Welcome to Eureka Street

back to site


Petrol price plunge won’t arrest car decline

  • 06 February 2015
Oh how we love cheaper petrol. After years of writing pain-at-the-pump puns, journalists are giddy at the prospect of prices heading south for once.

When a Sydney petrol station sold E10 Unleaded for 99.9 cents a litre at the beginning of January, the Sydney Morning Herald spruiked the offer with an entire news story and video.

When the symbolic $1 barrier was cracked in Queensland, the Courier Mail cheered ‘Bowser bonanza fills motorists with joy’. Any more joyful and motorists will be pictured at petrol stations, nozzles in hand, splashing the stuff about with carefree abandon. 

The 99-cent deals are, of course, a promotional stunt. Last week, the national average price for unleaded petrol was 111 cents a litre (although down to 104.5 cents in Sydney). That's the lowest prices have been in five and a half years, and it's come after nine weeks of trending downwards. 

The reason is a drop in the international benchmark price for the Asia-Pacific region. That’s ultimately driven by the recent collapse of the crude oil price, which has fallen from near US$115 a barrel in June 2014 to below US$50 a barrel in January 2015.  And the biggest reason for that, many analysts argue, is the shale fracking boom in the US contributing to a global oil glut. (The US doesn’t export crude oil, but now imports far less, inducing oversupply.) The Economist has labelled the standoff ‘Sheikhs v shale’: a Saudi-led price war to put higher-cost producers in the US and elsewhere out of business. 

As the media reminds us, the low oil price is a boon for motorists, who are expected to take advantage of cheaper petrol to travel more kilometres. Already regional tourism operators in New South Wales are reporting a surge in day-trippers from Sydney. But any increase in driving will be short-lived because car use is actually declining in Australia, and even the lure of ‘bargains at the bowser’ won’t alter this long-term trajectory.

For most of the twentieth century, kilometres travelled by car per person in Australia rose steadily. But it began to plateau in the late 1990s, and noticeably declined from 2004. Australia isn’t alone in this. A 2012 study by the Bureau of Infrastructure, Transport and Regional Economics of 25 countries found that after rapid growth in the 1960s and 1970s, traffic per capita for all vehicle types consistently slowed, and is now at saturation point in many countries.

A lower petrol