Will the price of jet fuel go stratospheric?

Comparison of air fares and HSR fares used in the patronage demand forecasting modelling (one-way). NOTE: The clue to understanding this graph is the blue curve is business fares and the grey one is non-business fares

Ultimately, the bottom line in discussions about the warrant for High Speed Rail (HSR) always seems to come down to proponents’ certainty that the price of jet fuel will go stratospheric.

HSR won’t save time, won’t reduce fares, won’t increase economic activity, won’t promote decentralisation and is an extraordinarily expensive way to reduce carbon emissions – but if at the end of the day the cost of jet fuel means flying becomes ridiculously expensive, then, the argument goes, HSR is the only way of filling the breach.

There are a number of points to consider about this sort of scenario.

One is that while fuel is a significant part of the cost of flying, it’s not the whole story. At present, fuel comprises around a third of airline operating expenses, up from about 15% ten years ago. So a doubling in fuel costs will have a big impact, but it isn’t going to double fares – that would require fuel to quadruple in price (and other costs to remain constant).

Airlines could respond to higher fuel prices by finding ways to reduce their consumption of jet fuel. Aviation expert Ben Sandilands reckons “by 2036….jet fuel is realistically predicted to be at least 50% derived from algal or biological fuel substitutes….”. Others like Robert Merkel are not as convinced of the prospects for biofuels on the scale required. There’re plenty of “out there” proposals for alternative fuels and technologies (e.g. here and here) but they all look pretty speculative.

I don’t think alternative fuels have much potential at this stage but there’re better prospects in using jet fuel more efficiently. Although commercial jet aircraft speeds haven’t increased a lot over the last 40 years, the Aviation Green Paper says modern aircraft are 70% more fuel-efficient than they were in the late 1960s.

The current average fuel consumption of the world’s jet aircraft fleet is around 5 litres per 100 Revenue Passenger Kilometres (RPK), but this will improve as larger, more modern aircraft come into service. For example, a fully laden A380 consumes 3 litres per RPK and the new Boeing Dreamliner is claimed to be even better. Of course this is a mature technology so it’s unlikely historical efficiency gains can be carried forward at the same rate.

However not all experts expect fuel prices to go sky high. The Federal Government’s new High Speed Rail Study – Phase One report assumes both air and HSR fares will reduce by three per cent in real terms by 2015 and remain constant thereafter. Road vehicle operating costs on the other hand are assumed to increase in real terms by eight per cent to 2036 and by a further four per cent to 2056. None of this suggests the apocalypse is nigh.

There’s very little in the report elaborating on these assumptions but it’s as well to remember that the peak oil hypothesis does not mean an immediate end to oil production. Rather, as John Quiggin says, it means a gradual decline over 100 years or more (international oil production has been stable for the last seven years). Read the rest of this entry »


Where does Melbourne end (and sprawl begin)?

Drive out towards Warburton and it seems easy to see where Melbourne ends and rural life begins. One minute you’re driving through houses, shops and businesses, when all of a sudden you’ve arrived in country. Except you’re actually still in Melbourne because the official boundary of the metropolitan area lies on the other (eastern) side of Warburton!

People seem to like a hard edge – a clear and unambiguous boundary – between city and country. But it only works if the non-developed land is “pure” bush or bucolic farming land, without service stations, hobby farms or other urban detritus. Head out of Melbourne in most other directions and development – almost all of it tacky and ugly – tracks you like a mangy dog.

The continuous built-up area of Melbourne (the pink bit in the middle of the map) occupies less than 2,000 km2. This is much less than is commonly assumed by the media and is just a little more than a quarter of the area covered by the official or administrative boundary, which is 7,672 km2. There are a number of “islands” of development within the boundary (also shown in pink), like the townships of Melton and Sunbury, that are officially part of the metropolitan area but separated from “mainland Melbourne” by green wedges. It makes sense to count a place like Melton township as part of Melbourne because 65% of workers living there travel across 9 km of green wedge to work in mainland Melbourne.

These islands make discussions about sprawl particularly fraught. Is it just the central core of continuous urbanised development that sprawls or should all the islands within the boundary also be included? If they are, then that not only includes towns such as Melton, Sunbury and Pakenham, but also towns like Warburton, Healesville and Gembrook that appear to the first-time visitor to be country towns. And given that island townships like Garfield and Bunyip in the outer south-east corridor are officially part of Melbourne, it’s reasonable to wonder why towns that lie just outside the boundary, like Drouin and Warragul, aren’t also seen as part of Melbourne’s sprawl.

This story from a 2003 issue of The Age shows how closely linked many country towns located outside the boundary are to Melbourne:

Census 2001 figures cited by a Monash University Centre for Population and Urban Research report for the Southern Catchments Forum show that, remarkably, more than half of the working residents of the Macedon Ranges area are employed in Melbourne. Similarly, about 40 per cent of the working residents of the Moorabool region (which includes Bacchus Marsh) and the Melbourne side of the Greater Geelong area commute to Melbourne for work. It’s clear, the report says, that these areas are “largely dormitory towns servicing the metropolis. Read the rest of this entry »


Why did Melbourne 2030 fail?

