The impact of rising oil prices on the transport sector

Abstract

Oil is the dominant motorized transportation fuel used in most countries, including Australia. Many other oil-derived products and services are important to the functioning of the Australian economy. It makes sense, then, that this issue of Australian Planner focuses on the risks associated with scarce and/or expensive oil. This paper provides background information about oil consumption in Australia, and reviews the available information on price elasticities for the major oil end-uses. Based on this review, the impact of higher oil prices is assessed, and short- and long-run policy options are discussed. Reducing fuel used for private motoring, and preparing emergency adaptation plans to cope with sudden oil price spikes are identified as the major areas on which planners should focus.

Keywords:

• peak oil
• adaptation
• transport economics

Notes

1. I stress the ‘well connected’ because it is clear that access to a nearby centre alone is not a good indicator of general access to urban services. Access to a highly connected centre, however, is a good indicator (Rickwood and Glazebrook, 2009).

2. This is calculated based on an elasticity of −2.75 (the mean of the two values given in Table 2), a 66% increase in fuel price, and assumed fuel costs comprising 25% of total fare costs.

3. The same assumptions as for leisure travel, but with an elasticity of −1.1, as reported in Nairn and Hooper (1992).