Fire over fuel
BY JAMES STANFORD | 18th Jul 2007
Responding to GoAuto’s exclusive report last month, which revealed that it could take at least eight years for Australian oil producers to begin producing low-sulphur petrol for engines already available in Europe, the new Federal Chamber of Automotive Industries (FCAI) CEO Andrew McKellar has argued that tough new laws could arise should the Australian automotive sector fail to meet its environmental targets because of substandard fuel.
“You don’t want Australians to be left on the shelf in terms of fuel quality while Europeans and other fuel markets move forward,” Mr McKellar said in an interview with GoAuto.
“In order for us to perform to our maximum potential, we need to have access to those better-quality fuels. They can have a real impact on the technologies that we can bring into this marketplace.” Taking a much harder public line than his predecessor, Peter Sturrock, Mr McKellar stressed that the local auto sector could be held accountable for failing to adequately improve fuel economy levels and meet emissions targets, even if it had the technology to do so, should the Australian petroleum industry not reduce the sulphur content in its fuels over a reasonable timeframe.
He also spoke of the risk that the Federal Government could regulate along the lines of the new CAFE (Corporate Average Fuel Economy) standards in the US. If passed as expected, the CAFE legislation will force down average fuel consumption for American cars by 40 per cent to 27.5mpg (8.55L/100km).
“The risk is that at some point policy makers are going to be tempted to go down the track that Europe and America have gone down, and that is to mandate the process they want to see from the industry as a whole,” Mr McKellar said.
“That approach does not work well, it defeats the market and, frankly, it is not the sort of thing that should be contemplated in a market like Australia.” Mr McKellar said the introduction of such regulations could damage all companies selling cars in Australia, not just the local manufacturers.
“It would be adverse for all brands operating in Australia, manufacturers and importers alike. That’s why we think there should be encouragement for the local industries to take up those (fuel-saving) technologies as well as for importing brands to be able to bring them into the market,” he said.
“We think that we can achieve very good results where we are given the freedom to bring these technologies in to implement the fuel-saving measures in the marketplace.”
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As GoAuto has revealed, there is no plan or timetable to reduce sulphur levels in Australian fuel to European levels.
Furthermore, the Australian Institute of Petroleum (AIP) believes there is “no net benefit” to the Australian community in producing ultra-low-sulphur petrol before at least 2015.
Overseas, European car-makers such as BMW are introducing models with new highly efficient petrol engines that deliver fuel economy savings of up to almost 20 per cent by running a lean-burn mode that requires a special catalyst.
This technology requires petrol with no more than 10 parts per million (ppm) of sulphur, a standard which is fast becoming the norm across Western Europe.
Australian sulphur levels in premium unleaded petrol will stand at 50ppm by January 1, 2008. There is no deadline to reach 10ppm and sources have told GoAuto that upgrading Australian refineries to meet this level would cost $1.5 billion.
Mr McKellar told GoAuto that the failure to introduce clean fuels within an acceptable timeframe would mean Australian customers would miss out on a wide range of models and that many of the vehicles that would make it to Australia may need to be modified to cope with our fuel.
“The risk is that you would have to de-spec or dumb down what they are able to offer in Europe or other parts of the world,” he said.
In contrast, the AIP pointed to a 2005 government study which found the environmental benefit of introducing 10ppm fuel was limited because producing the cleaner fuel would create more emissions and that it was unaware of many vehicles that could utilise that fuel.
However, Mr McKellar disputed the claim there might be no net environmental benefit, adding that several car-makers were developing new technology that could dramatically cut fuel consumption by using cleaner fuel.
“I think that assessment of the issue hasn’t been based on future opportunities in the automotive industry to contribute to an improvement in CO2 emissions, and one of the key avenues clearly (to) the introduction of more advanced fuel systems and engine technology is access to cleaner fuels,” he said.
“From the point of view of the Australian automotive industry, it is important that we have access to the best-quality fuel possible in the Australian marketplace. That enables all brands to consider which technologies they can access and bring into the Australian market, and the timing at which they can do that.
“There are a number of technologies, but particularly advanced catalyst systems and related technologies which are available around the world which nearly all manufacturers have access to.” Mr McKellar added that car-makers needed to know when low-sulphur fuel would be available in Australia in order to plan to import vehicles with the latest engine technology.
“Really, it is a case of having access to the fuel, and in fact you will see there is a broader range of brands that take advantage of that and bring new technologies and new models in those configurations to the market,” he said.
Mr McKellar described the AIP’s proposed timetable, which included a review in 2009 (expected to take more than one year) and a further five years to implement any potential changes, as cautious. He was especially critical of the argument that the Australian oil industry needed more time because of the cost of upgrading the facilities.
“This is not a reason for not working out a timetable, working out what the investment challenges are, what the supply is within the region and the price at which it comes,” he said.
“Putting it off because it is expensive is not a solution to the problem. What they might say today is a $1.5 billion investment. Two or three years ago that might have been $1 billion. In another two or three years that will be $2.5 billion. So it is not getting any cheaper, it is not getting any easier.
“What we need to do is look at what are the benefits of having this fuel available, what technologies can be introduced and at what cost will the investment come to put that better-quality fuel in place.”
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