Howard’s wrong decisions on offshore gas exports start to hit transport sector now

The trucking company 1^st Fleet has gone into voluntary administration. Only months of checking the books by the administrator de Vries Tayeh will reveal why that happened but following factors may be at play:

(1) high diesel prices which are continuing much longer than in 2008

(2) a weak retail sector (money motorists spent at the bowser can’t be spend in the shops)

(3) declining margins in the retail sector which passes on pressures on the logistics industry

(4) financing problems

So all the factors have something to do with peak oil which increased oil prices five-fold from their 1990s level and triggered the GFC.

http://www.abc.net.au/news/2012-05-03/trucking-workers-lose-jobs/3987724

http://www.dailytelegraph.com.au/business/st-fleet-shut-down-600-jobs-to-go/story-fn7ki14e-1226345517546

1 St Fleet web site with notice on voluntary administration, captured 4/5/2012

Trigger for the 1^st Fleet debacle is the withdrawal of the financing facility by the French company Coface Australia. More details are in this article:

Transport company head breaks down as he lays blame for collapse on administrators and funders

4/5/2012
A distraught Brown [managing director of 1^st Fleet] says he used a French company called Coface Australia to help make its payments, rather than a bank overdraft. In return for payments, Coface took security over the firm’s assets.
http://www.pmflegal.com/blog/index.php/2012/05/04/transport-company-head-breaks-down-as-he-lays-blame-for-collapse-on-administrators-and-funders/

On the Coface Australia website we find an interesting report titled “Country Risk Overview” and a chapter “Towards a new oil shock?”

 Here is an extract:

“We foresee a $120 price per barrel of Brent in 2012. This reflects the severe constraints limiting the oil supply since the year began, the strong demand from emerging countries,

 

and the heightened geopolitical uncertainties. In this article we consider several scenarios and analyse the effect on the world economy if prices surged beyond $120 per barrel. The global recession is likely to be triggered if prices soared above $200 a barrel but what would be the consequences if Brent prices surged to an intermediate $150 a barrel? And then, how would American, Japanese, European and emerging companies be affected?”

Australia: Negative watch on the A1 risk assessment

• The very strong growth expected in 2012 (about 2.8%) rests largely on mining sector performance. But this also tends to cloak the difficulties in manufacturing and tourism, more sensitive to price competition. Those two sectors have suffered not only from the appreciation

of the Australian dollar but also from weaker domestic demand.

• Housing construction has sagged in a context of chronic shortage, which will likely put upward pressure on prices.

• The confidence of households – deep in debt – buckled late 2011 amid growing unemployment.

• Access to credit has remained difficult for companies outside the mining sector and payment times have tended to lengthen (accordingto a survey conducted by Coface Australia over half of the 553 companies participating reported that payment times granted to customers had increased by over 60 days).

• Corporate bankruptcies accelerated (up 17.3% in six months through February 2012), a trend consistent with the rise of the Coface payment incident index.

http://www.coface.com.au/PDF_interactif/country_risks_overviews_apr2012/files/docs/all.pdf

So that gives us some background information on the Coface decision.

Now to the title of this story. Some of the above problems surrounding peak oil could have been mitigated had prompt action been taken after Colin Campbell’s warning between 1996-1999 details of which are here: 

http://www.oilcrisis.com/campbell/

Who was in power then?
8/7/2011    “Yes, Prime Minister”, peak oil 2006 under your watch

http://crudeoilpeak.info/yes-prime-minister-peak-oil-2006-under-your-watch

What should have been done for the trucking industry? Australia’s gas could have been used as alternative transport fuel, either as CNG (urban freight distribution) or LNG (long distance trucks).

Not to mention that rail could have been electrified and intermodal freight trains be introduced to carry trucks and/or trailers on flat bed cars.

However:

6 month’s after the Iraq war – a failed attempt to grab Iraq’s pre-peak oil with the objective to push the global crude oil peak a couple of years into the future – we saw the Howard government signing a memorandum of understanding with the Chinese Government to export LNG instead of looking at the national interest first and use the gas domestically.

 

http://www.nwsalng.com.au/news/2003/NORTH-WEST-SHELF-VENTURE-TO-ASSIST-IN-DEVELOPING-CHINAS-NATURAL-GAS-AND-LNG-INDUSTRY

Howard’s energy white paper of June 2004 said there is no need to accelerate the uptake of alternative transport fuels. Howard proclaimed Australia to be an energy super-power[1] and allowed the export of huge amounts of offshore gas from the North West Shelf instead of setting policies in place which would have allowed Australia to use its gas as transport fuel.