Power Equipment Australasia

XXXX OPINION What is going on with energy prices? I am going to ask you to look at your energy bills. I know that trying to understand your 14-year-old’s social media account is less stressful than analysing energy usage, but that is what you need to do. The energy costs we need to review include fuel cost for vehicles and your electricity bill. Maybe you also have a gas bill and other energy sources. Fuel prices are the costs we notice most often. Watching fuel price boards along the road is a national pastime so let’s start with fuel. Energy Australia has calculated the average price of petrol at the beginning of COVID in 2020 was $1.39. Diesel was $1.45. By December 2022, petrol had risen by 32 per cent to $1.84; worse still for business are diesel prices which rose 53 per cent to $2.22 per litre. Why? Everyone has a theory, and we have had far too many studies and Royal Commissions into fuel pricing, more than any other industry. Let us start at the start. The foundation of Western economies and the major driver of our increased wealth since WWII has been globalization. That means we treat the world as one big market. We allow companies to buy and sell products at world market prices, avoid trade restrictions and minimize import duties that only ever slow down trade. As a result, what we pay retail reflects world prices. Australia imports over 90 per cent of our fuel. When the price of crude oil goes up it is because, for example, the Saudis announce they are reducing production. The supply/demand trade-off pushes prices up in the world market, and in turn at our fuel pump. Diesel prices have risen much more than petrol mostly because we are buying a lot more diesel. In 2020, Australia was buying about the same amount of petrol and diesel, around 1,500 million litres per month. By 2022, petrol sales had dropped slightly to 1,400m litres/month but diesel had steadily grown over $2,500m litres/month. As the demand for diesel keeps growing so will the relative prices. I can’t see that trend changing in the next few years. High diesel prices are here to stay. The world price has also taken us for a ride and that’s what has pushed Australia over the edge into an energy crisis. To get a handle on this we need to understand that all energy prices are linked. Oil is the probably the starting point, as its price is managed by OPEC. Gas prices follow and so in the end does coal. To put this into practice, here is just one scenario. Germany imports most of its energy and gets half of its gas supplies from I am going to ask you to do something you never do. In preparation, open your bottom drawer and take out that packet of ‘Brave’ pills. Take one now and keep the packet handy. 18 | POWER EQUIPMENT AUSTRALASIA | MARCH - APRIL 2023

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