ABC Listen, podcasts, radio, news, music, and more. I'm Carrington Clark and I'm Alan Kohler. In 2026, Business Big and Small is moving at a rapid pace. And ABC Business Daily is here to help you cut through the noise and spin Monday to Thursday. And on Friday, I sit down with business leaders, founders, creators, change makers, and those in the know to ask them how they see the world because that's business. All in the ABC Business Daily feed on ABC Listen or wherever you get your podcasts. For a lot of us, petrol really, really matters. Probably more than we like to admit. Anyone who thought we'd carry on much as before as prices soared has to contend with a pretty substantial drop in our use of cars by as much as a fifth on some roads on weekends, a surge in our use of public transport and record sales of electric cars. But one thing we haven't stopped buying is petrol. Credit card data shows us topping up with petrol at what might be a record rate because we're scared. If only there was a way to win ourselves off petrol. And even more importantly, win ourselves off diesel. How can we do it? Welcome to the Economy Steupert on ABC Radio National with me, Peter Martin. And my guest this week, someone has been examining exactly that. How to win ourselves off petrol and diesel at the Economics Consolidancy Mandala. Adam Triggs is also a researcher at the Australian National University and the Brookings Institution. And someone who's been examining how petrol prices change our behaviour for decades now at the Australian National University, Energy Specialist Paul Burke. Welcome Paul and welcome Adam. Thank you very much Peter. Thanks for having us. Paul, what do high petrol prices do to us? You've examined this using sales data in the biggest ever Australian study in Sydney over seven years. What did you find? How much less do we buy in ordinary times as the price climbs? As economists, we would expect when the price is higher, we would cut back our quantity demanded of petrol and diesel as well. When we look at the data, that is what we find. We find that when the petrol price goes up by 10%, in the short run we cut back our use of petrol by about 1%. How do we do that? There are many substitution options. We could work from home a bit more, catch the bus, ride to work, walk to work and so on. The quantity response is not as big in percentage terms as a price shock, but it does exist. It's not nothing. Given that we've had a very big price shock, let's say 50% increase in the price of petrol, that would be substantial. It would mean that petrol sales would drop 5.5%. That is our expectation based on what has happened in the past. Of course, this card shock is particularly salient. It's big and people are talking about it. Possibly the effects could even be bigger now, but we would expect about a 5, 5,5% reduction as a result of the shock we've seen. Also, your study was carried out before COVID, before working from home became a thing. Also, at a time when electric cars were harder to get, it's likely both because of what you call a salience of what's happened, and because we're more used to avoiding the use of cars than we were, you might now expect an even bigger effect. I think that's right. We haven't done the study, but I think your intuition is right there, Peter. That response, that's called a price elasticity of -0.11, that was only the immediate response. What did you find you studied it in a different way, comparing different nations? What did you find the long-term relationship between the petrol price and petrol used to be? After some years, we ran a study for over 100 countries, and it indicated that the long run fuel price elasticity of demand is in the range of -0.2 to -0.5. That would mean that if the petrol price climbed 50% as it has, and if it stayed there, over time we'd expect sales to drop 10 to 25%. That's right. The way we got that number is we compared different countries. There's a huge range of petrol prices, as you compare Venezuela with a very low price to Norway with the very high price, and that's the type of response size that we got using the historical data. How does this compare with the CAD transaction data from the banks I referred to then? Westpac says, in the first fortnight of the Iran War, we saw more fuel transactions, more stocking up than at any time since it began collecting figures in 2019. It's an amazing statistic. People are hoarding in one sense, but really what they're doing is bringing forward their demand. So we're seeing a lot of people instead of doing one weekly or one fortnightly fill-up that they're filling up their car more regularly. The same concern underlies that, which is that they're bringing that forward because they're worried that prices are going to be higher, or maybe there'll be not enough fuel later on. I'm wondering whether that might make the government's decision to have the petrol price exercised, petrol tax for three months, a good one in some ways. I know economists don't like it. It blunts the price signal, but that probably eased panic and eased the feeling that things were out of control. I suspect people would look and they'd see that price come down, which it did very quickly, and that would give them a bit of confidence that the government has some control here. But you're right. I mean, cutting the fuel excise is great politics, but pretty bad economics. I think it would be very difficult for the government to not cut