The fuel prices crisis

Hal Morris

We are entering an age that means a new energy environment in more ways than one.

Fuel prices have skyrocketed as a result of demand growth outstripping supply. It is now common to see prices of $1.70 or above for petrol, and diesel, so vital for T&L, is hovering even higher.

Saudi Arabia has just hosted a major energy meeting in Jeddah of oil producing and consuming countries, with leaders attending from around the world including Australia’s Minister for Resources and Energy, Martin Ferguson.

The result of discussion at this forum was an undertaking to accelerate the bringing online of fuel investments. This is not a short-term solution but one that will take years to really start to have an impact, if it does at all.

Meanwhile demand continues to rise around the world, particularly from developing countries such as China and India. It is highly unlikely this trend will reverse any time soon.

Already these liquid fuel price rises are impacting on T&L supply chains. This increased cost pressure is hurting many players in our industry. Costs, where possible, are being passed on to customers and end consumers, but in some cases that is just not possible, particularly in the short term.

The whole of Australia is being hit, with each family’s grocery bill growing and pain being felt in the hip pocket.

On top of this substantial fuel price rise, the transport and logistics industry is about to be impacted by one of the biggest policy changes in our nation’s history. Australia is moving to an Emissions Trading Scheme (ETS) as part of the international shift to a carbon economy.

While the form of the ETS, particularly in relation to liquid fuels, is yet to be finalised by government, there is no doubt it will strongly impact on our industry. T&L is particularly reliant on liquid fuel as our energy must move with us.

Whether fuel is fully included in the scheme up front or some transitional arrangement is implemented to offset the impact on transportation, costs are going to increase and will need to be passed on to customers.

With all the debate focusing on the growing cost of energy and how industry will handle these price rises, it is easy to forget the rationale behind bringing in an impost on the use of carbon – a cleaner, greener economy, including transportation.

Actions that must be considered include the shape of our supply chains and distribution centres and more efficient use of transport through, for example, travelling at less congested times, full utilisation of available loads, and/or modal shift to less energy-intensive transport systems.

It should be recognised by policy makers that our supply chains are like oil in our economy’s engine: without T&L our nation will stop moving. Everything happening in Australia depends in some way on transport, be it your morning coffee, your bedtime novel or even the delivery of the next generation at the local maternity hospital.

It is therefore critical that governments give consideration to using carrots to encourage cultural change in reducing T&L’s impact on carbon emissions, not just sticks.

The stick is likely to be ETS, but carrots may include, for example, encouraging the efficient use of our national supply chains, assisting the parts of our industry hardest hit by ETS to cope with change, and innovative improvements in technology to reduce fuel consumption.

The impact the move to a carbon economy on our nation and the T&L industry cannot be underestimated. If we do not speak up about our needs change will happen anyway, just without our input. I strongly encourage everyone to become involved.

Hal Morris is the chief executive officer of the Australian Logistics Council.

MREC HERE

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