Breaking oil's grip

Matthew Wright from Beyond Zero Emissions (authors of the 'Zero Carbon Australia' Plan) has an article in The Climate Spectator talking about the importance of eliminating Australia's dependency on oil (especially in the context of Richard Branson's recent prediction of $200 per barrel oil) - Breaking oil's grip.

A $US200 per barrel oil price by mid-decade is consistent with Beyond Zero Emissions’ internal analysis and will have massive economic consequences for Australia. The issue presents us with an opportunity to achieve multiple outcomes: reduce our impact on the climate, while increasing our economic competitiveness and energy security. We can sandbag our economy from punishing oil prices, but only by equipping our automotive sector for the 21st century and utilising modern electric rail in upgraded national transport and freight networks.

The Australian economy will be importing 80 per cent of its oil by 2015, which means we will be forking out as much as $66 billion for imported oil per year from 2015 (based on Australian Petroleum Production and Exploration Association figures combined with BZE and Branson oil price predictions for 2015). Although this huge figure is equivalent to a quarter of the Australian federal budget, federal and state energy ministers refuse to acknowledge it, despite several years of trying to bring these facts to their attention. It is a significant economic vulnerability that will only grow in the decade ahead.

The increased cost of imported oil on the horizon is akin to a 'great big tax' on Australian families and already stressed industries. But unlike government taxes that pay for new schools, hospitals, train lines and other critical infrastructure and services, this multi-billion dollar price hike will solely benefit oil-rich nations. Instead of driving the Australian economy into a $66 billion brick wall, we need to get on the front foot and retool the economy for the safety and security of Australian families and industry.

Our government must push domestic car factories to retool for pure electric and plug-in hybrid vehicles. This is the case for leading US car maker GM. The company has successfully retooled its Michigan factories to mass-produce the Chevy Volt at the affordable $41,000 per car (in line with what average cars cost in Australia). There is no reason why Australia can’t do what Michigan-based automakers have done.

Given the rapidly rising demand for electric vehicles, reorienting the automotive industry is a strategic economic move. GE just announced it will aim for 25,000 electronic vehicles (EVs) in its global fleet by 2015. Anticipating increased demand, the European car-giant Renault will aim to produce 500,000 pure EVs per year by 2013. Even with ramped-up production though, EVs are expected to be in short supply globally over the next three to five years.

So what can the Gillard government do to encourage the automotive sector restructuring? There are several options.