the excise tax given that people could simply say, "Well, hang on, this is getting really expensive, and you guys are taxing it at the same time." And it's worth noting that Mark Cardi, who is a pretty good economist, I think, by all accounts, he actually did the same thing in Canada, and he's cut the excise over there. But the concern is that if you're in any market and you cut taxes, the benefit of that tax cut is going to flow disproportionately to the more inelastic part of that market, which is probably supply in the current situation. And so that's the concern a lot of economists have is that the benefit of that tax cut will disproportionately flow to suppliers rather than consumers. But I definitely take your argument that a lot of consumers who are worried about prices, they see it go down a bit. Maybe that does calm down some of their hoarding tendencies. One thing you've examined Paul is the other effects of an increase in petrol and diesel prices. One incredible study you did was on traffic flow. You obtained 12 million observations from those little black cords on roads that count traffic numbers over seven years. You found that traffic flows more smoothly when petrol prices are high and there's fewer cars on the road. You've also examined air pollution using air quality monitoring stations. What did you find? We found that when the petrol price is higher, you can see it in the skies. So there are reductions in pollution readings for some key pollutants, not all but some in particular carbon monoxide, ozone nitrogen dioxide, particularly as well. We found that the effect does flow through to pollution levels quite substantially. So for a 50% increase in the price of petrol diesel, you'd see a cut in carbon monoxide levels in the air of 15%. That seems substantial. You also examined Google searches. What did you find? Yeah, we took it to the next level. We were thinking if pollution is lower when fuel prices are higher, can we see anything in terms of what people are interested in with their Google searches? And these results are a little more experimental. They're using monthly data and some sensitivities. But what we did find is that when fuel prices are higher, people are searching less for smoke as a search term and less for asthma as a search term as well. On the basis of pollution, we could say that we probably can't quantify that high petrol prices, high diesel prices save lives. That's the natural extension. We didn't look at live saves or hospital admissions or those other types of variables. But absolutely we know that air pollution is dangerous for human health. There are estimates from other work that transport emissions each year in New South Wales contribute to about 500 additional from your deaths. So we would expect that to flow through to health outcomes. What about deathstone car accidents? Well, that's another topic that we've researched quite a bit. We've done that for Australia using New Zealand data and international data as well. It's quite similar to the fuel response. So when the price of petrol goes up by 10%, we see a reduction in the number of recorded road deaths of around 2%, depending on the study and the period. For the current increase in petrol price, if it continued 50% odd increase, it expect then 12% fewer.
road deaths, 10 to 12% fewer road deaths? Of that order. And of course, it could be bigger now to give them the saliency of this shock and the size of it. We have over 1,000 road deaths each year. But yes, we'd expect a higher fuel price, all else equal to lead to a reduction. And why does that happen? Our research found this substitution to public transport when fuel prices are higher. And all of those other types of substitution such as work from home as well. So perhaps high fuel prices aren't completely bad, all the more so if they encourage us to abandon petrol and diesel altogether, which is what we're about to examine here on the economy stupid on ABC Radio National, with me Peter Martin and my guests energy economist Paul Burke from the Australian National University and batter analyst and partner at the Economic Consultancy Mandala Atom Dricks. (upbeat music) (upbeat music) Adam, how are we going to ween ourselves off petrol and diesel? Let's start with petrol. The obvious thing to do is to shift to electric cars and sales of electric cars have almost doubled in the last month. There are now good ones about. But you reckon our government is making it needlessly difficult. What are we putting in the way of the transition to electric cars that other countries aren't? One of the things that we did was scraped a whole heap of data from Australia and from New Zealand to look at what the prices of secondhand EVs look like between these two countries. We found that the cars in New Zealand are about 41% cheaper than the cars in Australia. So it's about $9,500 for these EVs. And when we look across what's different between Australia and New Zealand, the really big difference is that Australia has a ban in place on parallel imports of second hand cars. Hang on, what are parallel imports? So this goes back to when Australia had a car manufacturing industry and the big car players here, so think of Holden and others like that, General Motors, when they made cars here, they didn't want people to be bringing second hand cars into Australia to compete with the cars that they were making. And so we gave them a veto and we let these large car manufacturers