There's no shortage of bad ideas in Australia
Almost every proposed response to Australia's fuel crisis would make it worse.
I don't know what it is about a crisis, but those with the worst ideas have an uncanny ability to make their voices heard the loudest, and also happen to occupy prominent positions within government.
The world is in the midst of an oil shock brought on by the joint Israel/US attacks on Iran. Were they justified? Who knows. But what we do know is that it sent the price of oil up very quickly, and has even threatened Australia's ability to get fuel (specifically diesel) at any price.
With any luck, the Iran theatre will peter out over the coming weeks as Trump gets bored, becomes increasingly worried about how high oil prices might affect the mid-terms, and chickens out.
The key for Australia is to avoid doing something really stupid in the meantime. The problem is that unlike oil, there's no shortage of stupidity in Australia.
As far as the government goes, the Prime Minister is getting National Cabinet together again to brainstorm "new emergency measures to conserve fuel", which will no doubt spook punters into loading up on fuel before they can implement whatever bad ideas they come up with, worsening the crisis.
Then there's the Treasurer, who is out and about passing legislation against so-called price gouging. What he doesn't seem to understand is that higher prices automatically curtail the lowest-valued uses of fuel, in effect rationing supply and easing the crisis. And what looks like "gouging" may not even be that: as economist Eric Crampton recently argued, the cost of selling a litre today is not just what it cost to source, but the value of keeping it in reserve when replenishment is uncertain. That's a socially valuable function in a time of crisis – higher fuel prices today are better than no fuel tomorrow – yet our Treasurer is actively undermining it.
On the other side of Parliament, you have Tasmania's Liberal Premier Jeremy Rockliff who wants to halve the fuel excise tax. Billionaire mining heiress Gina Rinehart wants to abolish it entirely. And One Nation, which is surging in the polls, wants to cut it by 50% and for Australia to start rationing fuel immediately.
All of those ideas are, to put it plainly, stupid.
Cutting the fuel excise tax during a supply shortage simply lights a fuse under demand, accelerating the depletion of Australia's finite fuel reserves. Is it a bad tax that should be abolished? Yes. In fact, in normal times I'd generally support replacing the fuel excise with a proper road user charge. Road funding could then be distributed to the states and territories on a per capita basis, rather than the current system in which the bulk of federal road money flows to the most marginal seats prior to every election.
But the fuel excise tax isn't excessive, as claimed by people like Rinehart. While it's true that it flows into general revenue rather than directly to roads, once you tally up all road-related revenue and expenditure, it's clear that roads in Australia are heavily subsidised: total government road spending has exceeded total road-related revenue every year since around 2008, with the gap now running at several billion dollars a year.
The shortfall is covered by taxpayers who may never use those roads. And cutting the excise now will only widen that margin, with lower prices also increasing the likelihood of running out of fuel entirely—an outcome far worse than higher prices!
I really hope the Iranian crisis ends soon, because the longer it goes the greater the risk that panic sets in and the stupidest people in Australia get an opportunity to put their worst ideas into practice.
