Should the federal Government reduce the price of petrol in Australia?



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The issue
On September 15, 2000, the Australian Automobile Association called on the federal Government to freeze fuel excise. In July, 2000, as a result of the GST, the government had increased its excise rate by almost two cents a litre. In August, 2000, there was a further rise. Another excise increase is scheduled for February, 2001.
The demand for government action to reduce the cost of petrol has been strongest in country regions where petrol is some ten cents a litre more expensive than it is in the larger cities. However, there has been significant pressure from motorists associations in all states. Others to call for a reduction in petrol prices have been truck drivers who claim that they are being forced out of business by the cost of fuel. In the second half of September, truck owner drivers in a number of states began blockading fuel depots as a protest against rising fuel prices. Similar actions have been taken by truck drivers in Britain and France.
However, the federal government has continued to defend its petrol pricing policies and has maintained that by international standards Australian petrol is relatively cheap.

What they said ...
'We can't change what the Arabs charge for oil, we can't influence the worth of the Aussie dollar, but we can change the level of tax we pay to the government on petrol'
Mr Peter Walsh, the president of the Victorian Farmers' Federation

'Price signals are an important part of the mechanism that will help the world economy to use energy efficiently ...'
Mr Alan Wood, economics editor for The Australian

Echo Issue Outline 2000 / 41 - 42
Copyright © Echo Education Services

First published in The Echo news digest and newspaper sources index.

Issue outline by J M McInerney

Background
Australia is more than 80 per cent self-sufficient in crude oil. This high level of self-sufficiency, however, is expected to gradually drop away to around 62 per cent by 2007.
The main producers of Australian crude are
* the BHP/Esso joint venture in Bass Strait,
* the Woodside consortium on the North West Shelf in Western Australia and
* the Santos consortium in the Cooper/Eromanga Basin in northeast South Australia.
These companies have benefited from higher world crude oil prices. The Australian Government has also benefited from significantly increased returns from petrol excise.

The major components of the retail petrol price in Australia are
* federal government petroleum product excise, state taxes and GST (together comprising approximately 57% of at pump price),
* crude oil feedstock prices (26% of at pump price),
* refining (1%),
* distribution (9%)and
* marketing profit margins (5%).
(Please note, these figures are approximations. They are based on figures supplied in a Parliamentary Current Issues Brief 11 1999-2000, 'Petroleum Refining and Marketing in Australia-Changes Ahead' researched by Mike Roarty for the Science, Technology, Environment and Resources Group and submitted to federal Parliament on 23 November, 1999.
They will be subject to change over time. They do, however, give an indication of the principal components of the retail price of petrol.)
The federal Government petroleum product excise tax is increased in February and August each year in line with the Consumer Price Index (CPI).

Crude oil feedstock is priced at the level which prevails on the world market. There are three reasons suggested for this.
Firstly world parity pricing was introduced in Australia in the late 1970s, as a conservation measure and a means of encouraging further exploration. It was argued that if Australian petrol were cheaper than that available overseas, this would encourage excessive consumption of Australian crude and rapidly deplete Australia's crude oil reserves.
It was also argued that if Australian crude were cheaper than that sold overseas, this would discourage oil companies from finding and developing wells in Australia.
The third reason for Australian crude being priced at international levels is that the Australian crude oil market was fully deregulated in 1988 and Australian crude prices now reflect world market prices.
The price of crude oil feedstock in Australia is also affected by the Australian/US dollar exchange rate as world prices are denominated in US dollars. Depreciation of the Australian dollar against the US dollar will increase local prices.