veto the importation of these other cars. So it's parallel to that. - This is a car that someone's driven in Japan or the US. You're allowed to bring it in, I think, with very tight restrictions. I think one of the restrictions is you can bring them in if they're less than 12 months old and limit on the number of kilometers and all sorts of other restrictions that can't be Japanese language on the instructions. That sort of thing. - Yeah, exactly. And you go to New Zealand and a lot of the taxis, the EVs that you'll get into, they will actually have Japanese riding on the dashboard. And we don't allow that in Australia. And as a consequence, our EVs are 41% more expensive than what they have in New Zealand. - Why haven't we abolished them? Who on earth wants these restrictions to remain? - It's really the big car manufacturers who aren't making cars in Australia anymore who still have this veto. It's just a relic still sitting on the books and it's really time to get rid of it. - Working in the other direction, Adam is a perconally available to people whose employers will pay the lease on their electric car. It's an exemption from the 47% fringe benefits tax. It's effectively tax-free salary for those lucky enough to take advantage of it. It's already had 100,000 takers. It's cost the budget 1 billion, far more than expected, making it one of the most expensive emission reduction schemes per unit of emissions cut of all time. - Or that scheme to go in the budget. - I would say you should get rid of it if you've got something to replace it with. So I wouldn't suggest getting rid of a incentive scheme that encourages people to buy EVs at a time when we're really trying to encourage as many people to buy EVs as possible. - Even though it goes to people in particular circumstances and usually high income people at that, in fact, the benefits higher, the higher their income. - Oh, absolutely. It's a poorly designed policy. It's a policy where the size of the subsidy goes up if your income is higher and the size of the subsidy goes up if you buy a more expensive EV. That's a pretty silly policy. So definitely we can come up with better ways of creating that same incentive without sort of having those distortions in the system. But once we've got those in place, I think it's a great idea to fix that up, but I wouldn't get rid of it, purely just to save some money. - Paul, the main scheme we've got is the government's new vehicle efficiency standard. How does that work and what should it achieve? - Australia really left it a long time before we did anything in this space in terms of new vehicle fuel economy or efficiency. We have the new vehicle efficiency standard now. What does it do for each of the car companies? It gives them a target. They like the same target in terms of CO2 emissions per kilometer on average of the vehicles that they sell in Australia. For a company that is just selling EVs or highly efficient vehicles, they're able to generate credits. And those credits can be sold to companies that are not meeting the target. - Would it mean that if I was a car company, say Toyota and I didn't have many low emission vehicles to sell, I'd be encouraged to increase the number of low emissions vehicles, perhaps try and sell more by lowering the price and reduce the number of high emission vehicles, perhaps by charging a high price. - Absolutely, and that's the goal. It's to steer our new vehicle sales in a low emission direction. So there's a target in terms of CO2 emissions per kilometer and that will be tightened over time as well. - Because I remember political history, Paul, I have to ask, are electric vehicles good enough? In his election campaign, successful election campaign in 2019, Prime Minister Scott Morrison derided opposition leader Bill Shorten's plan to encourage electric vehicles, he said, a standard electric vehicle wasn't good enough for the weekend. - It's not gonna tell you trailer, it's not gonna tell you about, it's not gonna get you out to your favourite camping spot with your family. Bill Shorten wants to end the weekend when it comes to his policy on electric vehicles, where you've got Australians who love being out there in their four wheel drives, he wants to say, see you later to the SUV. - Is that true now, Paul? Regardless of whether or not it was correct then, our electric vehicles these days perfectly capable of doing the things we need to do or we want to do on weekends. - Well, for most of us, the answer is yes. Most of us on the weekend, the range is really pretty impressive now, could get us 500 kilometers, depending on which model you have before needing another charge. It can definitely take you to a camping spot, it can definitely tell about, of course it depends. I don't know about you on the weekend, but if you were to be off road in the Kimberly area, it's a different story. But for most trips, currently EVs are an amazing product, cheap to run, a lot of power, they can tell about et cetera, but absolutely not every single trip in this big country currently, you would choose to do via EV and I think off road in the Kimberly is a good example of that. - Adam, your consultancy Mandala and the Energy Futures Foundation have looked at diesel. In Australia, we use more of it than petrol and we use more of it per head of population than most other places on earth. You've modeled a suite of electrification programs and your key finding is that now is almost the perfect