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Peak oil and the advent of demand destruction:implications for transport and access in AustraliancitiesMichelle Elaine Zeibots a & David Robert Bell ba University of Technology, Sydney, Institute for Sustainable Futures , PO Box 123,Broadway, Australiab Sydney, AustraliaPublished online: 14 Dec 2010.

To cite this article: Michelle Elaine Zeibots & David Robert Bell (2010) Peak oil and the advent of demanddestruction: implications for transport and access in Australian cities, Australian Planner, 47:4, 253-262, DOI:10.1080/07293682.2010.526953

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Peak oil and the advent of demand destruction: implications for transport and access in

Australian cities

Michelle Elaine Zeibotsa* and David Robert Bellb

aUniversity of Technology, Sydney, Institute for Sustainable Futures, PO Box 123, Broadway, Australia; bSydney,Australia

()

This article examines the implications of peak oil on the physical and money systems of the Australian economy,describing how over-reliance on private motor vehicles can expose the economy to the risks of demanddestruction.

Keywords: peak oil; macroeconomic stability; transport policy

1. Introduction

Since the oil shocks of the 1970s and the downturns in

economic activity that followed them, analysts have

been intrigued by the relationship between macro-

economic, or general economic conditions, and oil

availability. Their studies provide useful insights into

what we might expect in the years ahead as global oil

production struggles to keep up with demand and

what we might do in response. Most of these studies

examine economic conditions from a global or US

perspective (for example, Cleveland et al. 1984;

Hirsch et al., 2005; Hamilton, 2009; Kopits, 2009).

In this paper, we revisit these forms of analysis, but

from an Australian perspective and, by extension,

that of Australian cities.Central to our analysis is the observation that, in

the past, aggregate production measured in terms of

Gross Domestic Product (GDP), has grown in a

relatively stable way because energy has been readily

available and cheap. From time to time, this steady

growth path has been interrupted by short, sharp cuts

to oil production, usually as a result of conflicts in the

Middle East. Such production cuts triggered sharp

increases in oil prices that, in turn, appear to have

triggered global economic recessions (Hamilton,

2009, pp. 4�8; Kopits, 2009). By contrast, the recent

price spike in 2008 appears to have been caused by

insufficient production capacity to meet demand

(Hamilton, 2009, p. 9). In the period ahead, weanticipate that episodes like this will increase as oilscarcity becomes more pervasive, causing price spikesthat in turn trigger periods of recession, wheredemand and general production declines and macro-economies retract. As fuel prices drop in response toreduced demand and the global economy recoversand begins to grow again, demand for oil will increaseagain. But given that production is now flat and likelyto decline in the future, pressure will be put on prices,triggering another recession, so the cycle beginsagain. With each turn of the cycle, the degree towhich oil and petrol prices drop will be less andrecovery will be weaker.

To characterise this cycle we use the term ‘demanddestruction’, with the growth path that lies aheadexpected to look something like that depicted inFigure 1.

The term ‘demand destruction’ is used to describewhat happens to an economy, or industrial sector,when factor markets that supply the fundamentalinputs to production, change in such a way that thestructure of the production processes and patterns ofconsumption within that economy fail to adjust andso cannot be sustained (for example, Davis andHaltiwanger, 2001; Cavallo, 2004). In such cases,problems with the supply of factor inputs impairs theability to produce, which has implications for em-ployment levels that in turn has knock-on effects for

*Corresponding author. Email: michelle.e.zeibots@uts.edu.au

Australian PlannerVol. 47, No. 4, December 2010, 253�262

ISSN 0729-3682 print/ISSN 2150-6841 online

# 2010 Planning Institute Australia

DOI: 10.1080/07293682.2010.526953

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consumption so that the demand for goods and

services is undermined or destroyed.The supply of energy inputs comprises a signifi-

cant factor of production in all human economies. In

this paper we discuss how it is that changes to the

supply of this input factor can trigger responses that

affect many different parts of a macroeconomy,

which finally gives rise to demand destruction. We

do this by first drawing a distinction between the

physical economy and the money system. The physi-

cal economy includes infrastructure and the spatial

patterns of development found in cities and regions as

well as the energy and natural resources required to

power them. We discuss this in Section 2.In Section 3 we discuss the money system. We

describe how fundamental change in the circum-

stances of the physical economy * such as oil and

energy availability* can affect growth, spending and

investment patterns in the money economy, which in

turn has implications for the circulation of money

and the ability of that economy to invest in new

infrastructure and industrial processes that enable

adaptation to different circumstances and so sustainthe quality of life of people living in that economy.

