When the Howard government was implementing the GST, it promised the tax would not cause a net increase in the price of petrol.
To achieve this, it developed a formula that it said would reduce fuel excise by enough to fully offset the impact of the new 10 per cent GST.
It was a slightly complicated process but when the details were announced, there was instant outrage. The formula had been fiddled so the price of petrol actually rose by a net 1.5¢ per litre. That’s only 75¢ extra for a 50-litre tank, but at the time the government was already in world of trouble and facing an election later that year.
For a little while, the government rode the outrage, but then came a spike in world oil prices, which saw petrol for the first time break through the psychologically damaging $1-a-litre barrier.
The GST’s contribution was piddling but an-already hostile public blamed it for the whole catastrophe
On March 1, 2001, Howard held a press conference to announce he was reducing excise by 1.5¢ per litre and abolishing the twice-yearly indexation of excise to inflation.
“Let me make it clear that I was plainly wrong in not understanding some of the concerns held by the Australian people about the price of petrol and I acknowledge that,” Howard acknowledged.
“And I think it’s important that the response of the government be seen in the context of it being willing to acknowledge that the priorities that it thought were right were not necessarily on this issue the priorities given by the Australian people.”
The move ameliorated the anger over petrol even if it actually did nothing to provide meaningful relief to prices at the time. Over time, it cost the budget billions in revenue but this was masked by the great gouts of money that begun pouring in from the mining boom.
(Indexation was not restored until 2015 when Labor, after first attacking the Abbott government for proposing the resumption, agreed on the proviso the $3.6 billion extra it would raise over the next four years and $23 billion over a decade, would all be spent on roads).
In 2005, Howard endured another globally driven spike in fuel prices but this time, with no election pending and having played no role in contributing to the price hike, he resisted demands he cut excise, saying it would cost too much money and the decision would be politically difficult to ever reverse.
“It is a problem, not caused by a decision of the government,” he told an angry talk-back radio caller named Peter.
“I mean, I’m not responsible for a world… excess of demand over the supply of oil. I’m not responsible for Hurricane Katrina or Rita,” he said.
“Mate, I do understand it, I’m not just paying lip service, but there is no easy, immediate solution to this.”
A mug’s game
He was right. Short of slashing excise and blowing a giant hole in the budget, or nationalising the fuel industry, trying to meaningfully influence petrol prices is a mug’s game. Always has been, always will be.
Scott Morrison was ill advised this week to offer hope to motorists facing pump prices of more than $1.60 a litre and fearing they could hit $2.
Apart from ensuring the ACCC was guarding against collusion – which it is – and encouraging motorists to shop around, there is sod all the government or the ACCC can really do.
As a political leader, Morrison has to empathise with the concerns and he did. He also opened the prospect of wielding the same big stick of forced divestment with which he threatening the power companies if they do not lower prices.
The government has bought itself enough of a challenge trying to drive down power prices. Raising hopes over petrol, over which it has much less ability to influence, is setting itself up for failure.
Rather than create false hope, the government should point people towards the real thing – what appears to be a rapid move away from petrol-driven cars in this country.
To the shame of this Parliament, on one day two weeks ago, as everyone was consumed over whether Barnaby Joyce would roll Michael McCormack for the Nationals leadership, the CSIRO and its scientists were in the building exhibiting their latest achievements.
One breakthrough, which could rival the CSIRO’s invention of Wi-Fi, was the removal the last major hurdle towards the mass production of hydrogen-powered cars.
Hydrogen has a low density, making it notoriously difficult to transport and store in tanks and other existing fuel infrastructure.
The CSIRO has solved this by finding a way to separate it from ammonia, which is a compound of hydrogen and nitrogen. Unlike hydrogen, ammonia can be stored at moderate temperatures and pressures, is already mass produced in Australia and has an established distribution network.
The CSIRO has developed technology that would effectively enable you to pull up a servo and, at the pump, a process of cracking, which involves passing the ammonia over a catalyst at high temperature, would separate the hydrogen. That would be pumped into the electric car’s tank to power its fuel cell.
The harmless byproduct would be nitrogen, which already comprises 78 per cent of air. The government recently shelved consideration of a road-user charge to replace the revenue that will be lost when we stop using petrol. Unless it can tax hydrogen, the government had best reconstitute the user charge process.
Toyota and Hyundai are among those who have supported the CSIRO research. Hydrogen Mobility Australia says Honda, Hyundai, Mercedes-Benz and Toyota are all manufacturing hydrogen-powered cars and selling their vehicles in Japan, Korea, the EU and the US. Hyundai will release a hydrogen-powered car in Australia next month with an 800km range.
American company Nikola Motors will soon launch a hydrogen semi-truck and French company Alstom recently started running hydrogen trains in Germany.
Its potential is not limited to transport. The Japanese are already moving towards electricity generation using hydrogen, which they are extracting from natural gas.
Hydrogen can also be produced from water using electrolysis. The technology is still expensive and it requires significant amounts of energy but that can be done using renewable energy, meaning a clean fuel can be generated without emissions. All you need is wind and water.
Just as it was miles behind the public on social issues like same-sex marriage, politics is aeons behind on fuel technology.
While politicians obsess with coal-fired power, petrol prices, volatile oil prices and dangerously low strategic reserves, there is something deserving of government support that is within reach.
And which, thanks to the geniuses at the CSIRO, really would be fair dinkum energy.
Extracted from AFR