Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I am aware of the comments made by the head of the IEA, forecasting the possibility of even higher oil prices—something that no-one within this government would like to see. Of course it is highly speculative to be trying to forecast where oil prices might go. The Treasurer in our party room this morning reminded us all that, I think, in the year 2000 the price of oil was $11 a barrel. Today it is $70. Who knows what it will be in six months or a year’s time. It is difficult for domestic governments like ours to be operating on the basis of the unforeseen and impossible to forecast fluctuations in the barrel price of oil.

However, there is no doubt that the market does work—and the market should be allowed to work. When the price of oil is high there is innovation in alternative energy sources and innovation in much more efficient use of oil. It is a fact that the world is now much more efficient in its use of energy in general, but oil in particular. Oil as a function of world GDP is much lower than it was at the time of the oil shock in the early 1970s.

So it is important that governments do not seek to stifle the market signals that are sent when a non-renewable and declining resource like oil does go up in price. For that reason, we have seen much more investment by the motor car companies in hybrids, electric vehicles, hydrogen and all the alternatives to the use of oil that are potentially available for private transport. We have seen governments invest in hydrogen. The US government has made a major investment in the development of hydrogen as an alternative. For our part, we have quite specifically encouraged investment in and the use of alternatives to oil through our biofuel strategy, of which the industry minister is a key part and which is supported strongly by a number of senators in this chamber—to wit, ethanol and biodiesel. Indeed, I opened Australia’s largest biodiesel plant in Adelaide during the recess. It is a fuel that we strongly support.

It is important that governments allow those price signals to work their way through. We have a great deal of sympathy for Australians paying much higher prices for their fuel, but it would be naive in the extreme and cruel in the long term to suggest there is anything the domestic government can particularly do, except to ensure that we do our utmost to encourage the development of alternative energy sources, particularly for land transport.

Under our government we have made a major investment in rail infrastructure. The Australian Rail Track Corporation, of which I am a joint shareholder, is a major government business that has done a remarkable job in improving the efficiency of rail transport in this country, and it has received significant injections of capital under this government to improve rail transport in this country. I think all of us want to see greater movement of freight from road to rail in this country as an important contribution to lessening our reliance on oil.

I will not get into the business of speculating about the price of oil. All of us would like to see it come back to more realistic levels. Nevertheless, the upside of the current prices is a major increase in investment in alternative energy sources.