Internet links


A particularly valuable source of information is Parliamentary Current Issues Brief 11 1999-2000, 'Petroleum Refining and Marketing in Australia-Changes Ahead'
This paper was researched by Mike Roarty for the Science, Technology, Environment and Resources Group and submitted to federal Parliament on 23 November, 1999.
It gives detailed background information on the state of Australia's oil refineries, the sources of Australian petroleum, the main producers of Australian crude and the composition of the at pump price of petrol.
The paper can be found at http://wopared.aph.gov.au/library/pubs/cib/1999-2000/2000cib11.htm#Introduction

A clear explanation of the current federal Government's position on world parity pricing, the GST on petrol and the general level of government excise on petrol can be found in an interview given by the Prime Minister, Mr John Howard, to John Miller on Radio 4BC, Brisbane. The interview was broadcast on August 22, 2000. It can be found on the Prime Minister's home page at .
http://www.pm.gov.au/news/interviews/2000/interview401.htm

The Australian Automobile Association (AAA) is a lobby group established to represent the interests of Australian motorists. The AAA has a very interesting and well-maintained Internet site which gives a significant amount of information about the impact of Government policies on the price of petrol.
In the issues section of its site, the AAA presented a series of arguments, published in August 2000, intended to show that the Australian Government could afford to freeze the excise on petrol. These arguments can be found at http://www.aaa.asn.au/issinfo/petprices.htm

The AAA also has a section of its site given over to monitoring petrol prices in all Australia states and territories. This section of the site is up-dated regularly. It can be found at http://www.aaa.asn.au/petrol.htm

In November, 2000, the AAA also published the results of a poll showing that Australian motorists expect tax cuts as a result of the currently high cost of petrol. The article detailing these poll results can be found at http://www.aaa.asn.au/press/2000/aaaanop.htm

Arguments in favour of the federal government reducing the cost of petrol
There are five main arguments offered in favour of the federal Government attempting to reduce the cost of petrol.

1. Approximately fifty percent of the cost of petrol comes from Government excises.
It has been argued that the Australian government cannot justly claim that overseas' influences are solely responsible for the recent increases in the cost of petrol in this country. According to this line of argument, though the price of petrol has risen on the world market, some 50% of the cost of petrol to the Australian consumer is the result of petrol excises levied in this country.
It has been claimed that the rise in the cost of petrol has thus netted the Government an unexpected windfall in increased taxation revenue. It has further been claimed that this unanticipated increase in taxation should be returned to the taxpayer via a reduction in the rate of petrol excise.
It has particularly been argued that the government need not increase the excise in February, 2001, to bring it into line with the Consumer Price Index. The head of the Australian Automobile Association, Mr Lachlan McIntosh, has called for an end to petrol excise increases linked to inflation levels.
Mr Peter Walsh, the president of the Victorian Farmers' Federation has sated, 'We can't change what the Arabs charge for oil, we can't influence the worth of the Aussie dollar, but we can change the level of tax we pay to the government on petrol.'

2. The Australian Government does not have to continue with a policy of world parity pricing
It has been argued that it is no longer necessary for Australia to maintain world parity pricing. According to this of argument, recent discoveries of oil in the Timor Sea have helped secure Australia's oil supplies for a significant period into the future and so have removed some of the pressure to retain world parity pricing.
This point was made by John Miller, in an interview with the Prime Minister, Mr John Howard, on 4BC, Brisbane, on August 22, 2000. Mr Miller asked, ' All right, now is it time that we review that oil parity pricing? Given that we've had some more massive discoveries of oil up in the Timor Sea?'

3. The federal Government has not compensated motorists for the full effect of the GST on petrol prices
The federal Government had pledged to offset the impact of the GST on petrol prices by reducing petrol excise tax by a comparable amount. When the GST was introduced, petrol was under 80 cents a litre. The Government had promised to reduce the petrol excise by about 7.6 cents, which would have negated the cost increase that would otherwise have resulted from the GST. However, increases in the cost of crude oil feedstock and consequent increases in the petrol excise have seen the cost of petrol rise to approximately a dollar a litre. The GST on this more expensive petrol is approximately ten cents a litre. This has meant that despite the reduction of approximately 8 cents a litre in excise tax, the government is still gaining an additional two cents a litre through the impact of the GST.

