Article – The Sydney Morning Herald

New South Wales in recent years has battled against a sparse supply of oil. In addition to this the region has also had to be content with high prices of oil leading to many commercial problems involved with transportation. Oil prices have continued to rocket to a sky high US$135 per barrel and this is likely to increase further. The geographical location of Australia doesn’t help either.
Oil is important for freight transport. The article implicated NSW as the epicenter of the problems but the problems are far reaching and impact the entire country. To ease the problems facing the nation the NSW Government needs to radicalise freight transport and urban environments in order to help Sydney against any future shortages in oil. As well as this the government needs to prioritise the delivery of fuel to certain organisations that need it most. (Deffeyes, 2006)
The article claims that a Peak Oil Response Plan was started Sept 2006 to try to alleviate the impact of fuel shortages. The NSW Government concluded that there were not enough funds available to distribute oil evenly. (Deffeyes, 2006) To overcome the problem of even distribution the solution would be for the national government to direct oil to place where it is needed most i.e. the epicenter. This will lead to an alleviation of problems in the short run.
The article signals that the freight transportation industry in Australia is the single dominant consumer of oil, and keeping it under control is by far the most important step in stabilizing our “natural balance.” Thus by agreeing upon a more efficient use of transportation, and putting an emphasis on the population rather than popularity, the setback of depletion can be diminished but has remained since 2006 especially in NSW. (Deffeyes, 2006) Judging from the article it is a sad truth that scientific estimations, carefully surveyed measurements and various other attempts to stop this reality had been overshadowed by procrastination for many shameful years. Another implication to the oil-setback was correctly suggested by the Hubbert peak theory. The theory states that once the oil industries reach its peak moment, the oil depletion will start to be noticed and immediate reactions will be done. These “immediate reactions” can range from limiting personal car uses to international ban of oil usage which could be seen as a solution in response to the problems faced in Australia in the freight industry. The theory is applicable to the article as it is actually meant to warn the people of the unthinkable consequences of oil depletion and is applicable to NSW and Australia as a whole. (Deffeyes, 2006) The worst that can happen if there is no improvement is a prolonged technological delay, until the oil reserves are filled again to support the unlimited wants. That period is estimated to be about two billion years which is unthinkable. Thus, the solution that is ultimately suggested by the theory is and linked to the article: start changing those “needs” to wants, and hold on, because the biggest crash in humanity just years ahead. The final possibility seems to be the most logical. It is to ration the existing supply of oil in other areas of Australia, to promote industrial developments, and at the same time discourage further developments in NSW and other states. This way, the market factors around the world will not get affected, only the value will level out according to their current levels. Everyone will be equal, without really having to be and NSW will again begin to prosper. Although the problem of oil depletion continues on, the search for a solution also counter-acts. Diminishing personal transportation uses, not using at all, or sharing the use is what is suggested. Whatever the final judgment may bring, Australia will remain steadfast on its feet with the sense of optimism and history. (Deffeyes, 2006). A good way of reducing the cost of fuel is to start an advertising campaign where the government would give tips to transport industry to be fuel efficient. These tips would include measures such as keeping their vehicles as aerodynamic as possible and the vehicles is kept in good shape IE tyres etc Transport manager could ask the local government to bring in Renewable Fuel Standard (RFS) which would provide relief in the short term and will save costs. These types of fuel are environmentally friendly so could provide some respite in the short term. The main aim is to distribute costs from one source to another. The government could temporarily take some finance from another industry and provide it to the transport industry for a temporary solution until circumstances improve. (Campbell, 2006)
Logistics in Australia has taken a huge blow due to the impact in NSW. Shankleman (2007) contends that many organisations have made staff redundant and that the availability of oil is not in proportion to demand meaning that many freight companies have gone bust due to the cost of oil. The state of NSW began to feel the pinch of high oil prices 3 years ago and this day the problem has lasted leading to other services being affected due to the absence of freight delivery. To counter the problem it is recommended that as many items as possible should be transported in a single freight and on the shortest possible route. This will save fuel and costs.
