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How will Australia's North survive as fuel prices increase?

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sptrawler

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I wonder how Broome in W.A is going?
The proposed LNG onshore processing would have supplied onshore jobs.
Now we have a situation of a falling dollar stripping tourism, due to the huge distances.

I believe the greens have the 'planets' best interest at heart, however one has to wonder if it is the best interest of the general population.
As fuel prices increase, overseas destinations become more attractive due to price sensitivity.
The viability of these Northern towns decreases as tourism wanes.
Therefore if we don't demand more from the resource companies to develop the North what is the outcome?
 

The Coalition plan to develop the North and West for the benefit of the people.

I would imagine that part of that strategy would to have cheaper fuel and as a consequence NO GREENS as Greens are a blight on the body politic and the population in general.

gg
 
How are the greens responsible for the price of petrol?

Australian fuel prices are based on the regional benchmark fuel (not oil) prices for the Asia-Pacific region–that is, the Singapore prices for petrol (eg. MOPS95) and diesel (Gasoil 10ppm sulfur).

In 2011–12, the tax component (GST and fuel excise) of the retail price of petrol averaged about 36 per cent or 51 cents per litre. Payments to the Australian government in 2010 (from fuel excise, GST on fuels and income tax) was over $19 billion. My understanding is the carbon tax doesn't apply to petrol.

GST was a Howard / Liberal tax and excise has been around I have no idea but possibly longer than the Greens have been.

As fuel prices increase, overseas destinations become more attractive due to price sensitivity.
The viability of these Northern towns decreases as tourism wanes.

Wont an increase in fuel prices mean that OS destinations also become more expensive? Airfares will have to rise.

Better if these tourist destinations invest in their product and make it something people want to travel to.

This sounds like the precursor to a request for regional handouts.
 

Except when it's in the Government's interest to do deals with them. No more debt ceiling now GG. The Liberals can borrow to their hearts content due to the deal they struck with the Greens and there's nothing that can be done to stop them.

September 6 2013 Tony said We will not do any deals with independents and the Greens.

He's done one with the greens, and looks like he'll be doing some with PUP in the not too distant future.

Personally I think the deal done with the greens was a sensible one.

Still, Tony was all about integrity and honesty. Maybe this was just another non core promise, or maybe we just misunderstood what he meant? I suppose he only said it, never put it in writing eh.
 

Obviously you haven't travelled, by road, throughout Australia.
 
To the extent that oil becomes scarce and expensive in the future, and we are already partly down that track so it's not really a hypothetical, then usage will contract to the highest value uses.

Already gone is most power generation, firing industrial boilers and heating buildings. They were all commonly done with oil at one point but not anymore - there just isn't enough oil to go around to use it for such things these days. They have moved to coal, nuclear, hydro (electricity) and especially gas in the case of industrial boilers and building heating.

Starting to go now is shipping, which is starting to go to gas in the form of LNG.

So far as tourism is concerned, it has held up thus far but suffice to say it's a long way down the priority list behind travel for day to day activities both private and commercial, the military and agriculture. At some point, it gets squeezed out.

It's worth noting in the context of tourism that Qantas, Virgin and Jetstar collectively burn through about 10% of all oil used in Australia. Now add in ground transport that is tourism related and the industry is a rather big oil guzzler all up.

I'm sure we'll still have a tourism industry in the future but, just as it was in the past, it will likely involve much shorter distances of travel. People living in Melbourne will tend to holiday in regional Victoria, for example. That's pretty much how it was in the past, and it's what we'll largely go back to if fuel prices and other factors kill off cheap air travel for the masses. Sure, we'll still have planes flying, but not at a price and frequency that enables the average person to fly on a regular basis for recreation.

All this is, of course, assuming that fuel prices do indeed increase substantially. Whilst I'm all too aware of the situation with oil resources, and shale wells peak and decline awfully quick so they're no silver bullet, there's always the prospect that a major economy falls in a heap or some kind of technological revolution (Eg mass adoption of electric cars) kills demand and keeps oil prices low enough to carry on business as usual with long distance travel including aviation. Predicting this one is a gamble at best.

