Australia’s two most senior politicians have made extraordinary and false statements about oil prices this week.
On Monday, Prime Minister Scott Morrison said oil prices would rise more than not if his government was sacked. But he provided no evidence to support his claim – even when asked.
Deputy Prime Minister Barnaby Joyce continued Tuesday morning, telling ABC Radio that Labor would raise oil prices by ending fossil fuel exports, a move he said would devalue the Australian dollar.
There is no evidence for this claim either. And Mr. Joyce’s comments were riddled with lies about Labor’s policies on fossil fuels and the climate.
Oil prices are already rising due to global factors beyond Australia’s control, while future coal exports will be decided by international action on climate change and will not necessarily devalue the Australian dollar.
A few months before the federal election, Tit New Daily asked experts to comment on the government’s latest assertions about oil prices.
Morrison’s false claim about oil prices
Let’s start with the Prime Minister’s extraordinary demand on Monday.
Mr Morrison was asked about rising global inflation and whether it would affect Australian households.
He replied: “Australia’s economic recovery must be driven by people with a track record of economic management.
“Otherwise, you’re going to see gas prices go up. You will see the price of electricity go up. You are going to see interest rates rise more than they should have otherwise.
To understand why Mr. Morrison’s claim is wrong, let’s take a look at what goes into the gas prices Australians pay the Bowser.
Australia does not produce its own oil – the vast majority of gasoline that powers our vehicles is imported from huge refineries in Singapore.
This fuel accounts for about 39 percent of Australia’s weekly gasoline bill.
The price of this fuel has skyrocketed over the past 12 months amid limited oil supplies and a global resurgence in road traffic following COVID shutdowns.
Gasoline prices rose to over 170 cents per liter in Melbourne, Sydney and Brisbane late last month, but have since started to decline slightly as global oil prices retreat from decade highs .
This means Australians are paying the Bowser more than they were last year, but it has nothing to do with Mr Morrison or the Labor Party.
Oil exporters such as OPEC countries and Russia (a group known as OPEC +) are negotiating oil supply levels without any contribution from Canberra.
These supply levels ultimately influence the cost of oil and the price Australian importers then pay Singapore oil refineries.
Canberra controls only one element of the Bowser Awards: taxation.
Federal fuel excise accounted for about 42% of Australia’s weekly fuel bill in the June quarter, according to data compiled by the ACCC.
It is the biggest contributor to oil prices in Australia. But there is no federal or Coalition labor policy to increase this tax.
The remaining 19% of your gas bill is determined by local retail margins and operating expenses. Governments could move the dial on this part of your bill with regulation, but Labor has no policy to do so.
Finance Minister Simon Birmingham said on Tuesday that subsidies to Australia’s two oil refineries protected motorists from rising oil prices.
The government has previously claimed that oil prices would rise by one cent per liter if refineries shut down.
But as The New Daily previously reported, experts denied this claim, saying that because Australia imports almost all of its gasoline, the refinery bailout is unlikely to impact Bowser’s prices.
The verdict on Morrison’s claim? It’s wrong. Whether the Morrison government wins or loses the federal election will have no effect on oil prices.
Shadow Treasurer Jim Chalmers said Mr Morrison had resorted to a “pathetic” fear campaign.
“The County Liar is starting over,” Dr Chalmers told reporters.
“Gasoline prices have skyrocketed under his watch. Is he now seriously claiming that he has a policy to keep oil prices low? Well, then let’s hear it.
“He’s so intent on deflecting attention from the economic failures and wasted opportunities that define his tenure that he’s resorted to increasingly ridiculous claims.
“Is he seriously claiming that interest rates would not rise if he is re-elected, or that he will control world oil prices?” It has made central Australia more vulnerable, not less. “
Joyce’s false claims about work
Mr. Joyce’s claim on ABC radio Tuesday morning was more specific than Mr. Morrison’s the day before. Asked about Mr Morrison’s comments, he made several false statements about Labor Party climate policy.
“If you are relying on green preferences you will have to rely on green policies, it is a very simple equation,” said Joyce.
“If they move away from exporting our fossil fuels, which is a clear policy of the Greens, then with the reduction in what you sell basically becomes a reduction in the value of your currency.
