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<FONT face=Tahoma size=2><B>From:</B> Robyn Roberts
[mailto:jroberts@alphalink.com.au] <BR><B>Sent:</B> Wednesday, 3 May 2006 1:30
PM<BR><B>To:</B> Adrian Whitehead<BR><B>Subject:</B> Rising petrol prices are
good for us _ Ross Gittins Opinion Page - feature article -The Age -today
:)<BR></FONT><BR></DIV>
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<DIV><FONT face=Arial><FONT face="Times New Roman"><FONT size=2><FONT
size=4>Rising petrol prices are good for</FONT> </FONT><FONT
size=4>us</FONT></FONT></FONT></DIV>
<DIV><FONT size=4></FONT> </DIV>
<DIV><FONT face=Arial><FONT face="Times New Roman" size=2>Ross Gittins Opinion
Page - feature article -The Age </FONT></DIV>
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<DIV class=articleDetails><DATE><FONT size=2>May 3, 2006</DATE><BR>
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<DIV class=articleDetails><FONT size=2>This pointless struggle to accommodate
motoring won't be able to continue.</FONT></DIV>
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<P><STRONG><FONT size=2>Traffic stresses us. So public transport will do us no
end of good, writes Ross Gittins.</FONT></STRONG></P>
<P><FONT size=2>One good thing about next week's federal budget is that even
though Peter Costello is flush with cash and likely to offer tax relief to
families, he's unlikely to cut the tax on petrol.</FONT></P>
<P><FONT size=2>That's a good thing because we must learn to live with high
petrol prices, not find ways to duck them.</FONT></P>
<P><FONT size=2>With prices hovering around $1.40 a litre in some cities and
Costello warning that worries about the Iranian nuclear stand-off could push
them up to $1.60, the motoring lobbies are looking for ways to ease the pain.
The RACV, for instance, wants Costello to remove the GST on fuel excise, saving
about 3.4 cents a litre.</FONT></P>
<P><FONT size=2>But whichever way you look at it, cutting the tax on petrol
would be the wrong way to go. For a start, there's the conventional economists'
argument that the best response to higher prices is higher prices.</FONT></P>
<P><FONT size=2>Huh? It's not as meaningless as it sounds. Prices rise when the
demand for something is growing faster than its supply. Although part of the
rise in oil prices is based on speculation about disruption in the Middle East,
and so may not be long-lasting, the underlying increase in demand is coming from
the rapid growth in the economies of China, India and other developing
countries. This is likely to keep upward pressure on oil prices for many
years.</FONT></P>
<P><FONT size=2>But in a market system, a rise in the price of some commodity
prompts a change in behaviour. It increases supply by encouraging exploration
for new sources, makes formerly uneconomic oil fields profitable and encourages
the development of substitute fuels.</FONT></P>
<P><FONT size=2>At the same time, it reduces demand by encouraging consumers to
use petrol more economically and search for cheaper substitutes. Put this
reduction in demand together with the increase in supply and you see that a rise
in prices should lead to a fall in prices.</FONT></P>
<P><FONT size=2>So allowing retail petrol prices to move in response to market
forces is the best way to minimise the long-term rise in prices likely to come
from the developing world's increasing demand for oil.</FONT></P>
<P><FONT size=2>There is evidence that motorists really are changing their
behaviour in response to the higher prices of the past year or two. Despite the
continuing growth in our economy, the quantity of petrol sold in Australia last
year fell 8 per cent.</FONT></P>
<P><FONT size=2>In the purchasing of new cars, there's a marked swing away from
four-wheel-drives and other gas-guzzlers towards smaller cars. There are even
signs of a modest switch back to travel by train and bus.</FONT></P></DIV>
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<P><FONT size=2>But the economists' conventional response doesn't fully capture
our present situation. We need to limit our use of petrol and other fossil fuels
in the interests of the environment.</FONT></P>
<P><FONT size=2>So, if anything, the tax on petrol needs to be higher, not
lower. The recent report on international tax comparisons showed that in the
December quarter of last year we had the third lowest level of taxation on
unleaded petrol among the 30 members of the Organisation for Economic
Co-operation and Development - 49 cents a litre compared with the average of
$1.15 a litre.</FONT></P>
<P><FONT size=2>It really is remarkable the way we can have our regular bouts of
indignation over the price of petrol without anyone thinking it relevant to
mention greenhouse gases. Politicians and greenies who profess to be terribly
concerned about our failure to sign the Kyoto Protocol keep their mouths firmly
buttoned.</FONT></P>
<P><FONT size=2>But, if you accept that the world price of oil is likely to stay
high and go higher over the coming years, there's a third respect in which we
need to adjust rather than duck.</FONT></P>
<P><FONT size=2>It concerns the way our state governments have persistently
neglected public transport while desperately seeking to accommodate our desire
to drive everywhere. Whatever the truth of the claim that the states have
allowed public infrastructure to run down, it can't be said of their continuing
direct and indirect investment in expressways.</FONT></P>
<P><FONT size=2>But it isn't working. No matter how many improvements they make,
the reduction in congestion is always temporary. Why? Because congestion is the
only thing restraining our deep-seated preference for driving.</FONT></P>
<P><FONT size=2>So when conditions improve, driving increases until the degree
of congestion returns to about its former level. The fact that public transport
keeps getting worse doesn't help either, of course.</FONT></P>
<P><FONT size=2>The point is that this pointless struggle to accommodate
motoring won't be able to continue. It fits neither with our need to reduce
greenhouse gas emissions nor with the likely inexorable rise in the cost of
private motoring.</FONT></P>
<P><FONT size=2>But when finally our state governments get the message that they
need to switch their investment from expressways to public transport there'll be
a bonus for you and me.</FONT></P>
<P><FONT size=2>Research into happiness shows that the aspect of people's daily
lives they least enjoy is commuting.</FONT></P>
<P><FONT size=2>And much research by psychologists shows that people find
driving through heavy commuter traffic particularly stressful. In extreme cases
it can cause gastrointestinal problems, headaches and anxiety. Elevated blood
pressure is common.</FONT></P>
<P><FONT size=2>But if driving through heavy traffic is so bad for us, why do so
many of us want to do it? Because human nature is full of contradictions. The
state pollie who wakes up to this one will do wonders for our health and
happiness.</FONT></P>
<P><STRONG><FONT size=2>Ross Gittins is a senior
columnist.</FONT></STRONG></P></DIV></BOD>
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