4. Australians, especially those living in country regions, are dependent on automobiles.
It has been argued that petrol is not a discretionary purchase. According to this line of argument, petrol is a necessity. It is claimed that many people, especially those in country regions, are entirely dependent on their private vehicles for personal transport. Also most of Australia's goods are transported by road and so this industry is highly dependent on petrol or diesel
Wendy Bevan of the Royal Automobile Association of South Australia has claimed, 'We've found petrol demand is inelastic. That means people have to use it to get around and when prices go higher they put off other purchases.'
.Mr Peter Walsh, the president of the Victorian Farmers' Federation, has claimed that country families' budgets were being 'blown away' by the high cost of fuel.

5. Australia's trucking industry is being severely damaged by the cost of fuel
It has been claimed that the current cost of diesel makes it impossible for many owner-driver truckies to make a living. Mr Darren Johnson, a truck driver operating between Queensland and Victoria, has claimed that as the average price for diesel climbs above $1 per litre many truck drivers are finding their operations unsustainable.
Mr Johnson has claimed that the average truck usually gets only 2km to a litre and that the average freight payment is $1 a kilometre and falling. These figures suggest that, after fuel costs are taken out, most owner-drivers are averaging only 50 cents a kilometre. It is further claimed that by the time truck repayments and maintenance costs are also taken out, truck drivers are not being left with enough to live on.

Arguments against the federal government reducing the cost of petrol
There are five main arguments offered against the federal Government attempting to reduce the cost of petrol.

1. High petrol prices encourage fuel conservation and further exploration and development of Australia's fuel reserves
This argument has been put since Australia first adopted world parity petrol pricing in the 1970s. It is claimed that if petrol were sold world-side at a cheaper rate, than there would be far more wasteful use of petrol reserves.
This point has been made by Alan Wood, the economics editor for The Australian, who, in an article published in October, 2000, claimed, 'Price signals are an important part of the mechanism that will help the world economy to use energy efficiently and, ultimately, move into the post oil age.'
According to this last line of argument, it can be expected that as oil reserves diminish around the world, oil will become more expensive, and there will be ever-greater incentive for scientists to develop engines capable of running on alternative fuels.'
It is also argued that while there are undiscovered oil reserves available, keeping the cost of oil feedstock at high levels encourages oil companies to undertake more exploration and investment as they are guaranteed a good return on their investment, if their exploration is successful.

2. The Government needs the money its acquires through excises on petrol
This point has been made repeatedly by the current federal Government. The Treasurer, Mr Peter Costello and the Prime Minister, Mr John Howard, have both argued that petrol excise revenue is necessary to maintain the Government's spending program.
The Government has further argued that using any budget surplus to give motorists petrol rebates would undermine the Government's international reputation as responsible financial managers. It has been claimed that speculation about Australia's fiscal responsibility could further weaken the Australian dollar.
It has also been argued by the Government that any short-term rise in Government revenue due to the increased cost of petrol, would be likely to be short-lived and would not be sufficient to fund a substantial reduction in the cost of petrol.

3. Key elements affecting the cost of petrol are outside Government control.
It has also been claimed that major factors contributing to the rising cost of Australia's petrol are outside the control of the Government.
The Organisation of Petroleum Exporting Countries (OPEC) produces about 40 per cent of the world's oil and holds more than 70 per cent of the world's known oil reserves. In March, 1999, OPEC decided to drastically cut back its oil production. This created a relative shortage and forced up oil prices world-wide, including in Australia, where Australian produced oil feedstock is sold at the same rate as internationally produced oil feedstock.
It has also been noted that the decline of the Australian dollar on world money markets has caused a hike in the cost of petrol in Australia. This is because oil is priced and sold in US dollars and Australia's currency is now worth much less in comparison to the US dollar than it was twelve months ago.

