Saturday, January 15, 2011

Shorter PIA NO. 2

Continuing my rough dissection of papers from the special edition of the Urban Planner (Australian Oil Vulnerability), the first paper gives an overview and assesment of the Australian transport sector, it oil use and some suggestions for reducing oil consumption. The theme binding these two papers is Australian reliance on private transportation. 

The impact of rising oil prices on the transport sector
Peter Rickwood, pages:243 — 252


Oil is the dominant motorized transportation fuel used in most countries, including Australia. Many other oil derived products and services are important to the functioning of the Australian economy. This paper provides background information about oil consumption in Australia, and reviews the available information on price elasticities for the major oil end-uses.  Reducing fuel used for private motoring, and preparing emergency adaptation plans to cope with sudden oil price spikes are identified as the major areas on which planners should focus.

This paper does not, for example, discuss laudable end-goals such as decarbonizing our economy, or drastically reorganizing our cities, because planners have limited influence over economic policy, and because less ambitious policies such as congestion charging are still contentious and difficult to put in place.

After transport (72%), mining (8.5%), chemicals/ lubricants (7.1%), and agriculture (4.8%) account for most remaining oil consumption.

Road transport (private and commercial) is responsible for 76% of transport-related oil consumption, and aviation 17%, with only small amounts from rail (2%) and water (5%) transport.

We can calculate that private car-based personal transport is currently responsible for ~35% of all oil consumption in Australia, commercial trucking 20%, aviation 13%, and numerous other non-transport sources account for the remaining 32%.

Car-based personal transport (35% of total oil)
Summary: Plateauing per-capita vehicle-kilometres travelled (VKT) will allow per-capita fuel consumption to decline, but population growth will continue to increase total demand for oil.

Apart from increasing population, there are two other trends that have been responsible for steady growth in oil consumption from passenger vehicles: increasing car ownership; and a corresponding increase in percapita VKT (due to increased access to cars and lower occupancy ratios, as well as other factors). Partly offsetting this has been a steady increase in vehicle fuel efficiency.

Commercial trucking (20% of total oil)
Summary: Fuel use largely driven by economic growth.

Aviation (13% of total oil)
Summary: Rapid growth expected to continue under ‘business as usual’, where incomes continue to rise and fuel costs do not increase substantially. Downside risks posed by poor economic conditions and/or significant increases in fuel costs are substantial.

Oil and climate change

Transport-related energy
Oil consumption and related greenhouse emissions are significant, making up 14.7% of Australia’s total greenhouse emissions in 2009.

Most urban transport energy is consumed in private passenger vehicles, and this is also the area that planners can have the most influence. The urban planning research on this matter is clear, fringe development results in high car ownership and use (Bento et al., 2003; Ewing et al., 2002; Rickwood et al., 2008), and development near well-connected employment and transport nodes results in lower car ownership and use (Rickwood and Glazebrook, 2009). These findings are broadly acknowledged by policy-makers, with the importance of centres and corridors acknowledged in most major metropolitan planning documents. It remains to be seen how well (or whether) these plans are implemented.

To cope with higher oil prices, some moderate reduction in car travel (at least 10%) could be achieved through demand reduction alone with limited impact on economic and/or social well-being. [A] further 20-30% reduction in fuel use could be achieved through better land-use and transport planning.

At first glance, it might seem that an increase in fuel costs would pose a serious problem for non-bulky goods transport …

[h]owever, fuel costs are only a few percent of final goods costs, so even a very large increase in fuel costs would result in relatively small flow-on costs to delivered goods.

Sections 1 through 6 tell us … that aviation has very little adaptive potential, and that unless we dramatically increase rail’s share of short-haul commercial freight, large reductions in oil use are unlikely to come from commercial trucking.

As I’ve recently read that second hand car prices in Australia are at a record low because Australians have bought 2 million new cars in the last 2 years, there was one statement that stood out as being somewhat subjective to me:  “Since the vehicle fleet cannot be changed in the short term” .

According to official data released by the Federal Chamber of Automotive Industries (FCAI), 1,035,574 passenger cars, SUVs and commercial vehicles were sold in the 2010 calendar year, up 10.5 per cent on the 98,246 vehicles sold in 2009.

So I guess it depends on what you mean by short term. Some of the references are available for download.

Bento, A.M., Cropper, M.L., Mobarak, A.M. and Vinha, K., 2003. The impact of urban spatial structure on travel demand in the United States. Technical Report 3007, World Bank

Ewing, R., Pendall, R. and Chen, D., 2002. Measuring sprawl and its impact. Washington, DC: Smart Growth America.

Rickwood, P. and Glazebrook, G., 2009. Urban structure and commuting in Australian cities. Urban policy and research, 27 (2), 171-188.

The next paper gives some general historical and economic background and compares the US transport system and economy to that of  Australia as a way of explaining the different economic fortunes of the two nations in recent times with reference to oil prices, native oil production and the energy efficiency of there respective transport systems

Peak oil and the advent of demand destruction: implications for transport and access in Australian cities
Michelle Elaine Zeibotsa and David Robert Bell, pages:253-262

Central to our analysis is the observation that, in the past, aggregate production measured in terms of Gross Domestic Product (GDP), has grown in a relatively stable way because energy has been readily available and cheap.