(click) Heaps of parking in central Paris in 1976!

The Age editorialises (21/11/10) that Melbourne 2030 is effectively dead and I agree. The latest nail in the coffin in The Age’s opinion is the apparently burgeoning growth of housing in townships and hamlets located in the peri urban area outside the Urban Growth Boundary (UGB).

I’ve argued before that this sort of “decentralisation” is poor policy (e.g. here and here). But I also think The Age has tended to ‘catastrophise’ the scale of the problem, especially with its highly misleading contention that Melbourne has “sprawled 50% beyond the official growth boundary, spanning 150 kilometres from east to west”.

However what interests me at the moment is why Melbourne 2030 failed. The key reason in my view is that it blithely assumed that enough affordable dwellings – mostly town houses and apartments – could be provided within the established urban areas to avoid the need for the UGB to be extended.

This objective was never realistic for a number of reasons. Read the rest of this entry »


Can the NBN ‘save’ our cities?

In yesterday’s post I asked if our largest capitals could grow bigger and remain liveable. Today I’m looking at the flipside – whether or not the National Broadband Network (NBN) will give regional centres the wherewithal to draw population growth away from Sydney and Melbourne.

This question is prompted by avuncular New England Independent, Tony Windsor, who argued on Q&A this week that the National Broadband Network could be a key driver of decentralisation:

“If there’s been a piece of infrastructure (if it’s done correctly) that negates distance as being a disadvantage of living in country Australia, this is it…..

“We’re going through a population debate at the moment. The election was about the people of western Sydney and western Melbourne and Dick Smith and others talking about how we’ve got to constrain the population of this nation. Nothing about regional Australia in that context. Nothing about the infrastructure out there. If we get the broadband system right it could revolutionise country living and solve some of the city-based problems”.

I’ve previously concluded (here, here, here and here) that the prospects for diverting growth from our cities to regional centres on a significant scale do not appear promising (other than if nearby regional centres become satellites i.e. de facto outer suburbs). However could the NBN, as Mr Windsor suggests, be the magic bullet? Read the rest of this entry »


Can our cities get bigger (and remain liveable)?

The issue of decentralisation could be back on the table given the elevated significance of the three regionally-based independents*. I’ve previously argued (here and here) that there are big questions about the viability of decentralisation on a large scale, so today I want to look at whether or not our major cities can cope with more growth.

There was quite a bit of interest in the 60s and 70s around the idea of an efficient city size. The assumption that a point was reached where diseconomies of scale set in was part of the rationale for the failed decentralisation push of the Whitlam era.

There’s a better appreciation today that cities make structural adjustments in response to growth and may generate new economic advantages. There’s wide acceptance of the idea that productivity increases (modestly) as city size/density increases.

Australia’s major cities are certainly not bursting at the seams, notwithstanding residents’ concerns about issues like traffic congestion and housing affordability. Sydney is actually only the 80th largest city by population in the world and Melbourne the 87th. Many of the larger cities dwarf ours – Tokyo, for example, has more than nine times as many residents as Sydney. Read the rest of this entry »


Will miners, retirees and the NBN drive Tony Burke’s decentralisation agenda?

Grey areas show parts of Victoria without access to Broadband (mainly ADSL)

It’s easy to see why that most Whitlamesque of policies – decentralisation – has been revived in this election campaign. Not only does it offer the familiar prospect of more jobs and economic activity in regional areas, it can also be sold as improving the quality of life in our crowded, heaving cities.

However I think the Minister for Sustainable Population, Tony Burke, is stretching credibility with his latest claim about what’s driving decentralisation.

Speaking at the National Press Club debate last Thursday, Mr Burke argued that the decentralisation debate is different now to what it was 40 years ago. Then, he argues, it was all about moving people to regional areas by relocating government departments. Now however decentralisation is:

“being driven by the market through the movement of retirees, through the mining boom and through the roll-out of the National Broadband Network, which allows businesses that previously could only be located in the heart of the CBD to locate in other areas”

His use of the present tense is curious because there’s little evidence of actual decentralisation away from Australia’s two ‘super cities’ – Sydney and Melbourne – to regional centres over the last five years. Sydney grew 1.4% p.a. over 2004-05 whereas regional NSW grew by 1.1%. In Victoria, Melbourne grew 2% p.a. but the remainder of the State grew 1.4% p.a.

But it’s the drivers of growth he cites that I find even more curious. Read the rest of this entry »


What will high speed rail do for regional development?

Albury-Wodonga

Yesterday I looked at the carbon reduction justification for high speed rail between Sydney and Melbourne. Today I want to discuss another argument – that high speed rail will promote the development of regional centres. It is argued that this could in turn relieve capital cities of much of the burden of projected population growth.

I have no doubt that improving connection times between regional centres like Albury-Wodonga and Melbourne will benefit both.

But if regional centres are to be a serious alternative for growth, they will need to provide new arrivals with jobs. The question I ask is: where are those jobs going to come from?

One way could be that regional centres provide a “dormitory” for workers who can live in the country but commute to work in capital cities like Melbourne by high speed rail. Read the rest of this entry »