High fuel prices have huge implications for the transport field in Australia. Social and professional lives will be disrupted. Those who work in the transport field will need to look for alternative employment should their employers make them redundant. Economic problems will also follow the cost of living will rise. High prices mean that people may be forced to look elsewhere to meet their needs. A solution to the problems could be to use and implement and electronically based railway system which the logistics industry could use to transports its supplies. Electricity is a lot cheaper and economically efficient than oil so would definitely provide some economic relief.
The government could promote a less oil dependent policy scenario where they could have the issues raised in the World Energy Outlook 2006 such as cutting trends in energy consumption etc. The government could also promote an environmentally friendly way of getting around for people which would be on their bicycles. For long distance travel an economically viable way would be to use buses and fill it to capacity.
Many companies remain overwhelmingly dominate the oil industry. Among them are a Texaco B.P. and Shell. All are western companies, 5 American, 1 Anglo-Dutch, and 1 English. The last few years have seen the importance and influence of oil, and the world’s dependence on it but NSW and Australia have been on the receiving end as the article states. The article also states that producer nations that contain voluminous reserves have gained the spotlight and made themselves the most dominant players in the world petroleum trade and this has left Australia at a disadvantage. This trend was both represented and organized by OPEC, the Organisation of Petroleum Exporting Countries. Since oil problems took place in 2006 in NSW and Australia, demand has grown steadily and remarkably, at geometric and times exponential rates. The high prices have meant that people are not willing to spend which causes the economy to go down hill and the transport industry to a halt. The transport field provides vital funds for the economy; to put it simply high prices lead to low travel. The airport industry will slow down and tourism will also adversely affect the economy. To challenge this government could ensure that airports are given first priority on fuel whilst encourages those on the ground to use more economically viable means of transportation.
The article states that Australia relies on oil for 97% of its energy needs, 35% of industrial needs, 8% of commercial needs and 13% of residential needs. Oil efficiency has increased and can be improved continually. This can be seen especially in many regions of Australia where policy makers have relied on efficiency amelioration to check demand. Looking at the article the gasoline consumption, using only 13 percent more oil for transportation than was used in 1990, NSW gets 1.5 times as many miles and has 50% more vehicles on the road in this region. (Ball, 2006, pg66)
The price of oil nevertheless has an effect on the NSW economy. Both the AS/AD and AE models of the economy shed some light on what effect of the increase on oil prices has on the domestic economy, but a more complete understanding of the effects is achieved if both models were used in conjunction. In the AS/AD model, the aforementioned decrease in aggregate domestic supply results in the short run AS line shifting to the left from AS0 to AS1 as shown on the graph on the next page. Also, since the rise in oil prices represents a loss of income to oil consumers in energy-consuming countries such as Australia, it is likely that aggregate demand will now be slightly weaker at all price levels, thus shifting the aggregate demand curve in the model below to the left, albeit not as much as the AS curve. Price level Real GDP AS0 AS1 Long run AS AD New equilibrium Original equilibrium. This result creates a contractionary output gap as equilibrium with a higher price level and production level below potential GDP is established. Thus rising oil prices causes the economy to experience both inflation and recession a very unfavourable condition known as stagflation”. Stagflation accentuates the problem with inflation, as high unemployment coupled with high prices leads to a dramatic decrease in living standards. The usual problems of high unemployment, such as lost production, incomes and human capital also plague the economy. (Ball, 2006, pg19)
The article is very shrewd and in depth and the problems associated with it are long term but the recommendations are short term to provide a long term solution. Oil is indeed expensive but the problems lie far afield for NSW and the real solution lies in distributing fuel evenly and only importing what is actually needed and bargaining with suppliers to make sure that the best deal is possible. A shrewd option would be generate a campaign and raise awareness about how to spend money appropriately. Asking people to shift transport mode i.e. to railways would provide relief.