In Section 4 we discuss the implications ofdeclining oil supplies on the relationship betweenthe physical economy and the money system inAustralia and what broad policy options should bepursued in order to move the Australian economyaway from the path of potential demand destructionand onto a different growth path that holds greaterpromise for stable and sustainable economic condi-tions in the future.

2. The physical economy in Australia: a history of

domestic oil production and consumption patterns

The consumption of crude oil products in Australiahas grown steadily from an average of around 128million barrels per year in 1965 (or 350,000 barrelsper day) to just over 329 million barrels per year in2009 (or 900,000 barrels per day). As can be seen inFigure 2, while domestic production climbed rapidlyduring the 1960s and 1970s, production peaked in2000, declining at a rate where Australia now importsaround 40% of domestic consumption. On currenttrends, Australia is likely to need to import around60% of domestic consumption by 2015 (see datatrends, DRET, 2010; GeoScience Australia, 2010). Bythis time expenditure on oil imports is likely to exceedincome generated from coal exports (see data trends,ABS 2010a).

Australia’s oil imports are primarily sourced fromMalaysia and Viet Nam (DRET, 2010). But, as inAustralia, production in these two countries haspeaked and is now in decline, with growth in theirdomestic consumption reducing potential exportvolumes for importers such as Australia (EIA,2010a). Growing scarcity in this region is being

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Figure 2. Domestic oil production and consumption in Australia (1965�2008) with forecasts to 2025.

Data sources: BP (2009), GeoScience Australia (2010).

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replicated globally, with only 39 of the world’s 100 orso oil producing nations producing more than theyconsume and with production in 19 of these nowhaving peaked (BP, 2009; EIA, 2010a).

Declining production is placing increasing pres-sure on exporters from the Middle East, such asSaudi Arabia who, in the past, have had sufficientcapacity to increase supply at short notice whenneeded, keeping prices stable and softening globalsupply shocks (Hamilton, 2009, pp. 9�10, 56). But thecapacity of Saudi Arabia to play this role of ‘swingproducer’ has been brought into question, with somecommentators speculating that Saudi reserves aremoving towards their peak (Simmons, 2005).

While new reserves continue to be discoveredthroughout the world, these are now smaller, moredifficult and more expensive to access than pastdiscoveries, as many are in deep water locations(Tsoskounoglou et al., 2008, p. 3800). In the past,new discoveries exceeded, or at least kept pace, withconsumption. But this is now no longer the case, withonly five to 10 billion barrels of new reserves beingdiscovered each year while total global consumptionsits at somewhere between 25 and 28 billion barrelsper year (PCI, 2010) and global production hasremained relatively flat since 2005 (OilwatchMonthly, 2010, pp. 2�4).

Australia’s growing dependence on oil importshas implications for macroeconomic stability. Howand why is best explained by comparing the history ofoil production and consumption in Australia withthat of the US, where domestic production peaked in1970 and imports currently comprise just over 50% ofUS consumption (EIA, 2010a).

Figure 3 shows oil consumption as a percentage ofGDP. Kopits collated this data for the US and foundthat when consumption rises above 4%, economicrecessions occur as shown to the left of Figure 3(Kopits, 2009). This suggests a threshold over whichthe price of energy inputs to the macroeconomy

undermines the ability of that economy to produce atprices that can be tolerated by domestic markets.How prices induce demand destruction � or periodsof recession � is discussed in more detail in the nextsection, but at this point it is sufficient to say that athreshold appears to exist within the physical econo-mies of all nations over which the need to consumeenergy inputs cannot be accommodated, given thephysical structure of that economy. This thresholdchanges between different economies because each isphysically different.

