Weaning ourselves off oil would do real damage to Putin — and other dictators

With Russia’s invasion of Ukraine keeping oil prices above $90 a barrel, up nearly 10% in the past month and 20% over the past three months, petrol prices will continue to be a big factor in inflation in Australia — and continue to force real wages down for households.

It also means continuing strong revenue for the regime of Russian President Vladimir Putin, despite international sanctions. In 2021 Russian oil and gas revenue exceeded forecasts by 50%, reaching US$120 billion. It’s also a key part of the revenue of some of the world’s other human rights abusers and mass murderers — the Iranian government and the Saudi regime.

As the Australian Bureau of Statistics noted last year, “automotive fuel is one of the most volatile series measured in the CPI”. It traditionally accounts for between 2% and 5% of the Consumer Price Index. Inflation induced by higher oil prices puts pressure on central banks to tighten monetary policy — despite the fact that oil prices, particularly when they rise due to geopolitical tensions, aren’t responsive to higher interest rates except by the extent to which they smother the economy, cut growth and stifle activity and employment.

Two big changes are reducing our dependence on this volatile energy source. One is very recent — the spread of remote working in the pandemic dramatically reduced commuting for those who could do it, although the rapid growth in online commerce during lockdowns requiring an expansion of freight networks would have partly offset it.

Governments, of course, are now pushing back against home working in response to pressure from powerful lobby groups — commercial property owners who fear falling demand for office space, often funded by major investors, and urban retailers who want office workers to return to redirect spending from home and the suburbs back to city hospitality venues.

The other is the growth of electric vehicles (EVs) where Australia is a global laggard. EV penetration is still well under 1%, compared with more than 40% in Norway and Iceland, more than 20% in Sweden and Hong Kong and more than 5% in many other countries. A key reason is the Coalition’s hostility to EVs — a hostility invented on the run by Scott Morrison in the 2019 election and which we’re stuck with, however many lies the prime minister tells about how he never ridiculed them.

As is now routine in Australian policymaking, it’s been left to the states to drive EV uptake, with the NSW government embracing rebates to encourage sales and investing in charging technology — on the understanding that transforming the car fleet is a crucial part of reaching net zero emissions.

If Morrison wanted to remove a key source of inflation, as well as cut the funding of some of the world’s worst regimes over the long term, he could follow the NSW lead and get serious about driving uptake of EVs — if not to Norwegian levels, then maybe to Swedish ones. In the meantime, we’re funding our enemies and human rights abusers every time we fill up.