“A reduction in the value of your currency means that everything you import obviously goes up. “
The long bow drawn by Mr. Joyce here presents several problems.
The first is the suggestion that Labor will adopt Green policy to end fossil fuel exports if they are elected because they are relying on Green preferences.
Although Labor has yet to unveil its full range of climate policies, it has guaranteed a continued role for fossil fuel exports in the economy.
Labor plans to unveil policy ahead of the election, without consulting the Greens.
This part of Mr. Joyce’s assertion is false. Labor does not have a policy that would end fossil fuel exports, as Mr Joyce suggested.
Joyce’s unsubstantiated claims about the dollar
The second part of Mr. Joyce’s claim implies that oil prices could rise in Australia due to a devaluation of the dollar caused by falling exports.
This claim is more complex and has been presented without any evidence.
It is true that Australia’s trade surplus with other countries influences the value of the Australian dollar against the currencies of other countries.
A lower-valued Australian dollar is good for exporters like farmers and fossil fuel companies (which, ironically, are Mr. Joyce’s main constituents) because they earn more for their products.
But this worsens the situation for importers, as the Australian dollar they use to pay for goods is worth less than every dollar in another currency.
Australia’s trade surplus is just one of many factors influencing the value of the AUD, as economist Saul Eslake said The New Daily.
Mr Eslake said Mr Joyce’s claims showed he had a misunderstanding of the economic principles behind the Australian currency.
He said a major factor in the value of the Australian dollar is the Reserve Bank of Australia’s official cash rate, which is currently at an all-time high of 0.1%.
Higher RBA cash rate
The Reserve Bank sets the interest rate independently of the federal government.
“You could say [RBA Governor] Phil Lowe is going to push up oil prices because he’s going to raise interest rates later than [the US]”said Mr. Eslake.
“So should we fire Phil Lowe?” “
Mr Eslake said there was no evidence the energy transition would devalue the Australian dollar.
It is possible that falling prices for fossil fuels (like coal and gas) will put downward pressure on the Australian currency as the world moves away from fossil fuels to reduce carbon emissions.
But the crucial word there is “world”. Although Australia is a net exporter of coal and LNG gas, the price we get for these products is determined by international demand, which is expected to drop rapidly through 2050.
This will happen regardless of the policies decided in Canberra.
In fact, according to the government’s own net zero modeling released last week, the value of Australia’s coal exports will fall by 50% by 2050 due to “shifts in global demand beyond Australia’s control. “.
And while falling fossil fuel prices may depreciate the Australian dollar, it is also possible that other green industries are increasing their share of Australia’s trade with other countries, offsetting the effect of falling prices. fossil fuel prices.
Indeed, what matters to the Australian dollar is the value of our trade surplus with other countries, not our dependence on a particular export category such as fossil fuels.
Nicki Hutley, economic spokesperson for the Climate Council, said Australia had many opportunities to export hydrogen and a range of other minerals such as lithium, which will be critical to meeting the net zero goals. .
“If we diversify into other exports and have a much larger base… we become less dependent on a single mineral,” Ms. Hutley said.
“You get a less volatile dollar. “
“It’s a bad economy”
The government’s net zero modeling projects that the mining industry will be 5% larger in 2050 than today due to a surge in new minerals.
A report by rights group Beyond Zero Emissions released in September found that green exports could bring the Australian economy $ 333 billion annually.
Australian coal exports were worth just $ 33 billion in the past year, according to ABS data. The gas was only worth $ 39 billion.
Even those numbers are overshadowed by Australia’s biggest export: iron ore.
Australia’s iron ore trade was worth around $ 196 billion last year.
Australia’s demand for gasoline is also expected to decline sharply by 2050, with electric vehicles set to become a much more important part of our lives as the world moves away from internal combustion engine cars.
To quote the government’s own net zero modeling, oil will be “replaced” by zero-emission transportation technology until 2050.
Thus, oil will also become a smaller share of our annual imports.
“If we lower our import bill, our checking account is doing better and we will probably have a stronger currency,” Ms Hutley said.
“But you can’t take just one thing in isolation; it’s a bad economy.
“You can’t make wacky assumptions without setting out all the assumptions and assessing what’s going on as a whole. “
The gist of Mr. Joyce’s remarks? His claim about Labor policies is false and his opinion of the Australian dollar is unfounded.