The price of 91 octane petrol had been sitting at $1.99.9 – effectively $2 a litre – for quite a few weeks until I noticed on Friday afternoon that the psychological barrier of $2 had been broken, with the stations around where I live showing a price of effectively $2.03 a litre.
The AA “Petrol Watch” website shows us that the last time 91 octane was over $2 a litre in the main centres was September 2008, when it was in the midst of a dramatic fall caused by plummeting demand as a result of the Great Financial Crisis that happened during that month.
Back in 2008 petrol jumped above $2 a litre in May, before peaking at almost $2.20 a litre in July: around the time oil peaked at $US147 a barrel. It’s interesting to have a look at what impact these prices had on road usage and public transport patronage.
If we look first at traffic volumes, NZTA’s own data for state highway traffic volumes during the four months in 2008 when petrol was above $2 a litre show some interesting results:
All the numbers are comparisons with volumes in the same month in 2007. So we can see that May 2008 was 0.3% down on May 2007, June and July 2008 were 8% down on the same month in 2007 and August 2008 was 7.5% down on the same month the year before. Those are some pretty serious declines in traffic volumes. It will be interesting to see whether the same thing happens this time around – particularly if petrol stays above $2 a litre for a sustained period of time (or particularly if it gets well above $2 a litre).
If we turn to public transport patronage, we can also see some big impacts in those winter months of 2008. Working off data I compiled for a blog post a month or so ago those months were certainly good months for public transport patronage – and I would argue finally ended the “rot” of 2005-2007 when patronage fell away quite badly: particularly on the buses:
Interestingly, in the months in later 2008 – when petrol prices were actually falling quite sharply, public transport patronage growth remained strong. This could suggest that high petrol prices encouraged people to “give it a go” and they actually found things had improved quite a lot since the last time they tried to take a bus or (perhaps more particularly) a train. It will be useful to see whether the same thing happens again – should petrol prices go and up down a bit over the past few months.
I suppose it should be fairly obvious from looking at all of this, but I do wonder how sensible it is spending $11 billion on new motorways over the next decade when it seems higher petrol prices put people off driving and encourage them to use public transport. Perhaps we’re de-sensitised to prices of around $2 a litre now – but it would be interesting to see whether public opinion on how sensible the government’s transport policies are would start to change if prices were above $2.50 a litre. If the global economy recovers throughout 2011, as it’s supposed to, it would seem to me that such a price level is quite possible by the end of the year.
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If you ask me this has to a be contributing factor to the economies continuing stagnation despite bumper commodity prices. NZ is such an auto dependant nation compared to other developed countries that looking at it from a macro level, all the extra earnings from commodities are simply being spent on ever more expensive petrol. Would love to see someone put some numbers to this but i’m too lazy.
The rest of the developed world (and china) see high speed rail as essential to continued economic development and NZ mothballing rail and building gold plated motorways…
In the US Obama and the Demoncrats may see high speed rail as important for the future but the Republicans and Tea-party representatives don’t – they’re currently demanding that most of the funding proposed by Obama be cut from the current budget – now that they control the senate it will probably will be cut.
I do think once people notice how much it costs to fill up the car that people will take less casual trips but for many people stopping to drive to work really isn’t feasible, and they’re the ones that are probably going to be hardest hit by Nationa’s obsession with building roads. They’re also probably the ones not voting for National in any case, so perhaps National doesn’t care….
Interestingly, BP and Shell went from 199.9 to 202.9, but Mobil and Gull went from 199.9 to 197.9. Since the latter are more numerous, there are actually more petrol stations around Auckland selling at 197.9 than there are 202.9.
The most frustrating thing about this when we talked with Steven Joyce about this in 2009 was that he still maintained people drive the same amount when the price of petrol increases. This data clearly shows they don’t, but it still won’t be enough to make SJ change his approach.
Make sure you send this data to Gareth Hughes. He’s doing a fair job of calling Joyce on his nonsense in the House, so more figures cannot hurt.
Point him to the most-recent patronage figures for rail, too, and explain how Joyce cannot continue to claim with any accuracy that Puford carries more people than the Auckland rail network. Someone needs to get that on the record in the House, or at least force Joyce to explain his numbers with excruciating clarity.
The lustre is finally wearing off Key, now it’s time for some of National’s sacred cows to be slaughtered in public.
