Petrol Price Plunge Won’t Arrest Car Decline

Eureka Street

Eureka Street

OH HOW WE LOVE cheaper petrol. After years of writing pain-at-the-pump puns, journalists are giddy at the prospect of prices heading south for once.

When a Sydney petrol station sold E10 Unleaded for 99.9 cents a litre at the beginning of January, the Sydney Morning Herald spruiked the offer with an entire news story and video.

And when the symbolic $1 barrier was cracked in Queensland, the Courier Mail cheered ‘Bowser bonanza fills motorists with joy’. Any more joyful and motorists will be pictured at petrol stations, nozzles in hand, splashing the stuff about with carefree abandon.

The 99-cent deals are, of course, a promotional stunt. Last week, the national average price for unleaded petrol was 111 cents a litre (although down to 104.5 cents in Sydney). That’s the lowest prices have been in five and a half years, and it’s come after nine weeks of trending downwards. 

The reason is a drop in the international benchmark price for the Asia-Pacific region. That’s ultimately driven by the recent collapse of the crude oil price, which has fallen from near US$115 a barrel in June 2014 to below US$50 a barrel in January 2015.  And the biggest reason for that, many analysts argue, is the shale fracking boom in the US contributing to a global oil glut. (The US doesn’t export crude oil, but now imports far less, inducing oversupply.) The Economist has labelled the standoff ‘Sheikhs v shale’: a Saudi-led price war to put higher-cost producers in the US and elsewhere out of business. 

As the media reminds us, the low oil price is a boon for motorists, who are expected to take advantage of cheaper petrol to travel more kilometres. Already regional tourism operators in New South Wales are reporting a surge in day-trippers from Sydney. But any increase in driving will be short-lived because car use is actually declining in Australia, and even the lure of ‘bargains at the bowser’ won’t alter this long-term trajectory.

For most of the twentieth century, kilometres travelled by car per person in Australia rose steadily. But it began to plateau in the late 1990s, and noticeably declined from 2004. Australia isn’t alone in this. A 2012 study by the Bureau of Infrastructure, Transport and Regional Economics of 25 countries found that after rapid growth in the 1960s and 1970s, traffic per capita for all vehicle types consistently slowed, and is now at saturation point in many countries.

A lower petrol price is unlikely to reverse this megatrend. The Bureau’s report found past fluctuations in the petrol price haven’t produced marked deviations from the saturation trajectory. Seesawing fuel costs are blips in the overall pattern. There are larger, structural forces at play.

What we’re looking at, writes Professor David Metz, former Chief Scientist at the UK Department for Transport, is the end of an era. His book Peak Car argues that up until this point in human history people have steadily travelled greater daily distances, but from now on they’ll travel the same distance or less.

Metz has two main points to justify this claim. The first is that the purpose of daily travel is to access more choice – choice of jobs, schools, homes, food and other goods. But choice is subject to what economists call ‘diminishing marginal utility’, meaning that the more choices you have of a particular type of thing, the less you value each extra choice. If you have well-stocked food stores or supermarkets within fifteen minutes of home, then the incentive to travel further for just a little more choice is small. Your demand for travel to access more food stores has reached saturation. The same applies to a whole range of other aspects of modern life – with enough choice already close to home, the value of venturing further shrinks.

Metz’s second point is that we’ve reached the limits of speed for passenger cars. It’s not that they can’t physically travel faster. It’s that the costs of driving – in terms of energy consumption, carbon emissions, road wear-and-tear and potential damage in a crash – rise exponentially with velocity. At a certain threshold, the costs outweigh the benefits of arriving somewhere more swiftly, and that threshold has already been reached in the large cities of most developed countries. ‘So we have come to the end of an era of growth in travel,’ writes Metz, ‘not just because we now have high levels of access, opportunities and choice…but also because we have largely run out of possibilities for travelling faster by means of new technologies.’

In a 2011 journal article, Australian researchers Peter Newman and Jeff Kenworthy from Curtin University raise further reasons why we’ve hit peak car. One is that all cities have a similar travel budget time of about an hour – a phenomenon known as Marchetti’s constant after the Venetian physicist who discovered it. As technological innovations have allowed people to travel faster, they’ve chosen to live further from work or food sources, but rarely more than an hour away.

So drivers face two dead-ends. The car can’t go much faster than it currently does, and most people aren’t willing to travel more than an hour a day. Combined, these two constraints mean the potential range for daily car travel has hit a wall.

Those are just a few of the theories for why we’re driving less. There are other potential causes: the architectural and design movement New Urbanism has promoted walkable cities with car-free streets and high-density suburbs, reducing the need for mechanised travel; increased traffic congestion has created a disincentive to drive; as the population has aged a larger proportion of people are retired, with less need for daily car trips; and digital technologies have reduced the need to travel for social interaction. 

Most worrying for the auto industry, young people aren’t taking up driving at the same rates as their parents did. Explaining why, Ford Motor Company’s future trends manager, Sheryl Connelly, has said that the car no longer symbolises freedom to Gen Y as it did to the baby boomers.  With the rise of car-sharing websites, renting has lost its stigma, and young people now prize access over ownership.  

For a whole range of reasons, we’ll be driving less in the future. Once the novelty of petrol for 99 cents a litre wears off, we’ll find ourselves in exactly the same position as before: slowly walking away from the car.