[P]roduction cuts triggered sharp increases in oil prices that, in turn, appear to have triggered global economic recessions.  [T]he recent price spike in 2008 appears to have been caused by insufficient production capacity to meet demand.

The physical economy in Australia: a history of domestic oil production and consumption patterns.

[W]hile domestic production climbed rapidly duringthe 1960s and 1970s, production peaked in 2000, … Australia now imports around 40% of domestic consumption. Australia is likely to need to import around 60% of domestic consumption by 2015 (see data trends, DRET, 2010; GeoScience Australia, 2010). [E]xpenditure on oil imports [will]  likely exceed income generated from coal exports [by this date] (see data trends, ABS 2010a).

Australia’s oil imports are primarily sourced from Malaysia and Viet Nam … [but]  production in these two countries has
peaked and is now in decline.

[O]il consumption has historically comprised a smaller percentage of total GDP, as shown to the right of Figure 3. Significantly, Australia has had fewer recessions than the US.

There follows a long discussion about the factors causing US recessions, focussing on the thesis that when US oil imports rise above a threshold level of 4% then the US economy goes into recession, whereas this has not historically been the case in Australia. There is also the case of the 1990s recession where global oil prices spiked but only comprised ~2% of the Australian economy. This is put down partly to the US recession triggered at this time, the “interconnectedness” of the global economy and the deflating of various asset bubbles.

In absolute terms, oil consumption rates in the US have always been around 10 barrels per capita per year higher than in Australia.

The US also consumes more fuel per capita for transport than Australia … [m]ore extensive motorway networks and road space has been supplied in US cities, facilitating higher trip rates, longer average trip distances and higher rates of Vehicle Kilometres Travelled (VKT) per capita than in Australia.

In Australia, total car travel has remained relatively flat since 2005, while population has increased so that VKT per capita is beginning to dip while total travel on public transport - rail and bus - has been increasing.

[T]he economy in Australia is structurally different in a spatio-physical sense - oil inputs to key infrastructure are not as high per capita, road space is generally less and mass transit provision higher and our dependence on oil imports is not as great.

[C]ircumstances could change … if urban motorway networks continue to be expanded … at the expense of more energy efficient public transport development.

In Australia, road space supply [is] between seven metres per person in Sydney to just over nine metres per person in Melbourne and Perth. Japan has placed far greater emphasis on public transport development and over 50% of journey-to-work trips in Japanese cities are undertaken by walking or cycling. This means that travel constitutes a far lower opportunity cost to other activities within the Japanese macroeconomy.

The next section contains some long explanations of the connections between the physical and money economies to outline the cause and effect nature of ‘collapse’ or as we like to call them at the moment ‘recessions’.

The money system

[T]he loans used to finance development have to be repaid along with interest to those who subsequently forgo consumption. For this to occur, the economy must grow in both money and physical terms. This leads to a situation where much,of the money in an economic system comprises debt, or credit, in excess of cash reserves retained by banks.

[T]he need to repay the loans used to finance development is the fundamental reason why economists place so much emphasis on
economic growth. [But] economic growth in the physical economy comes in a variety of forms, and some are ultimately detrimental
to maintaining the ability to repay loans in the money economy.

The world’s current problems in the financial system started when oil production began, in 2005, to flatten and stop growing, pushing up fuel prices. In the US, the need to consume petrol, diesel and other petroleum products is hardwired into the physical structure of most city economies by past decisions to build extensive road and motorway networks, instead of public transport…

Implications for future policy

[I]n our view there are three general [transport policy] principles … to avoid a future marred by periods of demand destruction. First, transport systems need to be shifted from reliance on finite to renewable energy sources. Second, these renewables need to be from relatively high energy yield sources …. Thirdly, where high-energy-yield sources cannot be obtained, greater efficiencies in the transport mode … need to be found.

[I]t is important to acknowledge that individuals alone cannot bring about change along the lines we have described. It requires the will of
planners, planning authorities and governments.

[P]lanning and provision of [Australian] transport infrastructure needs to be approached [so that the] physical and monetary system functions … to reduce the impact of demand destruction while shifting our cities and regions [to] a sustainable growth path.

This paper contained a large number of statistics and references sourced from the internet.

Australian national accounts: national income, expenditure and product.

International trade in goods and services for Australia June 2010.

Australian petroleum statistics.

 International energy statistics: petroleum production and consumption.

Petroleum Navigator: Cushing spot prices.

Australia’s annual production of crude oil 1975-2025 and forecast annual production 2009-2025.

Causes and consequences of the oil shock of 2007-08

A glossary of political economy terms: money stock.

Boyer lectures. Lecture 4: the recession of the 1990 and its legacy.

Oilwatch Monthly July 2010. Energy bulletin: peak oil primer.

Statistical tables: money and credit statistics, monetary aggregates D3

Databank: total population.

Books and papers

The Ecology  of Money

Energy and the US economy: a biophysical perspective

The transport energy trade-off: Fuel-efficient traffic versus fuel-efficient cities (subscription/payment required)

The self-defeating nature of urban road capacity policy: A review of theories, disputes and available evidence (subscription/payment required)

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