“Back in 2008 petrol jumped above $2 a litre in May, before peaking at almost $2.20 a litre in July: around the time oil peaked at $US147 a barrel.”
That was also the time NZ was falling in to recession. So were the 2008 vehicle and public transport changes mainly due to petrol prices or the economic situation? There is no way to say for sure. However your statement “and I would argue finally ended the “rot” of 2005-2007 when patronage fell away quite badly” might be a hint. The economy was doing well then. Were petrol prices falling? If petrol prices were stable or rising then the economy is the primary driver in transport patterns and it seems that people prefer to drive when they’re able to, while they see public transport as a distress purchase. If that is the case then should the government base its development priorities around an assumption that we’ll remain in a recession for a prolonged period?
That’d make an interesting election policy: “Vote for Labour/Greens/Whatever because we’re planning on recession for the next 10 years but we’re buying buses to compensate”. I don’t see it as a vote winner.
Petrol dropped by over 50 cents per litre before the end of 2008, so the recession is clearly not the only effect.
Also, at risk of sounding like Shon Key and avoiding the issue, mean wages have increased so the people who have jobs are mostly earning more. Without getting into all the qualifications and explanations (such as low-wage jobs being first to go, which drags up the average wage), that points to a much bigger effect being the cost of “discretionary” travel and the quality of alternatives. If you can get to work other than by driving, and it’s price-competitive as well as of reasonable quality then of course you’re going to go with the alternative. As petrol gets more expensive price-competitive becomes easier to achieve, especially if we get rid of the Minister of Trucks come November and can drop the nonsense 50% fare-box ratio.
“were the 2008 vehicle and public transport changes mainly due to petrol prices or the economic situation? ”
I don’t think you can look at those in isolation. The petrol prices rise, people continue driving, money is diverted from local discretionary spending to offshore oil producers. Less local discretionary spending = recession. Of course you can’t look at anything in isolation, as 2008 was also the year we lost the great easy money gamble, but there is a general trend that higher oil prices = less growth.
A one off petrol orice increase above $2 a litre won’t change much. What is needed is for petrol to stay above $2 a litre, so people will start thinking of usingpublic transport more, or buying more energy efficient cars, or developers find urban sprawl subdivisions loose some of their value. I think if we get to $2.50 a litre by the end of the year and they stay high (i.e. don’t fall heaps before climbing to $2.50) people might see high prices as a pernament reality, and eventually Steven Joyce (asuming he isn’t promoted away from transport after the election) might eventually get the message too.
The last time i drove regularly, petrol was 88cents/litre. I can’t believe at $2/l more people haven’t stopped driving, but then i can’t believe AKLs PT is still so second class. Has the price of PT also doubled since mid-noughties?
Even at $2/L Petrol is still very cheep as a source of energy, for mid size sedan burning 8L/100km the petrol component of running costs is only 16cents/km (still very cheep). Petrol makes up only a small portion of vehicle running costs. For nice cars it is the cost of the capital outlay that typically makes up the biggest portion of ownership cost. Im not surprised that the demand for petrol is somewhat in-elastic. Its only really the CBD (with its expensive parking) where the marginal cost of car running costs exceeds the cost of PT tickets. To compare prices with at different dates the effect of inflation must be removed. Once this is done current petrol price does not seem excessively high compared to historic trends.
I think the main issue there is people simply don’t calculate the depreciation cost of vehicles, which is in reality hugely expensive. I.e. spend twenty grand on a nice fairly-new second hand family sedan and five years later it is worth maybe five or six. Thats a loss of over two hundred bucks a month. Buy new and depreciation is factors higher in the first few years.
If you just ignore the real cost of purchasing and even maintaining a vehicle, then the marginal cost of petrol is actually pretty minimal so shifts of ten or twenty cents a litre aren’t that bad.
However, once you’ve depreciated it all away you’re golden. My car is 15 years old. Its insurance market value is somewhere around $3500, and hasn’t changed much in the last two years. It cannot depreciate much further, so whatever driving I do is, effectively, free in that respect. The NZ vehicle fleet is, traditionally, old. Most of it’s second-hand from Japan, most of it is 10 years old or older. Ignoring depreciation is, for many people, entirely viable because it’s such a minor consideration.