From the perspective of WA, personally I'd be more worried about gas than oil. There might be a lot in the ground but with the rate it's being committed to future export there's going to be very little left to run WA industry. Even reserving 15% only pushes the problem out a decade or two. Then what? They'd better hope that some combination of wave, tidal, wind and solar works out OK since nuclear isn't really suited to the WA situation and they're selling the coal too so forget that one.
 
medicowallet said:
As well, the falling dollar makes OS travel much more expensive so people will be flocking to broome in droves
Click to expand...

You think so? I will love to qoute you in five years time.

It will be really interesting to see how things pan out.
In the 1970's if a company wished to exploit our resources, they had to install infrastructure and towns to house the workers.
Now with fifo no lasting infrastructure is installed, if you think tourism will maintain these Northern towns, your dreaming.
Check out tourism Australia Wiki. lol
http://en.wikipedia.org/wiki/Tourism_in_Australia
Read that and tell me how many tourists are visiting, if you can work out the spin.
IMO unless we demand value added infrastructure from multinationals, we will end up in manure.
 
sptrawler said:
Obviously you haven't travelled, by road, throughout Australia.
Click to expand...

I just responded to your point that it was was the Greens' fault somehow.

Falling AUD has the downside of higher petrol prices, and generally higher import costs.

Most of the cheap oil has been used up. Seems $100 a barrel is about the price point needed to bring new supply on.

http://www.thebull.com.au/premium/a/43169-why-a-finite-world-is-a-problem.html

Last year, 80 big energy companies in North America spent a combined $50.6 billion more than they brought in from their operations, according to data from S&P Capital IQ. That deficit was twice as high as in 2011, and four times as high as in 2010.

So I'm just trying to understand the point of your post. What is the problem, and what do you see as the solution?

Are you asking for fuel subsidies - just look to Indonesia / China / India to see how much they take up of their budgets.

Should we provide incentives for people to holiday in Australia? Should the incentive be for driving rather than flying? Should Governments be trying to pick winners? Shouldn't resources flow to the one who can make the greatest economic use of it?

The fact is we're at the other end of the resource boom. We'll be giving up at least 30% of the free income increase we received when the ToT were sky high. It's going to feel like a recession for most of us due to this. The falling AUD is one way the rebalancing of the economy will occur. It should in theory make domestic holidays more competitive against overseas ones. It probably wont make it more competitive for someone in Mel or Syd to head to Broome though considering the distance.

-------------------

Just read your last post.

IMO unless we demand value added infrastructure from multinationals, we will end up in manure.

So you've gone from blaming the Greens to blaming the multinationals using FIFO workers. In a world that has over capacity in just about everything - from Aluminium to steel to copper processing, you want Australia to add more to this and then? We'd be a high cost producer and liable to perpetual Government handouts or closed down fairly quickly with billions in loses.

Personally I'd have preferred Governments at all levels had continued to invest in TAFE and ensured that there had been a greater number of Australians who could have worked on these mining projects rather than requiring 457 Visa holders to flood into the country. Not only would the wages explosion not occurred, it would have meant the projects could have been built cheaper and more likely on time and budget. Interest rates could have been lower sooner, the AUD not so cripplingly high, and some of the hollowing out of industry in this county avoided. Short sighted State and Federal Governments have ensured that option wasn't available.

As for building infrastructure and new towns, I think part of the reason for FIFO is because most people don't want to live a 4 hrs flight from a capital city with not much within driving distance either. Once the labour intensive construction phase is completed these mining projects require few humans. The way BHP and Rio are automating the production processes there will be fewer and fewer humans required over the next few years.

The RSPT was a much better way for these multinationals to be forced to give a larger share of their super profits back to the community, but they fought a successful battle in the media to stop that from occurring, and just as the MRRT that replaced it is about to start paying some decent dollars, the current Government is proposing to kill it off.
 

All good points Syd, I really don't have the answers.
I just can't help but wonder what will happen to the area north of the 26th parrallel. Tourism is a non event, Venice gets more tourists a year than Australia, so that isn't going to save the North.
Cost of fuel pressures in the North add hugely to cost of living pressures, which in turn forces wages up. It also is a deterent for opening small businesses.
Therefore unless big companies are made to process our natural resources here sustainable growth can't be achieved. We have been digging up our raw materials since the 1960's, now after 50 years we have less down stream processing than we had then.