4. The difficulties faced by Australia's trucking industry are not due to the cost of fuel
It has further been claimed that the financial difficulties faced by Australian truck drivers and owners are not wholly caused by increases in the cost of diesel. It has been argued that freight rates are too low; that drivers should be paid fortnightly, rather than every three months, as a way of helping to overcome cash-flow problems, and that a licence system should be introduced to discourage fly-by-night operators.
According to this line of argument, Australia's trucking industry is in need of wide-spread reform. Those who put this case argue that only a small part of the industry's problems stem from the cost of fuel.

5. Australia's petrol is cheap by world standards
Finally it has been claimed that in comparison with many other nations, Australia's petrol is very cheap. It has been suggested that only the United States has lower petrol prices. It has further been noted that petrol in England is twice as expensive as it is in Australia.
These points have been used by the Prime Minister, Mr John Howard, to support his current intention not to take action to reduce the cost of petrol in Australia .

Further implications
Petrol excise has been a reliable source of taxation revenue for governments for many years. Bi-partisan policies, such as world parity pricing and the indexation of excise to the CPI reflect the importance of petrol taxes to both the Labor Party and the Liberal/National Party Coalition.
A Liberal Government introduced world-parity pricing and a Labor Government deregulated the petrol industry and indexed petrol excise to the CPI. Despite political point scoring, both sides of government still support these policies.
Up to this point there has been no obvious political fallout in taxing petrol and allowing the price of Australian produced petrol to follow world trends. As a parliamentary briefing paper presented to federal Parliament in November, 1999, noted, 'Governments have relied heavily on the relative unresponsiveness of petrol and diesel demand to changes in prices to continue to raise taxes at the petrol pump.' It appeared that motorists would continue to purchase petrol almost irrespective of cost. Motorists, it was assumed, were like smokers, taxes could be placed on the product they relied upon and they would continue to purchase.
The current rates of petrol tax, combined with increases in the cost of crude oil feedstock, have brought petrol prices to the point where they may begin to alter motorists' driving and petrol consumption habits. More significantly for governments, it is now being suggested that the current price of petrol could affect motorists' voting intentions.
In September, 2000, in Perth, the Royal Automobile Club conducted an Internet survey on consumer response to increased petrol prices. Some 4,500 people responded. More than 68 per cent of respondents claimed they were prepared to change their vote if the federal Government did not change its stance on petrol taxes.
The Queensland premier, Mr Peter Beattie, has claimed, 'Any prime minister who ignores the strong feeling about petrol prices does so at his or her electoral peril.'
Government backbenchers representing country electorates seem particularly concerned about the possible electoral consequences of allowing petrol prices to remain at their current levels. The impact of increased petrol prices is arguably greater in country regions as petrol is generally more expensive in the bush and there is a greater reliance upon it.
There is still a great deal of disaffection in rural Australia. It has been argued that its neglect of the country cost the Kennet Government office in Victoria. The recent success of One Nation also suggests that country voters are prepared to change their political allegiance.
Further, it has also been suggested that the rising cost of petrol is likely to have a significant impact on Australia's inflation rate. It has been claimed that an increase in inflation could see the Reserve Bank increase interest rates.
All of these developments are politically dangerous for the Government.
The federal Government appears to be hoping that it will be able to buy back voter support with a new national rail and road building scheme estimated to cost some $4 billion. One of the aims of the scheme would be to improve rural and remote roads. It remains to be seen whether the electorate will see such a scheme as sufficient compensation for the rising cost of petrol. Current indications are that it will not.
Looking beyond the political implications of the current situation, it has been suggested that the current popular consternation at the rising cost of petrol is only a taste of what will occur unless the world reduces the rate at which it uses available oil reserves. It has also been claimed that the world needs to develop alternative sources of energy.
The Age, in an editorial published in September, 2000, warned, 'Worldwide oil production is forecast to go into absolute decline in the next 15 to 30 years ...'
This suggests that the time is fast approaching when the high cost of petrol will not be attributable to government taxes; it will be a reflection of the scarcity of petrol.