What irks me most about the petrol situation, is that a lot of the country don’t see it as a problem.
Public transport works well in most towns and smaller cities in NZ because they’re small, so bus and train routes work more effectively. Auckland sadly doesn’t have that luxury.
Each day, I drive to work. When I started this job, our company was closer to home, but a year or so back we moved into the CBD to be more accessible to our clients. My wife and I live about 25km out of the city, in our own home, so moving isn’t really an option, and my rostered day starts at 8am.
I leave early, around 6:20am each day, so I can avoid traffic and get better milage and arrive at work at about 6:40am. Parking is free for me, which is a small mercy!
Aside from this, my options are:
Two to Three busses one way at a current cost of about $9 each way, which of course are subject to increases to cover fuel.
Drive to the train station, then pay for a ticket into town (last check again $8 one way, subject to increase with fuel) then a twenty minute walk to work from either of the closest stations. Then repeat in reverse to get home, if my car is still there. I’ve loathed parking in unsecured public places for extended amounts of time, after someone tried to steal my car and the police did nothing to help.
I’ve had someone suggest a scooter or motorbike to get to work, but with Auckland’s drivers I doubt I’d live past a week, in spite of the fuel savings. It would help get the mortgage paid faster I guess!
Finally the option to either cycle or walk. Cycling isn’t really a great option, due to the distance and lack of showers at work, also see my previous note about Auckland drivers. Walking, possible, but I’d need to leave about five hours earlier.
My question is what I should do? What should anyone in my situation do? Auckland’s public transport system simply does not work, yet the rest of the country looks at us and says: well, you should take a train or a bus then!
I feel these options are not practical, I could be wrong, but after weighing them up they don’t work for me. My pay rates aren’t increasing and the extra $5 a week from the governments tax cuts doesn’t help much either.
Someone got an answer? cos I’m willing to hear it!
Sorry I don’t have all the answers, even the government doesn’t have a plan for increasing oil/petrol prices
Firstly I think public transport works better in larger city than small towns, for example Hong Kongs MTR is awesome and turns a profit, smaller towns/city’s simply don’t have the population to be able to justify running trains or even buses at high frequencies.
I feel sorry for your situation where your company has moved far away from your home, and in the meantime petrol costs have increased. The petrol component of your cars running costs assuming 8L/100km and petrol at 2.16/L (mid size sedan driven gently) will be about $4.32 a one way trip, you are right this adds up quite fast. It comes to $185 per mounth assuming you work 5 days a week. Have you compared this (plus your other car running costs such as tires/ oil changes etc) against monthly bus pass costs?
I agree active options aren’t the very attractive over 25km.
You are lucky to have free (subsidized) parking at work. Perhaps you could request the subsidized parking could be replaced with a monthly Bus or Discovery pass when your contract is next re-negotiated.
Short term you have limited options, monthly bus passes, carpooling (if you can find somebody who wants to go into town as early as you), get a more efficient car etc.
Long term (with perhaps even higher higher fuel prices) you do have more options, admittedly many of them will be to major for you to consider.
– sell up and move closer to the CBD or the rail network, or the NEX or a high quality bus route such as dominion road.
– Get a job closer to home
– Form a long term car-pool
– move to a shift that does not start and end during rush hour (depending on what kind of shift work you do.
– get a super efficient car
In conclusion any long distance commute is going to be expensive, and is exposed to future fuel price shocks.
When you say “Auckland’s public transport system simply does not work” please bear in mind that it does work for just under half of people entering the CBD between 7 and 9am. It’s just the subsidized parking you have that shifts the economics towards driving. BTW the Mt Eden B-line busses are jammed in the morning and evening peak at the moment, and they run a (triple axle) bus every 5mins. That’s a lot of people.
the monthly passes are only $180 a month by the way. However I see that a 20 min walk rule out using rail in your case. Hopefully simplification of CBD bus routes may help you in this case, and with integrated ticketing this should be no extra cost.
Also the CBD rail link is likely to big a big help to people like yourself who work in the outer CBD, and should bring you within 5 or 10 mins walk.
Alternatively if many other people who work closer to stations do take the train, this wwill help cut down your journey time, so either way Public Transport investment will help you out.
Thanks for posting your story, is good to hear from everyday people about their transport choices.