At the moment we appear to be in an indulgent phase of our development, people can live where they want and fly to work, as if that is sustainable.
You say we are a high cost producer, I agree. Also our value adding industries, which are located close to the cities, are closing down due to high costs.
So if we are reduced to an economy that competes in the same market place as third world countries, flogging minerals, somethings got to give.

I think the window of opportunity to actually capitalise on our resources has been well and truly missed.
You probably hit the nail on the head, when you said no one wants to live in the North, they would rather be on the dole in the Cities.
 

The future is value adding and knowledge industries. Look to the USA or Japan, both relatively high cost countries that add an amazing amount of value to their products. Biotech companies can make a fortune from extremely high value knowledge.

If oil and most fuel sources are going to keep on increasing, and unless we see say 2 or 3 billion humans leave the planet in quick succession, then we really need to start adjusting to a future where travel is expensive and using the least amount of resources we can is not only an economic imperative, but probably for our own survival.

As for staying in the city to be dole bludgers, well the Kimberly region has an unemployment rate of 6.6%, compared to WA of just 3.8%, NSW also seems better at 5.6%. Can't find what the current Sydney Metro area unemployment rate is, but would consider it to be lower than the state average. Possibly the dole bludgers up in the Kimberly could move to Perth or another state where there's better long term employment options? The other factor of why people don't want to live and work in these areas is the climate. Massive rainfall from Nov to April means enjoying the outdoors is not much of an option. Other issue for a lot of people is the fact it's horribly hot up there. When it's not raining it's consistently in the mid 30s or above. I hate to think what it costs to aircon a house up there.

We live in a relatively market based economy. People live where they live mainly by choice. Humans all over the world pretty much choose to live on the coast in a major city that benefits from the network effects of having lots of people and businesses close together. I can see some benefit in Government trying to promote the large regional cities in the hopes of alleviating congestion in the capitals, but trying to encourage people to move to places like Broome is bound to fail.

I remember watching a doco on Kununarra around 12 years ago on the ABC. It was depressing.

I'm with smurf. I see a not too distant future where long distance travel will again be a luxury and we will live mostly within our states and cities, where electrified transport will be the main way to travel long distances, which makes interstate freight a real issue. Cities will have to go back to a similar layout like paris, where the Arrondissements were pretty much a 20 minute walk to the nearest water source in layout. I can see it happening where I live. Just about at the point where if I had the passive income to not work I could literally do all my living within walking distance of my house.
 
Large super-urban cities have had their day. They are now the refuge of Greens and terrorist nutters, along with a rich left new class, who have an interest in perpetuating a top down ethic. They despise workers.

Most of the real work, mining , agriculture and manufaturing is done in the outer suburbs or country, areas ignored by the new class.

Tony Abbott plans to develop the North and West to afford workers the chance to realise their potential and improve the lot of their families and communities.

Fuel prices will come down as a result.

And indistries such as beef cattle will not be strangled because a Left ALP minister, hasn't got the bottle to ignore the Green ABC lobby.

gg
 

So how does developing the North and West reduce fuel prices? Considering how remote those areas are wouldn't it take quite a bit of fuel to ship to and from those areas?

can't alk about other cities, but the inner suburbs, especially the wealthiest, are generally full of blue blooded Liberals. Not many labor voters can afford to live too close to the city centre these days.

I also like the way you discount the knowledge industries that generate quite a bit of income. Biotech companies and the education institutions bring in tens of billions of dollars in export income.

I'd prefer Australia generated IP and licensed it around the world that tried to manufacture everything. Royalties can and do generate vast amounts of money. You only have to look at the USA to see what is possible.

Is Abbott going to do a CBA for his 100 dams in the North before they're built? I feel the pork barrelling is only just begun.
 
Thinking of towns an cities generally, there is always some reason why there were established in the first place. There might be an exception or two somewhere (?) but people don't generally just build a city for the sake of it. There's always some underlying economic activity which supports it.

Small towns typically are linked to agriculture, mining, fishing, timber, energy, tourism or something like that. There's a reason why the town developed, and if that reason disappears then the town ends up going with it eventually.

It's the same with cities. Adelaide, for example, serves as the primary administrative centre for the entire state and is also a hub for all forms of transport. That manufacturing industries sprang up was just a bonus - there's a natural reason for the city to exist in the first place.

