petrol costs spell doom for the suburbs

aust govt transport report today

Petrol costs spell doom for suburbsBy Cathy Alexander
August 19, 2008 05:40pm
Article from: AAPFont size: + -

RESIDENTS and businesses in the outer suburbs of Australian cities will leave in droves if oil prices stay high, a new report predicts.

Analysis undertaken by the federal government's transport department predicts households and businesses will move to the inner city if petrol prices continue to bite.

This is because people will abandon their cars and take public transport instead.

Those who do keep driving will switch to diesel or hybrid cars, while 4WDs will fall by the wayside, the analysis predicts.

International holidays will also become a rarity.

But the great Australian tradition of living in the suburbs and driving to work might survive for some time - the analysis found the shift to the inner city would only happen "in the very long term''.

The transport department based its analysis on the effects of the recent spike in the oil price, which pushed petrol prices over $1.70 a litre.

Prices have dropped back down again - to $1.49 last week - but some analysts warn the days of cheap oil are over.

The oil spike caused an 8.2 per cent drop in fuel use, the analysis found.

In the long term it may have a deeper impact.

"Over the long run, fuel prices do have an effect ... a longer-term process of adaption is set off,'' the analysis said.

"It is possible that the recent oil price increases have set off such a process and that if oil prices remain on an upward trajectory, the adaption process may still have a long way to run.''

The analysis found for each 10 per cent rise in the petrol price, there is a 1.5 per cent drop in car fuel use.

It found that higher oil prices and technological change would lessen demand for petrol.

But this could be outweighed by population growth and increasing incomes, which allowed people to spend more on fuel, the analysis found.

Richard Denniss from the Australia Institute said the analysis showed higher petrol prices would not sufficiently reduce demand or greenhouse emissions.

Petrol should be included in emissions trading to send a message to use less of it, Dr Denniss said.