We have collated the same data for Australia,where it can be seen that oil consumption hashistorically comprised a smaller percentage of totalGDP, as shown to the right of Figure 3. Significantly,Australia has had fewer recessions than the US. Themost pronounced exception to this pattern occurredin the early 1990s when Australia went into recessiondespite oil consumption sitting below 2% of GDP.This recession has been attributed to the intercon-nected nature of global financial markets. As formerReserve Bank Governor Ian Macfarlane pointed out,there was an asset bubble at the time created byspeculative investment in real estate and businesstakeover activity. During this period, cash rates inAustralia rose to 19% and business lending rates toaround 20%, restricting capital availability for in-vestment in real development of the physical econ-omy (Macfarlane, 2006). However, there were alsocritical factors affecting the physical economy thatMacfarlane does not discuss. At that time, oil pricesspiked as a result of the Iraq War when productionfrom Kuwait and Iraq was cut, pushing the WestTexas Index (WTI) oil spot price to US$41 a barrel �almost double the previous year’s price (EIA, 2010b).This registers as a high percentage of GDP for the USbecause they were importing just over 40% of theirdomestic consumption at that time (EIA, 2010a),while Australia was only importing around 5%(DRET, 2010). The lower expenditure on oil imports

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Figure 3. US and Australian crude oil consumption as a percentage of GDP (1970�2008).Sources: Kopits (2009, p. 2), ABS (2009), BP (2009).

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in Australia meant that a relatively high proportionof oil production was included within the Australianeconomy.

But is a greater reliance on oil imports the onlyreason why the percentage of GDP per capita spenton oil is higher in the US’s economy than inAustralia’s?

In absolute terms, oil consumption rates in the UShave always been around 10 barrels per capita peryear higher than in Australia, as shown in Figure 4.After the 1979 oil shock, consumption fell in the USby around five barrels per capita per year as house-holds and businesses began switching from oil to gasand electricity for space heating, and electricitygeneration from oil was switched to nuclear (Tothand Rogner, 2006, pp. 3�4). Reductions also occurredin Australia, although these were less, with per capitaconsumption showing slow but steady increases fromthe mid 1980s to the present, while in the US itremained relatively flat with the prospect of declinesin the near future.

The US also consumes more fuel per capita fortransport than Australia because of the spatio-physical state of US infrastructure. More extensivemotorway networks and road space has been sup-plied in US cities, facilitating higher trip rates, longeraverage trip distances and higher rates of VehicleKilometres Travelled (VKT) per capita than inAustralia (Thomson, 1977; Newman and Kenworthy,1988, 1996). In many cases, where electrified rail andtram systems were in place, petroleum dependentforms of road transport replaced them. In recentyears, rates of car travel have levelled off in the USand even begun to decline (see data, USFHA, 2010),partly in response to higher global petrol prices and

partly because of higher unemployment brought onby the recession (Brady and Gross, 2008; El Nasserand Overberg, 2008).

In Australia, total car travel has remained rela-tively flat since 2005, while population has increasedso that VKT per capita is beginning to dip while totaltravel on public transport � rail and bus � has beenincreasing (see data, BITRE, 2009). Unemploymenthas not increased to the same extent that it has in theUS (see comparative data, ABS, 2010; US Depart-ment of Labor, 2010). This is because the economy inAustralia is structurally different in a spatio-physicalsense � oil inputs to key infrastructure are not as highper capita, road space is generally less and masstransit provision higher and our dependence on oilimports is not as great. But these circumstances couldchange as domestic oil production drops due todepletion and if urban motorway networks continueto be expanded, inducing greater car use at theexpense of more energy efficient public transportdevelopment.