If you have a town based on iron ore, gas, oil, gold or whatever then ultimately the life of that town is finite unless some new activity comes along to replace the economic base once the iron ore, gas or whatever inevitably runs out. No mine runs forever, they're always finite in nature.

And before anyone mentions renewable energy as an alternative industry, that has the same fundamental problems. You employ say 2000 or even 3000 workers on a large construction project building wind, hydro or whatever. But once it's built, it's all over. You only need very few people to keep a wind farm running, and it's much the same with solar etc. As for hydro, these days the stations are completely unmanned and fully automated - there's no need to even unlock the door apart from during inspections or maintenance which is necessarily done by humans. But maintenance doesn't happen every day of course, these things are by their very nature pretty robust. Apart from biomass, which is essentially just agriculture thus requiring suitable land, renewable energy provides a lot of work to build but very little once it's up and running so it doesn't provide a real economic base to support towns etc. The inherent nature of non-biomass renewables is that most expense and work happens during construction with not much to do once it's built.

Long term, it's inevitable that certain things do have a finite life and that does include some towns and indeed entire regions. If the only reason it exists is to support oil extraction, then the life of the town is pretty much linked to the life of the oil wells. Once they run dry, and that will happen someday whether it's 5 or 50 years from now, there goes the town.
 

That is where sustainable industrial development as opposed to extraction and sale of the raw product, makes sense IMO
As you know Smurph, the amount of LNG that is going to be extracted from our North is immense. It seems crazy we aren't developing a petrochemical industry at the extraction point. This could nurture a plastics and composite products manufacturing industry.
To say it can't be done is completely false, Japan has built industries by importing all the resources. We have the resources and are sending the raw product to Japan, where they strip the condensate to supply their plastics industry.
Seems to me that we are selling ourselves down the drain, yet again.
Even when the LNG runs out, if you have a mature industry, you can then buy in the LNG to continue production. As Japan and the U.K does.
 

Gg makes a lot of sense in his post. You do realize that oil comes from north of Australia and that it is more expensive to transport oil south than to the north. Same with cars food etc. Chuck a decent refinery up there and you can save heaps

What will stop Abbott is the loony alp and greens and city dwellers who have no idea where their food comes from where the minerals come from etc. For them churning of the money which is brought into the country due to exports generated in regional and rural areas constitutes "generation of wealth". Making money out of thin air
 

I guess that's the type of comment and thinking I'm hoping for.
When the resources are gone and the arable land is owned by China, what then?
Sit in the Cities in squaller, because the Government is broke, we don't produce anything and the farm is owned by overseas governments.
The upside will be, Indonesia will be turning back the boats.lol
 
sydboy007 said:
The future is value adding and knowledge industries. Look to the USA or Japan, both relatively high cost countries that add an amazing amount of value to their products. Biotech companies can make a fortune from extremely high value knowledge.
.
Click to expand...

As per my last post, and what I've being saying all along.
There is no better time to demand companies value add, than when they are makeing huge profits from their commodities.
Also as I've said, they aren't being made to do it.
The most recent example was Abbot saying to Barnett, we are better flogging off the gas than processing onshore. What a dick.
I hold my judgement untill the outcome is known.
 
medicowallet said:
Chuck a decent refinery up there and you can save heaps
Click to expand...
Very unlikely to happen in my opinion.

Processing industries get built somewhere that has a natural reason for them to be there. Eg there's an obvious reason for oil refineries in particular parts of the USA - huge local demand for the products and historically (and still to a considerable extent) local supply of the feedstock.

Or refineries in the Middle East being built now. Not a huge local demand (but it's rapidly growing) and they're right next to the source of crude oil, and are using the lower grade oil that other refineries weren't set up originally to process.

Or refineries in Singapore. No local oil and not a lot of local demand but they're very convenient to international shipping for both crude and products.

Or even things like aluminium and ferro alloy production in Tasmania - only reason they were ever set up was cheap electricity. If that goes, so do the smelters (a fact that the local power industry is extremely conscious of I can assure you). The ore for the aluminium plant has always been shipped in, these days it comes from Qld, and for the ferro alloys plant they ship the ore in from the NT and 100% of the product is exported (ferro alloys) or further processed on-site to other products (aluminium powder and alloyed metals) which are then exported. Electricity is the only reason either of those operations were ever set up in Tas, and it's the only reason they continue to operate.

