between pricing and road travel demand
Majority of actions have targeted improved behaviours in passenger transport with little or no targeting of improved behaviours among road freight consumers
Strategies have largely been advanced on a one size fits all basis, failing to recognise the variability in switching potential according to factors such as:– geographic location– proximity of public transport– access to government services– capacity to pay
Door to door journey time is a much stronger motivator for the adoption of sustainable travel practices than price
Community research (NRMA 1995) suggests that individuals choose a particular
mode of travel based upon a hierarchy of travel needs that varies according to the
nature of the travel and individual preferences.
1 Door-to-door journey time
2 Personal safety/security
3 Flexibility
4 Convenience
5 Price (out of pocket)
Decreasing
influence
on an
individual’s
choice
of transport
mode
Transport consumer behavioursPotential future actions
1. Work cooperatively with major land transport generators to promote more sustainable transport practices.
2. Work with large employers to implement travel efficiency partnerships designed to reduce the quantum of road travel (worker commute and commercial activity) over time.
3. Investigate innovative opportunities to improve access to information and streamline public transport ticketing systems in major urban areas
A possible framework for reducing future vulnerability ofour economies to the adverse impacts of rising fuel prices
Human settlement& transport
infrastructureimprovements
+
Alternative fuels & vehicle technologies
+
Transportconsumer
behaviours
Strategic objective Improvement strategies Action areas
Reduce the
vulnerability
of the community
to the rising costs of
conventional
transport
fuels in the future
Public transport
Urban form
Business & industry
Connectivity& disadvantage
Alternative fuels
Transport efficiency
Key conclusions
1. The upward movement in fuel prices is a global phenomenon and Governments (at all levels) can do relatively little to reduce fuel prices per se.
2. Governments can, however, set an agenda and provide leadership towards the development and implementation of a whole-of-community response that reduces the vulnerability of our economies to future price rises.
3. Such a response would need to be developed around a consumer-centric philosophy that seeks to improve the opportunities for individuals and businesses to switch to more sustainable travel practices, via simultaneous and coordinated improvements in:
‒ Human settlement and transport infrastructure
‒ Vehicle and fuel technologies
‒ Transport consumer behaviours
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