These structural differences are highlighted ifanother physical economy is introduced into thecomparison. In Japan for example, over 98% ofdomestic oil consumption is made up of imports(EIA, 2010a). By comparison with US and Australiancities, road development has been far less in Japanesecities with centreline road distances sitting below fourmetres per person while equivalent rates in theyounger US oil cities, like Houston, Atlanta andPhoenix, at around nine metres per capita. For olderUS cities, like New York, Los Angeles and Chicago,road supply is around four to five metres per person;however, motorway supply is greater by factors ofbetween five and 20. In Australia, road space supplyranges from between seven metres per person inSydney to just over nine metres per person inMelbourne and Perth. Japan has placed far greateremphasis on public transport development and over50% of journey-to-work trips in Japanese cities areundertaken by walking or cycling (Hook andReplogle, 1996). This means that travel constitutes afar lower opportunity cost to other activities withinthe Japanese macroeconomy than is the case in theUS and Australia, where the mode-split to privatemotor vehicles for journey-to-work, and other triptypes, is far higher. In US cities, car travel comprisesover 85% of all trips � with the exception of NewYork � while in Australia the figure varies frombetween just over 70% for Sydney to 85% for Perth(Kenworthy, 2009). Some commentators have goneon to conclude that because transport and energyinputs to the Japanese economy are lower, they havebeen better insulated from oil shocks in the past andmore resources have been invested in research and the

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Figure 4. US and Australian per capita oil consumption inbarrels (1965�2008).Data sources: BP (2009), World Bank (2010).

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development of Japanese industries able to produce

goods and services that produce high volumes of

exports and income generation (Hook and Replogle,

1996, pp. 83�84).The relationship between factor inputs in the

economy, such as energy production and the nature

of transport infrastructure, which consumes energy,

is a fundamental part of every country’s physicaleconomy. Having the capacity to adapt to changes in

the physical-energy supply environment has signifi-

cant implications for macroeconomic stability andsusceptibility to demand destruction once global oil

production peaks. But what can be achieved in the

physical economy is indelibly bound to the money

system. Consequently, when confronted by the needto make structural changes to the physical economy

as a way of reducing exposure to demand destruction,

consideration must also be given to capital avail-

ability to finance change.

3. The money system

Of core significance to the money systems that

operate in western industrialised economies are bank-

ing practices that provide loans and credit to

individuals and businesses. While money obviouslycomprises currency � notes and coins � that facilitate

the exchange of diverse goods and services, it also

consists of credit, or loans, created from the con-

solidated savings of many depositors (Johnson,2005).

Loans enable individuals to purchase large items

such as houses and motor vehicles. It enables

businesses to invest in the development of newproduction processes that produce greater volumes

of goods and services at lower unit costs and � in

combination with taxation revenue � loans enablegovernments to build infrastructure like motorways,

public transport and telecommunications networks.

In this way, the credit created by the banking systemenables economies to develop and produce on a scalethat can enhance the quality of life of people thatsimple small-scale economic transactions on theirown cannot.

But the loans used to finance development have tobe repaid along with interest to those who subse-quently forgo consumption. For this to occur, theeconomy must grow in both money and physicalterms. In terms of money, growth occurs when peopleand businesses take out loans to purchase and investin the belief they will repay the principle with interestat a later date. This leads to a situation where muchof the money in an economic system comprises debt,or credit, in excess of cash reserves retained by banks(Begg et al., 1997, p. 375). Figure 5 shows theproportion of money in the Australian economythat comprises debt, or M3, in light grey, all of whichneeds to be repaid at some time in the future. Ifinterest rates on these debts rise, consumption inother areas is curtailed as money is diverted intopaying interest on these debt obligations and so thecapacity to grow is stalled.

In the physical economy, growth occurs whenmore goods and services are created at lower unitcosts due to efficiencies. The resources saved generatea surplus that can be directed into other areas ofeconomic activity or paying off loans (Douthwaite,1999).

