Australian government announces measures to reduce fuel costs

Monday, August 14, 2006

The Prime Minister of Australia, John Howard, has announced new measures to alleviate the impact of rising global oil prices on Australians. They include grants of up to $2,000 to switch to LPG, and $17.2 million over three years to improve E10 blend ethanol fuel infrastructure.

Speaking in Parliament House, the Prime Minister outlined the cause of higher petrol and diesel prices as a consequence of increasing global demand for oil occurring at a time when additional supply is tight. He singled out the re-emergence of China as a major factor in the increase in demand, and underinvestment as the main reason that supply cannot be increased rapidly.

The Prime Minister once again said he would not lower fuel excises, saying that any benefit that might bring would be quickly devoured by further rises in global oil prices, and would leave a large hole in the Federal budget.

He announced that the $1,000 grant to purchases of new vehicles equipped to run on LPG would be brought forward from 2011 to be effective immediately. In addition, he announced that conversions of private vehicles to LPG would be eligible for a $2,000 grant, also effective immediately.

LPG is much cheaper than petrol in Australia, partly due to concessional tax treatment. The Prime Minister said that a six cylinder vehicle that travels 15,000 kilometres in a year would save $27 per week at current prices if converted from petrol to LPG. With the $2,000 grant, the conversion would pay for itself in four months.

The cost of the eight-year program to convert vehicles from petrol to LPG, including lost excise revenue, is estimated to be $1.3 billion.

On the ethanol front, the Prime Minister announced a further $17.2 million dollars over three years to help petrol retailers install or convert pumps for E10 blends. Eligible petrol stations will receive up to $10,000 towards the cost of conversion or installation, once complete, and an additional $10,000 when sales targets are met.

The Prime Minister also made mention of remote communities that rely on diesel for their electricity supply. He said that the existing Renewable Remote Power Generation Programme has helped remote communities reduce their reliance on diesel, through the use of renewable energy services like wind turbines. He announced that the Government will extend this programme with an additional $123.5 million over four years, and will now include energy efficiency projects.

The Prime Minister also committed an additional $135.4 million over the next five years for exploration services, searching for new oil, natural gas and geothermal reserves.