What’s fuelling the surge in petrol prices?
UQ experts explain the soaring prices at the pump, the history of energy wars in Australia and options for a secure energy future.
In the face of the Ukrainian conflict and petrol price hikes across Australia, Contact consulted three experts from The University of Queensland, including Associate Professor in Australian History Martin Crotty.
“While not diminishing the reprehensible things he has overseen, Vladimir Putin looks likely to force the western world’s hand in a manner that carbon pricing, global summits and continued advocacy failed to achieve,” Dr Crotty said.
“The conflict in the Ukraine is the kind of disruptive moment that has potential to provide a divergence in government policy and technology adoption.
“We could be looking at a moment where there is a serious uptake in electric vehicles as a result of a simple equation of requiring alternate power sources and being economically disadvantaged in day-to-day life.”
On March 14 the Australian Competition and Consumer Commission (ACCC) released a statement to say that Russia’s invasion of the Ukraine was one significant factor in petrol price rises, with the USA banning Russian oil and the European Union limiting reliance on Russian gas.
Another major factor was a refusal to boost production of crude oil by the Organisation of the Petroleum Exporting Countries (OPEC).
Both factors contributed to supply chain forces, driving up fears of future shortages and subsequently elevating prices at the pump.
“The world was already experiencing high crude oil prices late last year due to the continuing actions of the OPEC and Russia cartel, and the enduring Northern Hemisphere energy crisis,” ACCC Chair Rod Simms said.
“Retail petrol prices in Australia are largely determined by international refined petrol prices and the Australian/US dollar exchange rate. As refined petrol is made from crude oil, movements in global crude oil prices drive the international price of refined petrol.”
UQ historian Dr Crotty noted Australia had already been through several energy supply shortages in the past century.
He said the 1970s energy crisis, triggered by the Iranian Revolution and the 1973 Israeli-Arab War (also known as the Yom Kippur War or Ramadan War) impacted Australia and New Zealand hard.
The response at the time included a move towards liquefied petroleum gas (LPG) vehicles.
In the Second World War, people resorted to charcoal burning gas when petrol shortages took hold, affixing unwieldy looking tanks to their vehicles.
In Melbourne during wartime, gas producer planes were used on private cars. Here men are seen refuelling producer attached to the rear of the motor vehicle. October 1942, Melbourne, Victoria, Australia. Image: Robert John Buchanan / Australian War Memorial / Ascension number 027267.
“A major difference between now and then, however, is the rates of private vehicle ownership,” Dr Crotty said.
“Public transport and unpowered forms of transport were far more prominent at the time of the Second World War.
“If we think about current elements of disruption, we could be about to see a pronounced rise in ‘micro vehicles’ … things like electronic bikes and scooters.”
“From there, the next chapter would be a possible redesign of our cities, because Australia’s major cities are not really designed for that mixed usage at the moment.”
Professor John Quiggin of UQ School of Economics also predicted a long-term change in the way Australians conduct their daily commute.
However, he had an expectation that petrol prices would drop again, at least in the short-term.
“I think we will see a dip. The pricing can’t be sustained at this level,” Professor Quiggin said.
“What it has done is given everybody cause to rethink the situation and our reliance on oil.”
In Melbourne during wartime, gas producer planes were used on private cars. Here men are seen refuelling producer attached to the rear of the motor vehicle. October 1942, Melbourne, Victoria, Australia. Image: Robert John Buchanan / Australian War Memorial / Ascension number 027267.
In Melbourne during wartime, gas producer planes were used on private cars. Here men are seen refuelling producer attached to the rear of the motor vehicle. October 1942, Melbourne, Victoria, Australia. Image: Robert John Buchanan / Australian War Memorial / Ascension number 027267.
As an exporter of coal and gas, and an importer of oil and petrol, Australia as a whole will emerge from the current situation with a boost to its finances, with less of the latter reaching our shores.
Yet that net-positive will be difficult for the everyday person on the street to relate to, as they see their weekly wage stretched thin, or face difficulties in arriving at their workplace.
“The benefits will be felt by the very few who control our commodities, while the average Australian who is a direct consumer will be worse off,” Professor Quiggin said.
“Fuel costs impact our entire economy, and we’re already looking at it resulting in an increase to global inflation.
“Inflation could be a good thing when it comes to the wage increases we hope to see, and an adjustment of interest rates.”
“Unfortunately, those will take time to become evident, while the cost of the weekly shop will rise more immediately due to transportation expenses.”
Professor Quiggin believes university students and younger generations will be more vulnerable to the added challenges brought about by steeper petrol prices, but are simultaneously well-served by their adaptability and recognition of what needs to occur.
“This whole situation underlines something most young people are acutely aware of – we cannot continue to be an oil-, gas-, and coal-burning world,” Professor Quiggin said.
“We’ve got to look at alternate sources.
“Across the generations, most people recognise there have been some unscrupulous people controlling our fuel sources for a long time, but we’ve largely chosen to look the other way.”
As the leader of UQ Solar, Professor Tapan Saha can see a number of areas of opportunity for encouraging use of renewable sources.
Professor Saha said most of Australia was suitable to solar photo voltaic energy, with wind power generation suitable in fewer locations, but also under-utilised in the current landscape.
“Solar and wind resources have very high potential to deliver substantial energy needed for Australia’s electricity grid,” Professor Saha said.
“Fossil fuel in any form is a limited resource and the price volatility is very high, but our transportation sector remains predominantly petrol- and diesel-based.
“If we adopted good policy with regard to electric vehicles, we could have reduced our dependence on petrol and diesel.
“It is a fact that Australia is one of the slowest nations in terms of electric vehicle uptake in the world.
“Policy changes, good charging infrastructure and financial incentives for early proliferation are necessary.”
While consideration of fuel pricing and shortages lead many people to picture bustling metropolitan hubs in their minds, Professor Saha believes some of the best inroads could be made in regional locations.
While these locations might be out-of-sight and out-of-mind to the vast majority of the population, their benefits from using renewable energy systems could have a flow-on effect across the nation.
“Our remote communities, including mining communities, are still dependent on diesel generators for their electricity needs,” Professor Saha said.
“Diesel is a pollutant, it requires financial subsidies from the government in many areas, and the price is volatile, as we witness now.
“We can definitely reduce diesel dependence by increasing solar and/or wind generators and battery energy storage technologies for these micro-grids.
“Beyond the current geopolitics, a reduction of carbon dioxide emissions is necessary in any case.”
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