The Insider: Not Saving the World – Part 2

Hold it, have you read Part 1 of Not Saving the World?  Click here.

Spent a week at the wheel of Ford’s new XR8 ute. Brutish, fast, glorious sound: if you can’t enjoy driving this car, it’s time to get the vital signs checked. (“Good lord man, you mean I’ve been dead for a month and no-one told me?” )

But somehow, driving the XR8 feels a bit like having the last ride on the merry-go-round before it is packed up and taken away.

You know the fun is coming to an end. The problem our local manufacturers face with cars like the XR8, SS Commodore and R8, is on the service station forecourt and the rapid rise in negative sentiment amongst car-buyers for larger cars.

For people who love their cars, and love the glorious bellow of a V8 on the hunt, the pain at the petrol pump is simply flagging the arrival of a dreary new order of things.

You might think it is so bad now, it can’t possibly get worse. “Surely, the price has got to start coming down soon,” you might be thinking.

You’d be wrong there: barring a miracle - peace breaks out in Iraq; Iran stops talking about its ‘nuclear program’; huge new oil find in the Arafura Sea; speculators and hedge funds suddenly exit the oil market... and other things equally unlikely - the bleeding at the pump is going to turn really uglified in the next year or so.

You see, one of the things currently protecting the Australian economy from even higher pump prices is our high Aussie dollar. Right now, it is trading at around 95 cents to the US dollar (USD), but you’ll remember when it fell to under 50 cents against the USD (47.75 US cents to be exact, that was April 2001).

It’s strong now because our commodities sector is really good at digging holes and selling what comes out of them; and it’s also strong because the US economy has taken a little break down the toilet at the moment and taken the US dollar with it – a mass outbreak of stupidity in the banking sector is responsible there.

Now the natural instinct when you’re down the toilet is to gather your wits, concentrate hard on not swallowing any lumps, work out which way is up, and swim to the surface.

When that happens, when the US economy starts recovering and gets its head up out of the shit, then our problems at the pump will really begin.

A recovering US economy will mean a recovering US dollar, and that, as certain as sunrise, will put our Aussie dollar on the slide. It could easily lose 10 percent or more of its value (after all, it has risen by 60 percent against the USD since 2001).

Then, oh crap, we will be paying even more for oil on the world market, because oil exchange is transacted in American dollars.

Imagine, hypothetically, the Aussie dollar was still trading at 50 cents rather than its current 95 cents value. With oil currently trading at around US$135 a barrel, Australia (with a ‘50c dollar’) would have to spend, hypothetically, A$270 to buy a barrel, which, under import parity pricing, would flow through to the pump price.

There are other variables at work, but you get the picture. Any movement down in the Australian dollar against the ‘greenback’ will be bad news at the pump.

So, sorry to spoil your day, but the view ahead, as far as the petrol pump is concerned, can only be seen through shit-goggles.

And it seems no-one has a clue what to do about it.

Sure, we could all drive less: drive 10% less and you save 10% on fuel costs. Stop driving altogether and you’ve just given yourself a full 100% discount.

The tragedy in this is that the days may be numbered for terrific drives like the XR8 and Holden’s R8. At least for ordinary blokes like you and me. For sure, LPG is an answer – you can run an XR8 on LPG for the cost of running a Golf GTI – but it’s the negative sentiment and resistance in the showroom that will be difficult for our local manufacturers to overcome.

Yes, right now we need a miracle. Perhaps it’s time for the Ruddster to call a day of prayer. We’ll need a public holiday of course if we’re going to make it work; people need a chance to concentrate on this sort of thing. (Would the day after tomorrow suit?)

So you’ll have to excuse me, I’d like to spend a few minutes with the good book… there’s this little psalm that useful in times of crisis like this, psalm 98RON: “Blessed are the petrol heads…”

Ah hang it, just pass the Jim Beam.

LPG: the answer to our prayers?

Right now, 21 June 2008, inner-city board prices for ULP are showing $1.65 per litre; LPG on the other hand is on offer for $0.64c. That’s well under half price – a whole dollar per litre cheaper.

So work it out. With that price advantage, an XR8 fitted with LPG will cost less to run, in terms of fuel costs, than a Camry, Liberty, or Mazda 6, etc.

The sequential gas injection of modern LPG systems, when fitted by an accredited LPG fitter, is vastly improved over older systems. Power loss is marginal (undetectable), and there is only a very slight increase in consumption (expect around 10%).

And there are other benefits like longer engine life (because LPG burns cleaner); reduced tail-pipe emissions; a higher octane rating (of LPG) that reduces engine “knock” ; and, should you have your vehicle converted, the Government will slip $2000 under the door (the rebate on the fitting cost).

A conversion, depending upon the vehicle, can cost from $2500 to $4500 installed so you will still be left more than $1000 ‘out of pocket’ after the rebate – but at current petrol prices, you’ll get that back in 6 months or so.

LPG is currently excise-free. From 2011 however, the Federal Government is to introduce an LPG excise that will add 2.5 cents a litre a year until it is capped in 2015 at 12.5 cents per litre.

With plentiful supplies in Australia (enough to meet demand for at least 50 years), and a ‘home-grown’ product, LPG may be the answer to our prayers.