In a new series on Viewpoint we discuss some of the most common assumptions the media makes on a day to day basis, without even checking the facts. It is keep it simple stupid approach misses the full story on a range of issues. Everyone is not the same but for simplicity the media makes us one.
Nothing apparently gets the public more furious than those high oil prices that never seem to stop rising and in my view I fail to see a problem with them rising, as that is exactly what they are meant to be doing!
The basic issue that seems to escape media, politicians and the public is the cause is related to the basic economic fundamentals of supply and demand. Outside of discovering new oil supplies or reducing usage nothing can be done to solve this issue to the satisfaction of the public.
While 2007 was by no means a bad year comparatively for oil prices in Australia, 2006 was much worse. The common figure quotes is the price per barrel on the New York exchange which has risen considerably by as it quotes in US dollars, the real Australia cost of a barrel has risen as much as our dollar has strengthened against the United States.
Australian media outlets when reporting the price of oil in its finance reports ideally should covert the US price into local currency so that consumers can much easily measure the real changes in oil prices. A casual observer could easily make the assumption that oil prices have skyrocketed this year based on the US price when the change in price is more to do with falling American dollar than the change in the price of the oil.
That issue aside, much of the news cycle for petrol prices are the poor motorists stories which revolve around the basic premise that everyone else is to blame for their self-inflected woes. Instead the greedy oil companies, the duopolistic supermarket chains which dominate petrol retailing in Australia and the Arab nations who hold most of the oil supplies.
You can almost guarantee an easy sound bite from the self-imposed petrol price monitor, the NRMA and a few vox-pops with concerned motorists. Same format if the price of a bus or train trip happens except the useless opposition transport minister substitutes for the NRMA with a pretty hapless and predictable whinge about the incompetence of the Government.
The NRMA on the other hand is a strong political force, which a large membership base and has the media feeding out of its hand. Though its wish list to get oil prices to drop from where they are today is a fantasy and it common list of complaints are pretty much solved already.
There a few types of stories occur, the petrol pricing cycle where petrol stations raise prices on day people are most likely to fill up on! Wow! Welcome to free-market economics, it happens everywhere. Try booking a hotel or airline ticket on New Year’s Eve, it not going to be the same price as one in the middle of February. Bread rolls at Coles or Woolworths are much cheaper at 10pm than they were at 10am. With some much publicity of this practice it is a hard argument that consumers are not aware of this already with the easiest solution is to fill up on the days it is cheaper. If this was forced to be removed it would leave those that filled up on the cheap days to pay more than they would have with the current system. It only gives an advantage to the lazy and the peak days would be much busier at service stations as there would be no incentive to fill up during off-peak periods.
The other great issue is the sudden increases to petrol prices prior to any significant holiday. You can almost guarantee a story in the tabloid press and the commercial television and radio news bulletins prior to every holiday. Another well established practice and one that consumers should know well enough by now that it smarter to fill up prior to the holiday period.
It is legitimate for service stations to charge extra during holiday periods and it really hard to mount an argument why not. Basic supply and demand are in operation again! You only have to compare prices in any retail store prior to Christmas and day after to get an idea how the practice works elsewhere. Simple, when you need expect the good to be at a higher price than when you are less likely to need where the price will drop.
The other great rallying call for its members is Government intervention into the petrol market. The ACCC if you are to believe the NRMA should be monitoring petrol prices and regulating the market. With low margins in the business and most of the cost pressures outside the control of the petrol retailers and wholesalers this process appears likely to lead to a massive waste of taxpayers money to prove absolutely nothing. On a whole, generally with one of the most competitive marketplaces driven by the supermarket chains prices are unlikely to have the room to be dropped further.
The new Labor Government is promising a wide-ranging inquiry on the matter with the ACCC and wants to monitor prices on an ongoing basis. Committing basically to a waste of time that will see almost no change to the status-quo, even though they are giving the impression it will make a difference. For motorists it is a false dawn, the Government will not opt for tighter regulation as there is very little need for it and if there was it would be unlikely it would have much of an effect on the price paid by consumers.
You have to give credit to Howard for the most effective yet illogical policies of capping the federal excise taxes on petrol which in effect makes an effect on the final price. However, it was an expensive electoral bribe to reduce a tax on a good that is rightfully takes to recoup some of the social costs its use applies to the rest of society.
Yet the more logical solutions receive limited and erratic coverage. They are not as easy and may not be as popular as the other solutions proposed by motoring groups. Broadly, they agree with them in principle but limit the lobbying power to be big issues that will get them changes they believe their members are wanting.
The longer term solution is reducing our dependence on oil by reducing our usage ideally and finding our energy sources, ideally ones that are renewable. Reducing usage is not a popular concept with those who brave inadequate, often humorously inadequate urban transport system with the major cities and sparsely provisions in regional areas finding it difficult to get from A to B. Most of the networks have been deprived of investment, a lack frequency, in some cases they are unreliable and have limited operation hours reducing there ability to replace the majority of car trips with out major inconvenience to the motorist. In some areas even in the large cities it is just not possible.
Increased environmental awareness has placed alternative energy sources back on the agenda. Long term solutions here could see us benefit from other greener sources of power that are not dependent on fossil fuels which will in the future become cheaper than the more traditional sources. Back to basic supply and demand again and if the source is unlimited then the price can drop dramatically. However, development costs and getting people to use these methods remain an obvious hurdle.
The short straw is, the media is taking the easy options of the most part by exploiting the public’s fears about oil. They don’t even question the position of cheap petrol, congestion and pollution free suburbs when both clearly can’t co-exist. The media often ignores the fact not everyone owns a car in attempt to simplify the story.
There are exemptions to this rule throughout the year. One of the most notable efforts was by the ABC-TV Four Corners program ‘Peak Oil’ which took into account a much broader range of the issues with the benefit of 45 minutes of primetime television airtime. Hopefully educating some of the poor motorists who are mostly likely have not seen anything yet.
It is time for change, in the years to come we be seeing more motorists forced out of their cares thankfully on our trains and buses kicking and screaming on along the way.