time to do it. Why is that? - Well, putting aside the global oil shock, which provides a little bit of a burning platform for this as well, when we look across Australia's trucking fleet and we look at the ages of these trucks, about a third of them are coming up to the time where they need to be replaced. And that means that if we leave things as they currently are, we're going to see more of those diesel trucks being replaced with new diesel trucks. And the consequence of that is all of the things that Paul's talked about in terms of worse health outcomes, higher emissions, but also a more expensive decarbonisation path later on because we're going to have to get rid of newer trucks rather than older ones. Whereas if we go down the other path and we have these policies in place then we can avoid all of those sort of issues and then be more resilient to global oil shocks and have higher productivity as well, which goes to our previous conversation about how good some of these new vehicles are. You get higher torque, for example, much faster trucks. Hang on, you're saying these are more powerful, electric trucks are more powerful than diesel trucks. Yeah, absolutely. And you mentioned speed, too. Yeah, yeah, exactly. One of the key productivity benefits are that they're much faster uphill. So the days of where you're stuck behind the slow truck trying to get on somewhere on the highway is a thing of the past once we get more of these trucks on the roads. So even keeping to the legislated speed level, electric trucks are faster overall because they keep to the level they're able to keep to the level more often when they're going up hills. Yeah, exactly. And because of that power, they're better with heavier loads than diesel? Yeah, that's right. I mean, they are heavier as well and this is something we have to factor in when we think about things like road, user charging and other things. But there's a whole range of policies that we looked at in terms of how you
can encourage more of these trucks to be replaced with these battery electric vehicles. And those are things like removing noise curfews given there, much quieter. You can have priority lanes for these vehicles. And there's things we can do in the subsidy space as well. And one of the risks that a lot of truck companies have is they don't want to purchase something if they're not going to be able to sell it to get something new. And so we can use measures from arena and CFC to really reduce that residual value risk. So what are you proposing? Essentially a guarantee where when you purchase this truck CFC in arena will basically underwrite whatever the cost of that is when you sell it. This is the cabin finance corporation. Yeah, yeah, that's right. And so basically what they do is when you purchase the truck, you're not at risk of not being able to sell it later on. So you have some guaranteed sale price. And if you fall underneath that, it gets topped up. But the math is really difficult for truck owners. Your study finds that 90% of freight operators have an annual turnover of less than half a million. And an electric truck itself costs almost that much. And a diesel truck only half as much. Even though the savings on fuel are enormous over time, that sort of explains why it's very difficult. These are the really big trucks. So we're not talking here about those light commercial vehicles that you see whipping around the city. The cost of ownership on a lot of those trucks is already quite low. It's for those heavier vehicles you see on highways and country roads. They're the ones that will need some support to encourage businesses to go down the decarbonisation path. And that's what these measures are about. Just getting down those costs and making sure that you can de-risk the sale later on. Paul, if we were to eliminate our use of petrol and diesel, what contribution would that make to the overall task of getting to net zero emissions? Well, it's a key part of the story. Currently our transport emissions are about 23% of our overall greenhouse gas emissions. That includes aviation and other parts of transport as well. Of course we have emissions elsewhere, agricultural, about 18%. The electricity sector, which is such an important sector on its own and for decarbonising other sectors, currently it's about one-third of our overall greenhouse gas emissions. So if we were to switch our electricity generation, which we're in the process of doing, and to remove our emissions from transport, those figures suggest we'd still have what 50% of the task lift, that's an agriculture industry, what have you? Yeah, a little less than 50% left, that's right. Industry, other stationary energy like natural gas for heating, waste, and we have fugitive emissions as well from gas extraction and coal mining. You've done calculations about this figure that we're hearing all of the time at the moment. The number of days reserves, we're said to have 30 or so days of reserves of petrol, reserves of diesel, and there's talk about us boosting reserves, storing more liquid in Australia. You've suggested that sort of an account or intuitive way, if we move away from using petrol and diesel, we'll increase our reserves. How does it work? Yeah, really when we're talking about how many days of fuel do we have in reserve, there's two ways to increase that number. One way is to increase the numerator, and that means actually having more fuel in barrels sitting in