Petrol price insurance

So in attempting to take some time off after the 2020 Summit, I forgot to write about my one big idea that came to me during the Summit but, of course, was never aired as I was in the wrong group for it. It was this: the way to sell the public on high petrol prices as a way of reducing emissions would not be to impose a tax on it but to fix the price of petrol at, say, $2.50 per litre, for the next 3 years and raise it by some fixed amount thereafter.

What is the rationale? Well, we know that people do not like petrol price fluctuations (as per the whole Fuel Watch thing). Also, we know that the vast amount of price fluctuations are cost driven. So if we set the price of petrol at $2.50, pegged, we would be sending all the right environmental signals and we would have the government assume the risk associated with cost fluctuations. At $2.50, the government would still be raising more revenue but it would also be absorbing price fluctuations.

How we would ensure that the government wasn’t being ripped off? Let them negotiate the petrol price on behalf of consumers. Any retailer who didn’t want to play ball could just accept a say, 100% tax. I think this would be constitutional as retailers could opt out of the scheme.

There are probably all sorts of practicalities to work out. But I think with regard to petrol, the government is going to need to think what it can offer voters drivers as a quid pro quo for climate change policy.

5 thoughts on “Petrol price insurance”

  1. It’s not April 1 anymore Josh!

    Ok, I’m sure your $2.50 was a pretty arbitrary figure but the ignorance in Australia in the progress of solar technology and things like it is stunning.

    Two companies in California are both building gigantic farms of Stirling engines in the desert, and the drive for this while being required by Calif law, hasn’t used public funding as far as I can understand.

    It’s not about “cutting emissions” Josh – that will never work and only delay any disaster a year or two. How about eliminating emissions by ridding Australia of the deadly duo – coal and oil – and transferring completely to electric cars and renewable energy sources such as the highly economical Stirling engines…?

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  2. It’d fly right until the underlying cost went above $2.50/L. Then in a few decades the government would be vastly in hock to sustain the price.

    Because none of them, not one, would have the guts to change the price.

    This is a terrible policy idea.

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  3. Jacques, the price was set for a few years and then would rise. The idea is that it would never be below the equilibrium price — that would be stupid.

    The point is that we are going to have to think about these issues if climate change policy is going to be sold in a meaningful way.

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  4. Joshua;

    I didn’t put my point well. My point is that this idea overlooks realpolitik.

    Once the price is set in stone at $2.50 it will never be changed again — nobody would dare touch it. Especially if, as is likely, the first price fixing event would put someone out of government.

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