Newspaper items used in the preparation of this outline
Available as a press cuttings package (with an issue outline reprint): price: $35.00 (NO LONGER AVAILABLE)

Sources
The Age
16/9/00 page 26 editorial, 'Grim portents for petrol'
30/9/00 page 21 analysis by Sue Cant & Geoff Strong, 'Keep on truckin'?'
16/10/00 page 4 news item by Chloe Saltau, 'Call for freeze on fuel excise'
18/10/00 page 1 news item by Phillip Hudson, '$4b transport plan to ease petrol heat'
18/10/00 page 2 news item by Josh Gordon, 'Falling $A keeps oil prices on the rise'
18/10/00 page 2 news item by Richard Baker, 'A drive to put social trips back in budget'
18/10/00 page 2 news item by Lyall Johnson, 'PM to buy votes with GST fuel revenue, says VACC'

The Australian
15/9/00 page 28 news item by Nigel Wilson, 'Mounting anger at the tax on petrol'
23/9/00 page 27 news item by Dennis Shanahan, 'Fuel anger forces shift in cabinet'
23/9/00 page 28 comments by Dennis Shanahan, 'Little left in ploicy bowser'
25/9/00 page 29 news item by Ian Henderson, Roger Martin & Alison Crosweller, 'Petrol prices "PM's big hurdle"'
27/9/00 page 1 news item by Ian Henderson, 'Premiers join revolt over fuel'
27/9/00 page 28 news item by Nicole Strahan & Claire Konkes, 'Bracks douses truckies' fuel rage'
29/9/00 page 26 news item by Ian Henderson, 'Costello's hard line on petrol'
2/10/00 page 37 analysis by Elisabeth Wynhausen, 'Along the road to ruin'
10/10/00 page 13 comment by Alan Wood, 'Oil hikes an incentive to conserve'

Herald Sun
7/10/00 page 23 analysis by Karl Malakunas, 'OPEC exposed'



Analyses of two newspaper items

Analysis of a news item No 1
Topic: should the Government reduce the cost of petrol?
Title of the article: 'A drive to put social trips back in budget'
Author: Richard Baker
Published in The Age on October 18, 2000.

This is ostensibly a news report. It is, however, an interesting example of the way in which supplying comments from a range of sources, all putting the one position, effectively converts a supposed news report into an opinion piece.

The title of the article, though a little obscure, is intriguing and likely to attract reader attention. Some of the people cited in this article suggest that the rising cost of petrol is reducing the number of family outings country people, in particular, are able to take. The headline appears to be a reference to this development.
The headline is also a pun. It appears actually to mean that there is 'a drive', or concerted popular pressure, to make it possible for families to once more afford to take 'social trips' in their cars. The word, a 'drive' also, however, suggests to the reader that the article is dealing with automobiles. The reference to 'budget' is also a little ambiguous. It would appear to refer primarily to family budgets, however, it could be taken to refer to the federal budget. Thus, though the exact meaning of this headline is not apparent on first reading, it suggests a number of interpretations, all relevant to the subsequent article, which would be likely to trigger reader interest. Its very obscurity may actually increase its effectiveness.

The article is accompanied by a graphic which shows a man in silhouette about to fill a vehicle with petrol. The use of the dark figure against a light background attracts attention. It is also slightly threatening or ominous. Above this figure is a chronology of the events that have taken place since 1990 that have contributed to the rising cost of Australian petrol. Finally, there us a graph showing the fluctuations in the price of oil since 1985. There are two dramatic peaks on this graph - one for 1991 and the other for 2000. Interesting, at least part of the information contained in this graphic suggests that the rising cost of petrol is not entirely within the control of the government, however, the overall impact of the graphic is likely to be to create concern about the level of petrol prices.

The article's lead paragraph begins with a paraphrasing of the position put by rural lobby groups and some politicians. Because the paraphrase opens the paragraph, this gives it the effect almost of a statement endorsed by the article, 'Weekend car trips to sports events or social activities were fast becoming an unaffordable luxury in country areas because of the continued high cost of fuel ...' It is only after this statement has been read, that the reader is told that this is the view of particular people and not a position being put by the article overall.

