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Thursday, 1 May 1980
Page: 2065


Senator YOUNG (South Australia) - I was interested and very pleased to learn that the Opposition is supporting the Liquefied Petroleum Gas (Grants) BUI 1980. At the same time, I took note of the criticisms of the Government's import parity pricing policy, which on its own is a big subject. I will not muddy the water today by discussing import parity pricing policies other than to say that I fully support the Government's stance. It can be clearly seen that the policies are working. As I have said in this chamber on many occasions, if people wish to take a short term view of import parity pricing perhaps they can justify some small criticism. The Government is not interested in a short term policy; it is interested in the long term security of fuel supplies for this country, which is basically what import parity is all about.

It is interesting to note the great demand for liquefied petroleum gas, liquefied natural gas and natural gas in the last few years. Once gas was regarded as a nuisance in oil exploration and particularly in oil development. Literally trillions of cubic feet of natural gas were flared off in the United States of America until it was realised that the gas could be utilised. It really was not until the crisis brought about by the Organisation of Petroleum Exporting Countries in 1 973 that the world suddenly realised that there would be an energy shortage particularly in the liquid hydrocarbons field and that natural gas could play an important part in helping to satisfy energy requirements. The demand for natural gas and its by-product, LPG, has increased. It is most fortunate that a great deal of natural gas has been discovered and exploited throughout the world. It is a tragedy that so much natural gas, as I said, was flared off because initially it was regarded as waste and, more than that, as nuisance material.

One problem which has arisen with the increased demand for natural gas and particularly for liquefied petroleum gas has been the escalation of price that has occurred in recent years, but no rise has been as great as that of the last 12 months. The prices are directly related to international crises, etcetera. At 1 July 1978 a tonne of liquefied petroleum gas cost $83. By January 1979- just six months later, the price had risen to $110 per tonne. By July 1979, another six months later, the price had risen to $147 a tonne. By January 1980 the price had escalated again to some $252 a tonne. One can see the great impact that this has had on the cost pricing structure for consumer usage of LPG. Throughout the rural areas many people have been dependent on LPG for many reasons such as cooking, home heating and, in some cases, refrigeration.


Senator Tate - Who encouraged that?


Senator YOUNG - There was a need for the Government to have a closer look at the whole situation. A moment ago Senator Tate interjected and asked who was responsible. Bottled LPG has been in use in country areas for quite some time because of its convenience. I think Senator Tate is very much aware of that fact. The Government also encouraged people throughout Australia to use LPG and natural gas for domestic and industrial purposes. We have witnessed the development of pipelines from the Cooper Basin in South Australia to Sydney and to Adelaide. We have seen the extension of pipelines from Lithgow to Bathurst and to Orange, from Sydney to Newcastle and from Cootamundra to Wagga Wagga. We know also of the trunkline which will be coming to Canberra. I hope that the present program will not be the end of the construction of pipelines for natural gas. Natural gas is taking the place of other fuels.

I turn now specifically to LPG. The Government immediately responded to the great escalation of pricing that took place by introducing a $80 a tonne subsidy to assist what I term domestic rural users. Even though this did have quite a beneficial effect it left the price of LPG very high in comparison with the cost of electricity in many areas around Australia. The Government decided, for that and other reasons, to encourage LPG usage and to back up that encouragement by having another look at the restructuring of the whole of the pricing of LPG. The Government has been criticised because LPG pricing was related to overseas prices. This policy was followed not by the Government- I emphasise 'not by the Government'- but by the Prices Justification Tribunal. I remind the Opposition, in a constructive way, that whilst it has been critical of the Government over the price of LPG it must remember that when in government it established the Prices Justification Tribunal. The Opposition responded every time by saying that the PJT should be looking independently at many of the price structures. That is the basis upon which the PJT decided the price of LPG.

The Government has very responsibly taken a further step and had another look, as I said earlier, at the whole structure of the pricing of LPG. We have finished up with a revised price. The Government has reduced the price from $252 a tonne to $205 a tonne. For domestic rural use a subsidy of $80 still applies. The price of LPG with that subsidy is $125 per tonne, which is near enough half the current overseas pricethe price accepted by the PJT. In fact, the reduction, some $127 a tonne, is greater than the price for domestic use.

There has been criticism by the Opposition that this whole pricing structure will break down. Whilst it is true that the $80 a tonne subsidy will apply to household use, it will not apply to dairies and other areas on farms. However farmers might have to use in their stove a bit of LPG which has been designated for the dairy. There is every probability that this will happen. But because of the probability of a slight discrepancy or anomaly within the whole exercise, which is only minor anyway, is the Government to say that the whole basis of its philosophy to give assistance to rural consumers will be thrown overboard?

I think the argument thrown up by the Opposition is farcical. The Government has encouraged the use of LPG. It is now making sure that it is giving assistance by way of a subsidy and a new pricing arrangement to those users in rural areas, as it is doing by giving tax concessions to industries which turn to alternative energy sources. LPG is becoming more precious. Whilst there are alternatives such as electricity- coal-fired et cetera- the Government, by giving tax concessions is encouraging industry, wherever possible, to go away from using LPG. As I have said, the current price of LPG is now down to $205 a tonne as against the overseas price of $252. There is no doubt that the price of LPG will continue to escalate as will the price of crude oil. But the price of LPG seems to have accelerated at a far more rapid rate, if I can put it that way, than has the price of crude oil.

The Minister for National Development and Energy (Senator Carrick) said that in future the wholesale price of naturally occurring LPG will be linked with the price of indigenous crude oil and will increase by the same percentage- I repeat, by the same percentage- as any increase in the price of indigenous crude oil. The ex-refinery price will move in accordance with any such adjustments. I think that that shows a very common-sense approach. The Government has seen fit, in its wisdom, to link future price increases of LPG with crude oil prices which, in history, have shown to be more stable than has been the case with LPG. Indications are that this will be the case in future also. Rather than being critical of the Government- I do not say this because I am a Government senator- I commend the Minister for his foresight in making such arrangements because with this compensation he will encourage far more use of LPG as an alternative fuel in rural areas.

As I have said, I look forward to the use of liquefied natural gas in Australia. I hope that continuing discussions will take place on this area so that country towns which are not able to have natural gas transmitted by pipeline will be able to have tanker supplies of liquefied natural gas. I hope this will come. I am certain that the Minister since he has had his present portfolio which covers a wide range in energy, has been looking at this matter very closely. I have not discussed this point with the Minister but I hope that in his response some time this evening he will mention what the Government may do concerning liquefied natural gas, which I think can also provide a great saving as an alternative fuel.

I could refer to many other matters this afternoon. I refer to the encouragement of the use of LPG in transportation. The Government has done a great deal by reducing the price of LPG to 50 per cent of that of the current price of petrol, based on Melbourne prices. This will be a static situation. I refer also to the encouragement that has been given by tax concessions with regard to equipment being fitted to motor vehicles to enable the use of LPG; the Government's removing of excise on sales of LPG for motor transportation, and the encouragement the Government is giving to the motor industry to produce vehicles that will leave the showroom or shop floor capable of using LPG or petrol.

These are matters that involve long term planning. Part of this legislation is not so much for long term planning but to compensate those people who had planned to use and were using LPG- some with the encouragement of the Government, and many by their own desire. Problems were created because of the great escalation in the price of overseas LPG, on which the Prices Justification Tribunal based the Australian price. The Government has taken an active involvement in this matter. It has come up with realistic legislation that will give assistance and benefit to those rural areas which are using and are dependent upon LPG. This is not a big

Bill, but it is an important Bill. I am very glad to be able to give it my support.







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