While the relationship between money and physi-cal production is complex, the need to repay the loansused to finance development is the fundamentalreason why economists place so much emphasis oneconomic growth. However, as will be discussed,economic growth in the physical economy comes in avariety of forms, and some are ultimately detrimentalto maintaining the ability to repay loans in the moneyeconomy. Distinguishing growth paths that aredetrimental � or unsustainable � from those that

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Figure 5. Australian money supply (1980�2009).Source: RBA (2010).

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can adapt to change and so sustain stable economicactivity over the long term, requires an understandingof the different aspects of the money system and howthey are linked to the physical economy.

The relationship between different aspects of themoney system is set out in a formula developed byFisher known as the Equation of Exchange. Theequation describes the relationship between theamount of money in a system, including currency,savings and loans (M), the velocity at which moneychanges hands (V), the average price level (P) andthe number of total transactions (T) in the formMV�PT (Fisher, 1911).

What this equation tells us is that the moneyeconomy and the physical economy are linkedthrough prices, or P.

When the price of a good or service increases,people can either not consume it, reduce theirconsumption, forgo consumption of other goodsand services, use savings they may have or else buyon credit and pay the increased price later. All ofthese options trigger different responses between thefour different aspects of the money system outlined inFisher’s Equation of Exchange, and so have implica-tions for the ability to repay loans.

In most cases where prices increase, people reducetheir consumption and the physical economy adjustsby improving efficiency, which lowers the price ofthat good or service, or else redistributes thoseproductive resources to other forms of productionand therefore consumption. These responses ulti-mately mean changes to consumption and choicesmade in the economy. In the longer term, theyrepresent the growth and decline of different indus-tries and sectors within the economy. But when theprice of an essential input to an economy, such as oil,increases, and people have to continue consuming itdespite higher prices, their options are fewer and theability of the physical economy to adjust is morerestricted. In these cases, where P increases, peopleusually reduce their consumption of other goods andservices so that T declines in accordance with theamount of money in the system, orM. As the numberof transactions decline, the circulation of money isreduced to those sectors for whose output demandhas now declined. As a consequence, jobs can be lostin that sector as a result of demand destruction.

The 1970’s oil shocks provide a good illustrationof where demand destruction ultimately leadswhen triggered by these types of responses in thephysical economy. High inflation and high unem-ployment were created giving rise to stagflation � thesimultaneous increase in prices and unemployment(Blanchard, 2000). In most cases where pricesincrease, there is a trade-off between inflation and

unemployment. If prices increase, demand is reducedso unemployment goes up, but prices go down oncethis happens because the demand for goods andservices has gone down (Phillips, 1958).

When an essential commodity like oil begins tobecome scarce and increases in price, the price doesnot necessarily drop to previous levels. When changesin the physical economy interrupt the circulation ofmoney in this way, the ability for the economy togrow is retarded and the ability to repay loans isjeopardized. Where a large number of individualsand businesses default on loans, the banking systembecomes unable to keep lending money fornew developments and business investment. Thisjeopardises economic growth and the ability to repayloans, as happened recently in 2008 in the US at thestart of the global financial crisis (Hamilton, 2009,pp. 39�403).

Changes in price levels can affect the relationshipbetween the money and physical systems in otherways. For example, if the money system grows fasterthan the physical economy � that is, too many loansare given to investors � the demand for too fewresources will push prices up and encourage inflation.This is usually controlled by central banks increasinginterest rates, which puts a break on business invest-ment, personal loans and mortgages. While bankshave some control over the amount of money beinglent when these transactions are occurring, they areunable to make money grow when the money supplyis contracting because a key input to the physicaleconomy that people cannot do without � like oil �becomes scarce and increases in price.

The world’s current problems in the financialsystem started when oil production began, in 2005,to flatten and stop growing, pushing up fuel prices.Consumers had to find ways around these higherprices by either not consuming as much petrol or elseby reducing their consumption of other goods andservices. In the US, the need to consume petrol, dieseland other petroleum products is hardwired into thephysical structure of most city economies by pastdecisions to build extensive road and motorwaynetworks, instead of public transport, as a way ofaccessing job markets from residential areas. It wasagainst this backdrop that the money supply systemwas placed under pressure to grow at an exponentialrate so that loans could be repaid. But the physicaleconomy in the US was unable to match this. As aresult, prices began to increase until the economy wasunable to absorb the high oil prices so that parts ofthe economy collapsed and the system set about itsown demand destruction.