The second paragraph indicates that independent state MP, Russell Savage, and the president of the Victorian farmers' Federation, Peter Walsh, are both urging the federal Government to change aspects of its petrol policy. Much of this paragraph is written in neutral language and so appears to suggest no position on the request being made by the two men referred to, however, it closes with a reference to the desire to 'limit the financial pain felt in country areas.' 'Pain' is a quite powerful and emotive word to use in this context and suggests that country drivers are in fact suffering significantly. The use of the word 'pain' appears likely to encourage readers to emphasise with the supposed plight of country drivers and also to support the position being taken by Savage and Walsh.

The next five paragraphs are a mix of quotes and paraphrases from first, Mr Walsh, and then, Mr Savage. Some of the opinions being cited are quite powerfully expressed and are likely to influence readers. One of these is Mr Walsh's claim, 'We can't change what the Arabs charge for oil; we can't influence the worth of the Aussie dollar; but we can change the level of tax we pay to the government on petrol.'

The article then gives the views of a Euroa service station proprietor, Mr Robin Weatherald. Mr weatherald is quoted as saying, 'sadly, it (rising petrol prices0 is going to restructure what rural australians think about travel.' This seems again an appeal to reader sympathy. It is being suggested that it is 'sad' or regrettable that country drivers may have to alter the manner in which they have typically used their cars.

The article then paraphrases Mr Savage, claiming that a bill he has put before state parliament, which would give the Victorian Government power to reduce the disparity between rural and metropolitan petrol prices, was supported by the Premier, Mr Bracks. This bill of Mr Savage would appear to be the political crux of the article, however, it is referred to only in the last third of the item. The bulk of the item appears concerned to engender sympathy for country drivers who may have to limit their use of their cars.

This is the manner in which the article closes. It quotes a Gippsland diary farmer, Mr Gareth Hume, who first suggests that rising petrol costs are making it difficult for him to continue running his farm.

Mr Hume is then quoted directly commenting on the effect of rising petrol costs on family outings and the family budget. The comments made by Mr Hume are quite emotive. 'You've still got to have a life. You can't make kids miss out on cricket or footy, but in order to make sure they don't ... something else will have to miss out.' This comment has strong emotional appeal. It opens with the colloquial expression, 'You've still got to have a life.' This is a dramatic overstatement. It is not 'life' that is at issue if a family has to restrict its use of a car, however, phrased in the way that it is, this statement, is likely to incline the reader to believe that something very important is going to be lost if families have to reduce their use of cars.

The reference to 'kids' and their 'cricket or footy' would also have strong popular appeal. It suggests that children, by definition the innocent parties in any situation, would be the ones to suffer if families had to reduce their use of cars. This claim would also have strong appeal to all readers who were the parents of children. The colloquial language used here is also likely to add to its effectiveness.

Overall, this article appears to completely endorse the sentiments being put by those who are cited or paraphrased within it. There is no attempt made to achieve a balance. No opposing points of view are put. There is no Government spokesperson cited, giving an explanation of why the Government wishes to retain petrol excise at its current level. There is also no one cited to suggest that there are factors affecting petrol prices which are outside the control of the Australian Government.

Analysis of a news item No 2
Topic: should the Government reduce the cost of petrol?
Title of the article: 'Oil hikes an incentive to conserve'
Author: Alan Wood
Published in The Australian on October 10, 2000.

This is an opinion written by the economics editor for The Australian. Alan Woods position is likely to suggest to readers that he is an expert in his area and is therefore likely to incline them to accept his arguments. His status within the paper is further indicated by the use of a small photograph to identify him. This is printed just above his name and separated from his name by a black line. He is looking directly at the reader, and smiling slightly. He is conservatively dressed, wearing a dark suit, a shirt and a tie. He appears at least middle aged and is wearing glasses. All these factors are likely to add to the reader's willingness to accept him as an authority.