Australia. The other option is to shrink the denominator, and that is to reduce the amount of fuel that we're actually using, and then that in turn increases the number of reserves. And out of those two options, we know that building a fuel stock in Australia, and this has been proposed by a bunch of people since the crisis began. We know that that is extremely expensive. I think the Prime Minister, his latest costing that he put out was suggested. It was in the 20 billions of dollars. Whereas when we look at what benefits you get from that, you do get more reserves. You make us more resilient to shocks temporarily. You don't really get any other benefits beyond that. And the benefit here is that if we were to shrink the denominator and use less fuel, then that is by electrifying our trucking fleet and getting more people driving EVs and getting more optimization to reduce our fuel use. Not only do you get a bigger reserves and more resilience to those global shocks, but also get those long run productivity benefits from having trucks that are going up hills quicker, from having better health outcomes, from having better optimization outcomes across our transport network. One of your calculations was that if we increased our use of electric vehicles to the level of Norway, our petrol reserves would just by accounting go up from 36 days to 47. Yeah, exactly. So the IEA treaty, I think, is 90 days. We know we're near that. I think on petrol, we've got about 36 diesel. It's 34. I think jet fuel is about 32. It changes every day. At least 1.2 of the days that we've got for petrol came from EVs that we've currently adopted. Already? Already. If we got up to the level of Norway, we get 11 more days from that. That gets us to 47 days. So there's two ways that you can really grow our reserves and shrinking the denominator using less fuel is probably the best bet. Paul and Adam, before we go, as is traditional on this programme, anything to look out for in the days and weeks ahead, Paul? Well, I think looking back at the 1970s oil price shocks is pretty informative. If that led to a big reduction in the oil intensity of GDP across the world, are we set for a similar story now? Will we see this rapid uptake of EVs and reduction in fuel use that we are expecting? Will we see that in the data for March for April? So I'm really looking forward to those data releases when data comes out on that. I think that's just the fundamental question. Is this similar to the 1970s oil shock? Will the world quickly start moving towards more energy efficiency and decarbonisation? What I remember, Paul, is that we moved to smaller cars, now since moved away from them, but in the 1970s, we moved to smaller cars. In fact, it probably began the death of the Australian car industry because they didn't make smaller cars. Might we see an unwinding of what's been a growing obsession with SUVs? Well, I'm not sure about that. Electric cars are very cheap to run and there are lots of good SUV models out there. The data show SUVs have been really popular in Australia over recent years. What are you looking at for, Adam? I think this is one of those situations where no decision is still a decision. If the government doesn't decide to get creative on policy to really reduce our fuel demand in Australia, and we more broadly don't do things to really get inflation down, we're making a decision there and that decision is we're putting all of the weight on the reserve bank who are going to increase interest rates and put us closer to potentially triggering a recession, depending on how bad it gets. So really, the government needs to get creative. I'm looking towards the budget, looking for the government to really have some ideas there about practical things you can do on the regulatory side to try to reduce fuel demand and get prices down. The Prime Minister and his press club speech talked about the budget being ambitious and so hopefully he sticks with it. So Anthony Albanese and Jim Charmer's no pressure. Adam Tricks, partner and founder of the Economics Consultancy Mandela and Energy Specialist Paul Burke at the Australian National University. Thank you so much. Thank you, Peter. Thanks for listening. You can find out episodes on the ABC Listen app or listen to us on ABC Radio National Thursdays and Saturday mornings. If you have any thoughts or questions or comments, no economic question is stupid, you can email us. Timothy has done that via the
[email protected]. He writes about last week's programme, "Could we see a return to pandemic style government support or has inflation permanently closed that door?" Rosalia writes, "Is there a chance the government will increase job seeker and welfare payments again? And if not, why not, given cost of living pressures? I've got to say that if things go the way that Adam is worried about, the answer is yes. We've seen a number of crises recently. We saw the global financial crisis. We saw COVID in both of those cases the government through caution to the wind and spent to stop the unemployment rate rising to stop it rising 8%, 10%, no government wants that. And my guess is that if things get bad enough, we haven't closed the door to those sort of things, but we'll see. And hopefully we don't need to see. Thanks to producer Halle Crane, I'm Peter Martin. We'll see you next week for what's really a continuing unfolding economic story. Thanks so much.
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