Avoiding demand destruction is dependent onfinding ways to adapt and change in the physical

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economy that will make the continued circulation ofmoney less vulnerable to disruption so that peoplecan continue to contribute to the economy.

In the next section we focus on the key features offuture transport policy that would help to shiftphysical economies away from their current state ofvulnerability while at the same time address how theywould relate to the money system and the ability torepay loans.

4. Implications for future policy

Much of the current transport infrastructure thatprovides access to people and goods in Australiancities, towns and regions is configured to use high-energy-yield liquid fuels from non-renewable sourcesfor which there are no long-term substitutes. Or, inother words, most access needs in Australia areprovided for using extensive road networks that carrylarge numbers of private cars that require largevolumes of cheap petrol and diesel from sourcesthat are depleting both domestically and internation-ally.

Given the issues raised in Sections 2 and 3, in ourview there are three general principles that need to beobserved in future transport policy to avoid a futuremarred by periods of demand destruction. First,transport systems need to be shifted from relianceon finite to renewable energy sources. Second, theserenewables need to be from relatively high energy-yield sources � a point we will explain in some detail.Thirdly, where high-energy-yield sources cannot beobtained, greater efficiencies in the transport modeand supporting infrastructures need to be found,which is to say that ways of providing the samedegree of access and exchange opportunities need tobe achieved with fewer resources so that the oppor-tunity cost of transport is reduced and GDP spent onenergy remains below the threshold likely to induceperiods of demand destruction.

To grasp why these principles are important, it isnecessary to outline a key property of different fueltypes relating to their energy-yield, or somethingcalled the Energy Return On Investment (EROI)ratio. This is a critical physical economic property offuels that refers to the amount of energy spent inorder to acquire energy as a proportion of theamount used for an end-use application (Clevelandet al., 1984; Fleay, 1995; Gagon et al., 2009). Whenextracting and producing oil, energy needs to be spenton finding the resource, extracting and refining it andthen transporting it to its point of end use. All ofthese activities use energy that in a physical sense ispaid for by forgoing other activities within theeconomy. If the energy gained is much higher than

the amount of energy used to acquire it, a surplus isgenerated that can be used to support growth in thephysical economy. Crude oil produced in the USaround the 1930s, for example, was able to extractcrude oil at EROIs in the order of 100, which meansthat for every unit of energy invested in the extractionof this energy source, 100 units more were madeavailable. This access to energy helped the USeconomy grow substantially in both physical andmonetary terms. However, the EROIs for domesticoil production in the US today are significantly lowerand range from between 20 and five (Heinberg, 2009,p. 28).

EROIs are significant because they show why easysubstitutes for petrol, such as ethanol, are not viable.The EROI for ethanol produced from purpose-growncrops is around one or two in countries such as theUS and Australia (Heinberg, 2009). This means theamount of energy required to produce ethanol fromthis source is almost as much as the energy for end-use. Consequently, there is no surplus and economicgrowth is stultified because the physical economy hashad to forgo use of the energy used to produce theethanol for something more productive. Smallamounts of ethanol produced from crop waste aredifferent in a physical economic sense because theprimary reason for producing the crop was for food,and low volumes of ethanol are a bonus. So whileethanol comes from a renewable source, its EROImakes it non-viable as a wide-scale substitute forpetroleum-based transport fuels (Zeibots, 2007).

This example demonstrates the considerationsthat arise around the first and second principles weoutlined above. Other sources of renewable energythat have relatively high EROIs � although notas high as oil � include sources such as wind- andsolar-generated energy, which can be produced atEROIs in the order of 10 to 20 (Heinberg, 2009,pp. 41�42). But these produce electricity, which is notportable in the same way that liquid fuels such aspetrol and diesel are, although advances are beingmade in battery technologies.

