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Shocking the Suburbs:
Urban location, housing debt and oil vulnerability in the Australian City
Jago Dodson and Neil Sipe, Urban Research Program, Griffith University
One of the most publicly discussed economic phenomena since early 2005 has been the dramatic rise in the global price of oil. The rising global oil price has been translated into rising domestic fuel costs. Given the heavy dependence of Australian cities on cheap fuel for urban transport the increasing oil price raises questions about their economic impact on urban households.

In a previous paper (Dodson and Sipe 2005) we examined the sociospatial distribution of ‘oil vulnerability’ in Australian cities. That paper received much attention from scholars, policy makers and the media. The earlier paper established a basic method for assessing oil vulnerability via a spatial index that measured a combination of car dependence and socio-economic status at the level of the Census Collection District.

We termed our original index the ‘vulnerability index for petroleum expense rises’ (VIPER). A version of this paper is to be published in an international journal. Many questions still remain, however, about the impact of rising oil prices on cities. Our continuing scholarly interest in this issue and increasing public and political concern about rising fuel costs has motivated us to extend our original VIPER assessment to take into account further aspects of urban socio-economic vulnerability to rising oil prices.

One of the key emerging public concerns is the socio-economic risk to households arising from the combined impact of rising mortgage expenses, historically high petrol prices and inflationary pressures. To assess how the impact of these three factors is likely to be distributed across Australian cities we have created a new index, the ‘vulnerability assessment for mortgage, petrol and inflation risks and expenditure’ (VAMPIRE).

This paper reports the results of our analysis of the VAMPIRE for six Australian cities and the implications these have for various aspects of public policy. Our findings suggest that households with mortgages residing in outer-suburban locations in Australian cities will be the most adversely affected by rising fuel costs, in large part because of their exposure to housing debt and the poor quality of alternative travel modes to the private car. In contrast, wealthier inner-urban and middle-ring localities appear less likely to be vulnerable to increasing petrol prices, due to relatively higher incomes and greater availability of public transport. The personal taxation changes announced in the 2006 Australian government budget also appear likely to favour the wealthy areas of Australian cities over less affluent localities in terms of mortgage and oil vulnerability. We hope that the analysis and discussion we present in this paper will assist to inform scholarly, policy and broader public debate about the impact of rising oil prices on Australia’s urban social fabric.
July 2006
Author Jago Dodson summarizes the 50-page report (PDF), available online:

The report examines the spatial vulnerability of Australian urban areas to fuel price and mortgage interest rate rises.

The report maps the extent of mortgage and oil vulnerability at the local scale. We note that outer and fringe suburban areas where there are higher proportions of households with mortgages, where car dependence is greater and where incomes are more modest are the most vulnerable to rising fuel price and interest rate impacts.

How to define ‘Energy Security’?

Jerome a Paris, Daily Kos

Jonathan Stern [in this morning’s Financial Times], director of gas research at the Oxford Institute for Energy Studies (…) suggests at least four different definitions of the problem:

  • Inadequate investment in energy supply and infrastructure to meet future demand;

  • Developed countries becoming increasingly dependent on imported energy from unstable countries or regions (such as Middle East oil or Russian gas);
  • China and India needing such a huge volume of energy for future industrialisation that it puts an intolerable strain on resources;
  • Rising oil and gas prices threatening to deprive the poorest countries of affordable energy.

To those might well be added the fear of terrorist attacks on energy installations, or natural disasters such as Hurricane Katrina, in a market with very little margin of spare capacity.

The debate over global warming also adds an extra dimension, with fears that those countries seeking to reduce their greenhouse gas emissions will make themselves uncompetitive, or be forced to turn back to nuclear energy, in spite of its uncertain financing and costs of waste disposal.

The above is a fair summary of the problem, in that it explicitly mentions global warming, and that it also (in an another, unquoted, paragraph) mentions the legitimate security issues of the suppliers, in particular their need for security of demand i.e. the ability to have some degree of certainty on the volumes they will sell, something which is essential to justify the massive investments in new production or transport infrastructure. The article also makes a clear distinction between the oil and gas industries, which, as I have repeatedly written over here, as essentially separate industries.

However, that article makes one major unsaid assumption: it takes demand growth as a given, or worse, as an necessity, accepting the hypothesis of an unbreakable link between progress, GDP growth and growth in energy consumption.

The way we count resource extraction as value creation rather than depletion of natural capital makes it look cheaper or more effective to work on boosting production than on reducing consumption, but is it?

Is it really easier to compromise with the Saudis, spark a new cold war with Putin, spar with the Chinese and the Indians while enriching countless corrupt regimes (including avowed enemies) than to make a small effort at home to avoid these imports by not needing them – simply by using less energy, as we know is possible?

Energy security is actually an energy demand problem and is entirely within our own control. If we waste less; if we consume in smarter ways; if we accept that energy is a precious resource that we can no longer take for granted, then we will have a chance to reach energy security. Otherwise we’ll just be pushing the problem a few years further each time we open up a new country to investment or find a new way to extract a bit more oil or gas or coal. Maybe a few years more is good enough for us. But will it be good enough for our children?

The solution is in our own hands
(4 July 2006)
The link given by Jerome doesn’t seem to point to the right article.

ASPO Newsletter for July
Association for the Study of Peak Oil (ASPO) – Ireland
The July ASPO Newsletter is now available.

Articles include:

724. Venezuela Revisited
725. British Ambassador admits to Peak Oil
726. The airlines admit to Peak Oil
727. Astrology
728. It is not difficult to guess the motives
729. ASPO-5 International Conference in Italy
730. Clinton raises alarm about oil depletion
731. Scientific evaluation of the Hubbert Curve
732. ASPO International Audio Conference – July 6th
(July 2006)

National Education Association alerted to peak oil

Aaron Wissner, valuesystem
Over 10,000 people were alerted to peak oil at the National Education Association’s annual meeting in Orlando, Florida today. The NEA is the largest professional association with over 2.8 million members in the United States.

Aaron Wissner, a teacher from Michigan, alerted the delegation to peak oil with a motion to look into the impacts to education.

This morning, all delegates received a special morning paper that included the text of the motion along with a rationale.

“NEA, utilizing existing resources and within the current budget, will educate members on challenges to bargaining, threats to retirement, stresses on families, and other negative impacts caused by world peak oil production,” read the motion.

The rationale, limited to a maximum of 40 words, read as follows: “Gasoline prices rob school pocketbooks, leaving less for educators. Expensive oil fires sudden inflation, imprisoning members trapped in multiyear contracts. The end of cheap oil threatens to cripple retirement plans. Children suffer as low wage parents face inflation driven unemployment.”

…The assembly chose not adopt the motion, but heard the warning issued by Wissner.

The day prior to making the motion to the assembly, Wissner spoke with the president of each state affiliate. He brought them the motion and asked each if they had questions. Many questions focused on how oil production impacted schools. One example he utilized was explaining how oil prices drove up inflation. He explained that a 10% inflation rate would make 3% annual raises over multiple years very poor agreements.

One fact Wissner learned while talking with state presidents was that certain states were doing much better financially due high oil prices in 2005.

“Oklahoma, Texas, North Dakota and Wyoming fund schools via money collected on oil revenues,” said Wissner. “For students and educators in these states, high oil prices have paid off with big funding increases. For most states though, the impacts of rising oil prices have been significant. In my home district, not only did energy and fuel costs increase, but we had to add bus runs because less parents are driving their kids to school. For my home state of Michigan, I suspect that oil prices are the primary cause of our slumping economy, due to the drop in sales of SUVs and light trucks. They’re the bread and butter of Michigan’s economy.”
(3 July 2006)