CSIRO fuel warning
BY JAMES STANFORD | 15th Jul 2008
Indeed, the report, which was officially called ‘Fuel for Thought – the future of transport fuels: challenges and opportunities’ and released last Friday, did indicate a possible rapid increase in fuel prices, but its own modelling revealed the petrol price in 10 years could be as low as $2.00 or as high as $8.00 depending on a range of factors.
“Owing to changes in international oil markets, and to a lesser extent carbon pricing, further substantial increases in the price of oil-based fuel products (petrol and diesel) are considered plausible, although very uncertain in their timing and extent,” the report said.
“Modelling projected that if international oil supply continues to grow steadily, petrol and diesel prices will experience only a slight rise on present levels. However, if there is a near-term peak in international oil production resulting in declining future oil supplies, petrol prices could increase to between A$2 and as much as A$8 per litre.” What the report was clear on was the fact that Australia would be hit hard by fuel price increases and effectively called for action to be taken to avoid the worst-case scenario of $8.00 fuel.
“We are a nation whose common way of life is underpinned by access to affordable and sustainable fuel sources, but we are also a nation more vulnerable to the costs of rising oil prices due to our import use, relatively high fuel consumption of our vehicle fleet, our 97 per cent reliance on oil-based fuels for transport and our declining domestic oil reserves. It is a pretty potent mix,” said CSIRO Energy Transformed Flagship director John Wright.
The Future Fuels report is based on a series of CSIRO models, with input from the Future Fuels Forum that was formed last November involving a wide range of delegates, including Holden, Caltex, Biofuels Australia, Woolworths, the Australian Conservation Foundation, NRMA, government organisations and several other groups.
The report predicted that Australia’s transport fuel mix would change dramatically, with more vehicles using electricity, LPG and natural gas in the next 10 years. Other likely fuels are likely to appear further down the track.
“Longer term, beyond 2020, advanced biofuels that limit competition with food production, and synthetic fuels derived from gas and coal (using carbon capture and storage) are also expected to come into use once production infrastructure has had sufficient time to scale up,” said the report.
“The extent of their use will depend on primary fuel prices and government greenhouse gas emission targets.” The report predicted that an emission trading scheme would have an impact on fuel prices. It suggested that a permit price of $100 per ton of CO2 “equivalent” would result in fuel rising by 25 cents a litre, “which is significantly less than the impact of oil price movements in the past four years”.
The CSIRO report said Australia would be forced to manage its “response to reducing greenhouse emissions and the risk of increasing costly and scarce oil supply” at the same time. It points out that soaring fuel prices would have a huge impact on low-income Australians.
Its modelling suggested average weekly fuel bills for a family using a mid-sized passenger vehicle could increase from $40 in 2007 to $50 or as much as $220 a week in 2018.
This would also have a flow-on effect to freight costs and other items. The CSIRO report predicts that the cost of a loaf of bread could rise by about 30 cents a litre in 10 years, due to increased freight costs, but suggests in the longer term (beyond 2030) that freight costs would be similar to today or even be reduced with the adoption of new fuel types and technology.
If there is a decline in international fuel supplies, new technology would not be enough to limit the affect on passenger and freight transport according to the CSIRO model.
It predicts that even a slow reduction in oil supply would lead to a necessary reduction in travel of less than 5 per cent. However, it warns that, if there is a rapid reduction in oil supply and alternative fuel vehicles are slow to be made available, the reduction could be as much 40 per cent.
The CSIRO said there would subsequently be a greater shift towards public transport and smaller, lighter vehicles, while more freight would be shifted using sea and rail freight, which would combine for a 17 per cent reduction of greenhouse emissions.
The report calls for an acceleration of debate, planning and investment by industry and government to counter these challenges.
While no-one from government was present at the report’s presentation, Holden chairman Mark Reuss gave an indication of his company’s view on what the industry’s response to the problem should be, stating that carmakers needed to take a lead role because the problem was not going to go away.
“I would say this is a permanent shift. That is my opinion and that would be the opinion of most of my FCAI comrades, and I don’t think this should be viewed as in any way temporary this is permanent and it’s worldwide,” he said.
“We have to lead that adaptation both from a societal standpoint and an economic standpoint. It’s that simple.”