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Fuel rationing is looming as a real possibility in coming weeks. There’s already discussion of some relatively soft steps which could include rationing of access to petrol based on odd/even number plates; driving every second day; working from home and speed limits.
One problem with soft approaches (often proclaimed by governments with much fanfare) is that rather than reducing demand, they induce a rush to the bowsers by a public troubled by the adoption of rationing.
It is instructive to look at what happened in World War II. Every vehicle owner received a ration book with coupons which showed allowed purchases of a fixed amount of petrol. Without a coupon, motorists could not buy petrol. In addition, allocation was prioritised for essential industries (farming, freight, doctors and emergency services).
This left very little available for everyday motorists, but supplementary rations were allocated if justified, such as for business needs. There were heavy penalties for black marketing and fuel coupon forgery. The result was a massive decline in the use of personal cars, a surge in public transport use, and greater use of bicycles and carpooling.
Of course, World War II rationing occurred in a different environment from now.
The size of population and number of cars was smaller; the needs of industry and the public were not as complex; most people lived within close walking distance of shops; there was considerable time to set up a rationing system and; in wartime circumstances, there was general public and nonpartisan support for rationing.
This wartime approach won’t be replicated, but it indicates some of the difficult issues that arise in liquid fuel rationing. What is likely is that federal and state liquid fuel emergency legislation of the 1980s could soon be activated to introduce rationing.
Apart from early soft steps, a more substantial early step may be government-enforced allocation to users such as transport, agriculture, industries deemed “essential” and emergency workers. There will also be special allocations to rural and remote areas.
The choice of essential users will be controversial, much more than the COVID selections of essential industries and workers.
These allocations will mean that less fuel will be available for non-prioritised users, including the general public, which will experience disproportionately high cutbacks, shortages, queues and high prices.
The higher prices stemming from the shortages themselves play a role in rationing demand, but the effect is modest. The demand for essential fuels is insensitive to price, with a 10 per cent price rise, say, is likely to lead to limited cutbacks of perhaps 1 to 2 per cent. A 100 per cent price rise might reduce demand by 10 to 15 per cent. This suggests very difficult, potentially nightmarish, decisions lie ahead for the government on rationing.
But as well, whatever form rationing takes, it will require associated price regulation. As motorists already know, they will not be shielded from a painful pass-on of high world fuel prices, but the public will want constant reassurance that the increases do not constitute price-gouging.
The present price powers of the Australian Competition and Consumer Commission are limited to attacking proven price collusion or false claims about the war as the cause of exorbitant prices. These powers do not address directly the scourge of price gouging.
The required legislation may be based on the mild price surveillance laws used in the Iraq-Kuwait War of 1991, or the sterner-but-temporary Howard-Costello laws used for the introduction of the GST in 2000. All of this constitutes a potential horror story to play out if the shortages appear.
In the meantime, Australia will do everything it can to protect supplies, or at least to stop a fall in our share of dwindling Asian supplies.
Let’s hope that there’s another solution than rationing or price control, but the government needs to plan for this contingency, and if it proves to be inevitable, it is better to act sooner rather than later given our limited reserves and the spectre of early fuel price buying, queuing and hoarding.
Professor Allan Fels of University of Melbourne and Monash University is former chair of the ACCC.
Allan Fels is the former chairman of the Australian Competition and Consumer Commission and former chairman of the Australian National Mental Health Commission.From our partners
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