The article has two essential purposes. One appears to be to allay readers fears that the current increase in the price of oil portends an immediate economic disaster for Australia and the world. His other aim appears to be to suggest that rising oil prices may actually be in all our interests as alternative sources of energy will ultimately have to be found.

The article opens by directly addressing its readers and encouraging the to remember Sheikh Yamani, a previous Saudi oil minister, who apparently once argued that the stone age did not end because people ran out of stones.

The point of this little analogy between stones and petrol is overtly drawn out in the second paragraph in which Mr Wood claims that the oil age will not end because we run out of oil. Instead he argues it will end because rising prices and the development of other technologies will see oil superseded as the world's fuel of choice. This is an attractive and reassuring argument. It is difficult to know how compelling readers would find it up to this point, however, it is likely that many would want to be comforted by Mr Wood's predictions.

Mr Wood then goes on to remove some of this reassurance and to complicate the picture somewhat by arguing that the cost of alternative energy sources is currently so high as to make them fairly impractical. He then appears to contradict this claim in the following sentence by referring to 'a significant shift in the world's use of oil' since the 1970s. The implication of this remark would appear to be that the world is currently less dependent on oil than it was in the 1970s.

All of these claims are assertions and further would seem to be partially at odds with each other, so again it is difficult to know how persuasive the reader is likely to find the argument being put.

Mr Woods goes on to be more simply reassuring. He cites figures to suggest that the current increase in petrol prices is far less than that which was experienced in the 1970s. He also suggests that current increases in the cost of oil are far less likely to trigger a recession.

The arguments he gives here are internally consistent and supported by quite detailed facts and figures. Though only one source is quoted, the reputable financial publication, The Economist, this is a fairly well known and quite well respected source. It is therefore likely that the reader would be persuaded by the position Mr Wood is putting here.

Wood then goes on to give more detailed support to his previous claim that the rich industrial nations of the world are less reliant on oil than they were in the 1970s. He claims that they have cut their use of oil by more than 40 per cent in the intervening thirty years. This is a dramatic claim and is likely to be persuasive, however, the reader is entitled to expect a little more explanation of how such an apparent reduction has been achieved and on what figures this claimed reduction is based.

Wood also argues that the current increase in the price of oil will have a less inflationary effect than occurred in the 1970s. This is a very general claim and not one which he has bothered to substantiate in any detail. He tends to make sweeping references to supposed proofs of his position such as 'Taking all these factors into account ...' This lack of detailed support leaves readers in a position where they will be persuaded by Mr Wood's case on inflation if they consider him to be a reliable source. If they doubt either his expertise or his objectivity they are unlikely to find his arguments compelling.

Woods then brings the argument onto the home front an attempts to reassure readers that Australia, as a net energy exporter, will be less damagingly effected by the rising cost of oil than will many other nations.

The article concludes with a direct reference to the Australian situation and asks whether the Prime Minister, John Howard, should try to reduce the petrol excise. The question is obviously one that is going to arouse reader interest. However, Mr Woods does not leave it hanging, he raises the question in order to answer it. Mr Woods argues that it is OPEC pricing policies, rather than Australian excise, which is primarily responsible for the rising cost of oil. (This claim interestingly ignores the fact that taxes account for approximately 60 per cent of the cost of petrol to the Australian consumer.)

Mr Woods then makes what would appear to be his central argument, and the one that is foreshadowed in the headline. Woods argues that increases in the price of petrol are an incentive to use energy more efficiently and will also encourage the nations of the world to develop alternative energy sources. This is the point with which he began his article. It is also, however, the point he dismissed with a refence to the cost of alternative energies.

Woods concludes on an odd note. He again attempts to be reassuring, telling the reader that there is 'no need to worry' about using a 'non-renewable resource' such as petrol. However, the only reason he gives for this reassurance is that the car is such a 'liberating' technology. It is hard to see why the fact the we enjoy motorised transport and rely upon it should make us less concerned that we are using a non-renewable fuel to power our cars.