Given the macroeconomic factors that are shap-ing this emerging energy-constrained environment,motorised transport in the long-term future is mostlikely to be powered by electricity. This raisesquestions about where that electricity will comefrom and whether or not it can be supplied in thequantities needed to maintain a relatively large carfleet and high levels of car use on the scale in placetoday.

The analysis required to answer this question in adefinitive and quantitative sense is beyond the scopeof this paper, and such an analysis is made morecomplex because part of the answer lies in market

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responses resulting from changes in the energy baseof the macroeconomy, as well as policy shifts madeby the planning system that would induce changes inthe market. But be this as it may, we are of the viewthat given that net EROIs will drop because ofdeclines in oil reserves, greater efficiencies in theway we use vehicles will have to be found either bychoice or necessity.

As fundamental changes in Australia’s macroec-onomy begin to take hold we would expect to seereductions in per capita VKT and increased levels ofpublic transport use. We would expect to see thishappen as a market response to higher fuel prices andchanges in general macroeconomic conditions. This isalready happening in the US and there is evidence ofthe same responses occurring in Australia, albeit at alesser rate. These market responses could be assistedby governments and planning authorities adoptingtransport policies that would work to expand net-work coverage of public transport services � espe-cially electrified rail and eventually electrified trolleybuses � as well as facilitate greater opportunities forthe use of active transport.

Many of the other papers in this special issue ofAustralian Planner discuss how active and publictransport and changes to patterns of land-use devel-opment can play a greater role in providing access inAustralian cities and so we will confine the rest of ourdiscussion to changes relating to private car use androad infrastructure provision.

While we cannot quantify the degree to whichmode-splits in Australian cities will need to shift fromprivate car use to greater active and public transportuse, it is our view that, in general, as energyconstraints become greater, transport markets willrespond further in ways that would ultimately includefewer vehicles. Many households will be financiallycompelled to find ways of living and working withoutowning private vehicles and this is likely to spill overinto the need for reductions in the cost of housing.Policy responses that would work to support thesemarket responses could include greater provision andaccess to car sharing facilities. There is probablyalready a market for innovative housing productsthat provide car sharing services as an integral part ofmulti-unit residential complexes so that home buyersdo not need to own a car of their own, but are givenaccess to a fleet of different vehicle types able to meetaccess needs where public transport and activetransport are not viable. This would reduce the costof housing as fewer car-parking bays would beneeded.

In line with declining rates of VKT per capita, akey concern we have with the present transport policyis the continued construction and capacity expansions

of urban motorways in Australian cities. Adding roadspace to networks without increases in the travelspeeds of parallel public transport services, in theshort term, simply generates greater levels of car useand continued congestion, while at the same timeleading to a higher proportion of GDP being spent onfuel and transport (SACTRA, 1994; Mogridge, 1997;Zeibots, 2007). These are problems we discussed inSection 2. Aside from the operational downsides forthe physical economy that arises from motorwaydevelopment, financing for urban tollways and mo-torways presents significant problems in the longerterm for the money economy. This is because largeamounts of capital have to be secured through loansand repaid in the future. Many current projects donot generate enough traffic to repay the interest onloans at present, let alone the principal, after main-tenance costs have been deducted from revenues(Goldberg, 2010). In the long run, investment inthis area will not provide a sufficient return, under-mining money flows and economic growth in thefuture. Continued investment in this type of transportinfrastructure starves public transport of capital fordevelopment.

Lastly, it is important to acknowledge thatindividuals alone cannot bring about change alongthe lines we have described. It requires the will ofplanners, planning authorities and governments. Astravel markets respond to the macroeconomic pres-sures generated by depleting oil reserves, the planningand provision of transport infrastructure needs to beapproached in a way that is mindful of both physicaland monetary system functions in order to reducethe impact of demand destruction on Australianswhile shifting our cities and regions towards asustainable growth path.

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