Much the same with the zinc works (and it's a huge operation - third largest in the world). Whilst it sources about 30% of the ore from local mines, electricity was the primary reason for building it in Tas. Similar with the newsprint mills - local wood as the raw material, local cheap coal to fire the boilers and local cheap power - that's why it was built.

Take away hydro-electricity and none of the processing industries in Tas would be physically or economically able to continue. Indeed without that power they'd never have been built in the first place. They're collectively a major source of employment and the zinc works alone accounts for one sixth of the state's overseas exports with the others also having individually large contributions.

It's the same with the aluminium smelters in Vic, NSW and Qld - cheap electricity is the only reason they were ever built there. Nearby raw materials do help in the case of Qld but power cost is still critical. And certainly in Vic and NSW it's all about energy - if they hadn't built the very large, highly efficient power stations in the 1960's - 1980's then they'd never have had an aluminium industry. And with power prices increasing, one of the two smelters in NSW has now closed.

As for northern Australia, at Gove (NT) there's an alumina (the "half way" stage of making aluminium) refinery built right next to the source of bauxite and very convenient to shipping being on the coast. But it's closing and there's one reason for that - energy. It doesn't have access to a cheap heat source (fuel) and you need a lot of heat to produce alumina. Add in that it doesn't have cheap electricity either, they generate it on site from expensive fuel (oil) and it's quite simply game over. The Gove operation is the first major, direct victim of the decision to export most of the gas overseas rather than use it locally. Suffice to say that closure is going to devastate the local community as it's the only game in town so far as employment is concerned. Whilst the mine will continue, there aren't many jobs just digging the stuff up and loading it on a ship.

Or even things like the iron ore mine in Tas. The company readily acknowledges that the only thing making the whole operation viable is that they transport the ore via pipeline rather than road or rail, and reasonably cheap energy to make it into pellets with. Take those away and the whole operation falls in a heap economically.

To put the significance of processing into perspective, consider this. WA mines around 500 million tonnes of iron ore each year and employment approaches 30,000 people (info from a quick Google search as I'm no WA iron ore guru). The WA operation is a simple dig it up, move it to the port, load it onto the ships mining operation.

In contrast the iron ore industry in Tasmania is comparatively trivial with 2.5 million tonnes annual production BUT it employes over 600 people to do it, and that's over 4 times as many jobs per tonne of ore as the WA operations produce. The reason is fairly simple. The Tasmanian operation is a dig it up, crush, transport via pipeline (no trains or trucks), turn it into pellets then load it onto ships operation. It's the processing, not the mining, that brings most of the employment benefits. It's even more once you consider the other companies providing services to the pellet plant.

Availability of cheap gas does, in theory at least, give WA the opportunity to process resources locally and bring about much employment and broader economic development by doing so and it's similar but on a smaller scale in the NT. Thus far however, the approach taken is "dig it up and ship it out" - that provides a few jobs and some royalties but it exports most of the potential economic activity along with the ores and gas.

The overall pattern of mineral resource development in northern Australia thus far is basically one of simple resource extraction with no real effort to develop anything of broader benefit. Indeed what's already there in terms of processing is being closed in order to continue and increase the shipping out of unprocessed resources. Exporting gas in particular is tantamount to economic sabotage in my opinion - a boom today at the expense of massive lost opportunities over the long term. Profits for a few but it comes at the price of massive lost potential employment and activity in all sorts of other industries.
 

Let's cut to the chase Woodside, Chevron and the boys are taking the pi$$, they want the cheapest extraction option, that gives them the maximum ROE.
It's a shame the younger generation can't see it's their future going around the S bend. They might not like the idea of living in the North, but if it was the difference between a first world lifestyle or a third world they may make different choices.
If there was a vibrante steelmaking and petrochemical industry in the North paying good money, people would go there.
The same as expats went to the middle east when it was booming.
The problem is fat arsed city dwellers thinking nothing is going to change, well guess what, it is.

It might be nice to think our I.T sector or our serum technology(now based in the U.S) or some young gun app designer on the NBN. Is going to save our ar$e well I'm yet to be convinced.
I would rather tell a company that wants to rip out our gas, to value add.
 
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