Dissenting Report from Senator Barnaby Joyce
The inherent weakness in the
committee's report is its failure to consider the impacts of biofuels such as
ethanol and biodiesel on fuel prices, climate change and liquid transport
energy security despite much of the public hearings being taken up with
evidence of the potential positive price impacts of alternative non-fossil
fuels.
Oil will become unaffordable
long before it becomes unavailable. Because our economy in mining, agriculture
and tourism is so vulnerable to any shifts in supply and an unaffordable major
overhead for the internal combustion engine, it is imperative on an economic
basis that emergence of affordable alternatives are spliced into the current
oil based consumption.
In its submission, Manildra
Group said:
"Petrol pricing is
determined by many factors but the final price paid by the consumer can and
should be reduced by around 3 cents per litre where ethanol is blended with the
fuel at 10%." (Manildra submission, September 9, 2006 page 2)
Indeed, it would appear that
this is more than rhetoric from one of Australia's few players in the fledgling
biofuels producing industry. The discount fuel retailer Freedom Fuels in
Queensland has moved to include a 10 per cent ethanol blend in all of its
petrol products. Apart from the well-documented environmental and health
benefits of ethanol blends, it has done this because of price. And it is
delivering with its pump prices always discounted below those of service
stations under the banner of the major oil companies.
Senator Joyce pointed out
during the Canberra public hearings that the independent fuel suppliers do not
seem to have a problem with start-up costs associated with holding tanks for
ethanol blended fuel.
While the uptake of ethanol
blended fuel has been slow due to the oil industry refusal to meet their
commitments to the Prime Minister under the 2005 Biofuels Action Plan process.
It is submitted that this is
further evidence that the major oil companies are not serious about meeting the
Federal Government's voluntary target of 350ML by 2010.
The committee should note
that at the end of 2006, just 15ML of ethanol and 5ML of biodiesel had been
taken up, well short of the lower limit of 89ML under the voluntary target for
2006.
This failure means that it is
taking longer to free up refining capacity with ethanol substitution, a factor
that the committee heard would put downward pressure on fuel prices.
The committee heard that
there is a future beyond E10 as E85 vehicles were starting to take off in
America, and Flex Fuel Vehicles in Brazil were capturing over 70 per cent of
new car sales.
The committee heard that
fledgling ethanol plants, such as the one proposed at Dalby in Queensland,
cannot begin production because the major oil companies will not give them firm
long term contracts. (Committee Hansard, August 23, 2006)
It emerged from the hearings
that the oil companies do not like ethanol because it is a competing product
that they can't control.
Senator Joyce told the
committee:
They
(the major oil companies) try to subdue it because they do not want it out
there, but I think everybody agrees that we should get it out there. If more
ethanol is out there it will free up excess refining capacity, and if it frees
up excess refining capacity they will go looking for a market for that refining
capacity, which in itself will drive down the market, so it will have a flow-on
effect beyond just getting ethanol out there. (August 23)
Furthermore,
Mr Ronald Bowden, Chief Executive Officer, Service Station Association Ltd,
said it would not be in the interests of the major oil companies to get serious
about ethanol, as revealed in this exchange with
Senator
Joyce.
Senator
JOYCE—I will put it another way. Let
us change your hats: if you were in the position of a major oil producer, would
you encourage the sale of ethanol in Australia?
Mr
Bowden—If I were an oil producer, I
would not because that is not where my best profitability would lie.
The Inquiry's Draft Report's
major flaw is its lack of attention on the role of alternative fuels to
mitigate in the current fuel prices. It is acknowledged that there is no reason
that fuel prices will fall in the long term. If Australia is not planning for
the future outside an oil price crisis then we will be placed at the
disadvantage of dealing with it in a crisis.
Independent fuel stations
have proven to be essential in both being leaders in price discounting and
leaders in getting ethanol and other bio-renewables out onto the market.
Legislation such as the repeal of the Sites and Franchise Act has exacerbated
this position in that it plays into the oil majors' hands of controlling retail
price and product.
It is clearly the case that
the current government target to incorporate ethanol in the sale of fuel has
being largely ignored by the oil majors and this is of some embarrassment as
there has been a reasserting of these commitments by the Prime Minister.
Since the change in sulphur
content rules, Australia has created a non-tariff trade barrier to the
importation of fuel from many previous producers in Asia. This has
quarantined the current oil majors in Australia from further external
competition in their refining capacity.
The available science on the
capacity of biofuels to reduce Greenhouse Gas emissions in the Australian
transport sector is compelling as it is complete. CSIRO-based recent studies
clearly show that current technologies reduce Greenhouse Gas emissions compared
to petroleum petrol by as much as 80 per cent and in some circumstances more
than 100 per cent on a litre per litre basis.
United States Government
laboratory data shows that a 10 per cent ethanol blend and biodiesel blend
fuels have the capacity to reduce fine and ultra fine particulate emissions
from petrol and diesel by at least 50 per cent.
Recommendation
That there be a phase in over
10 years of a 10% mandate on ethanol on all ULP sales and biodiesel as part of
suite of issues to alleviate a future oil crisis.
Recommendation
That should the major oil
companies fail to meet their Action Plan targets in 2006, then the Government
should move to immediately mandate access to motorists and the consumer to
cleaner burning and Greenhouse Gas-reducing ethanol and biodiesel blended fuels
in Australia.
Recommendation
That government policy
changes to encourage the development of independent refining capacity that
includes a minimum 10% component of ethanol and that the refining capacity also
concentrates on the development of bio-diesel.
Recommendation
That due to the unwillingness
of the oil majors to retail bio-renewables, investment incentives be available
to companies to construct retail outlets on the premise that 10% or greater of
their total entity sales be bio-renewables.
Recommendation
That an investigation be
immediately carried out into the social and economic effects pertaining to
incremental increase in oil prices to the $300 a barrel mark. The investigation
is to include the capacity and time to bring on line alternatives for the
economy to circumvent a crisis.
Recommendation
That the current ban on sales
above 10% ethanol be lifted in light of Australia's capacity to immediately start producing cars with
the capacity to run on 85% ethanol.
Recommendation
That an investigation be held
into the link between research grants given from oil companies to car
manufacturers and the effect on opinion this may have in the promotion of
bio-renewables.
Recommendation
That a further government
report be commissioned into auditable world reserves for oil to give a clear
and concise understanding of the time frame, quantity, likely demand curve and
pricing implications of future oil. This study is also to investigate essential
sectors of the economy that must rely on oil based fuels at affordable levels
to stay competitive.
Recommendation
That formal monitoring powers
currently held by the Treasurer in Part 7 of the Trade Practices Act 1974
are given to the Parliament.
Recommendation
That the ACCC be given the
powers to have complete transparency of Terminal Gate Prices including all
discounts and other measures so that the market can have an assurance of
monitoring of unfair market practices.
Recommendation
That a section of the fuel
retail market be quarantined for the exclusive use, by volume of fuel, of
independents, that is retailers whose total related entities sell less than 5%
of the total fuel sales in any given state
Recommendation
That
the committee note that the report has been very selective in the issues they
have reported. And the time constraints for the review have been quite
limiting. That would suggest a resolve by some members of the committee that
has not been reported in the body of the document.
Senator Barnaby Joyce
Navigation: Previous Page | Contents | Next Page