Liquefied Petroleum Gas: Is LPG Going To Help Australian Drivers?

By Motoring Channel Staff - 16/Aug/2006

Nationwide, Australia — The Australian Federal Government has for some time been accused of not doing enough to ease the burden of rising petrol prices on drivers, and has responded to such criticism with a new LPG subsidy scheme.

Simply put, if you buy a new LPG-fueled car from the dealership, such as an LPG Ford Falcon or Mitsubishi 380, you'll be entitled to a $1,000 tax-free grant. Furthermore, owners of petrol cars that convert their vehicles over to LPG, or liquefied petroleum gas, will get a grant of $2,000, also tax free.

The scheme began on August 14th, 2006, and will run for eight years.

The Government released details of its $1.5 billion dollar fuel package on Monday, which as well as providing incentives to drivers to convert to LPG, also encourages the use of ethanol-blended fuels by petrol stations by offering cash incentives, and includes $76 million for new oil exploration and puts $123 million on the table to fund renewable power sources in remote parts of the country.

Response to this new government initiative has been mixed. Though cheaper than petrol and more environmentally friendly (producing about 15 per cent less greenhouse gas emissions and just one-fifth the air toxic emissions compared to petrol) the Australian Labor Party has been cautious about applauding the new scheme, saying that many drivers will have to travel for thousands of kilometres before LPG begins to save them money, and only those with large disposable incomes will be able to afford the initial $2,500-$3,000 conversion or new LPG cars.

Talkback radio has been buzzing with arguments for and against, and one of the 'against' is that those drivers with older and cheaper cars could not make sense of the equation: why splash out $3,000 for a conversion when your vehicle is worth $1,500, and despite the $2,000 rebate? It has been reported that car lover and talkback radio host John Laws is not happy with the plan, labelling it discriminatory.

But the FCAI (Federal Chamber of Automotive Industries) has welcomed the Federal Government's announcement of an LPG Autogas conversion subsidy. "The subsidy is a useful initiative," FCAI chief executive Peter Sturrock said.

"It will help many families overcome the impact of recent high fuel prices. It will give many motorists an added choice by bringing forward the breakeven point which makes LPG fuel systems financially viable."

Mr Sturrock also mentioned that the new rebate scheme would help to stabilise demand for vehicles in market segments which had been hardest hit by increased fuel prices (read: large cars, such as Commodore and Falcon).

"LPG's cost at the pump means daily running costs are virtually halved," Mr Sturrock added. "It gives buyers another option to consider."

While the public reaction to the scheme appears to be mixed, it seems that the FCAI and carmakers are happy with the new scheme. "A new dedicated LPG Ford Falcon, with the grant, represents an outstanding offer for Australian families," said Ford Australia's president, Tom Gorman.

Ford is clearly happy with the move, as the Falcon - it's large family sedan - is the only Australian built car to offer a dedicated LPG system, essentially wiping $1,000 off the new car price due to the new LPG subsidy scheme. Ford sales of dedicated LPG Falcons have surged in the last two and half years, from 6% of annual Falcon sales in 2004, to 11% in 2005 and almost doubling for the third year in a row, reaching about 21% of all Falcon sales thus far in 2006.

"At current fuel prices, motorists can expect to save approximately $40 per tank with an LPG vehicle versus an equivalent petrol model," said Mr Gorman.

Not surprisingly, LPG Australia has also welcomed the move. "The government subsidies for new LPG vehicles and conversions are a sensible response to current petrol price trends because they recognise that LPG Autogas is a readily available alternative fuel," said LPG Australia's industry development manager Phil Westlake. He added that the Federal Government's $2,000 LPG conversion subsidy meant that motorists using about $80 worth of petrol per week would pay back the average $2,500 cost of conversion in less than four months.

Furthermore, the LPG Australia has also formed a new Autogas Task Force (ATF) in direct response the expect spike in LPG conversions. "With the Government's announcement, an autogas conversion has become an investment in the future for consumers, and the LPG industry will invest in the future as well," said ATF spokesperson, Ian Maloney.

"While the spike in demand may involve some short-term conversion capacity issues, this will not adversely impact on the savings the motorist makes, which will continue for many years to come. The government has given the LPG industry long-term certainty and we will respond with greater installation capacity and a wider range of autogas kit availability," concluded the ATF's Ian Maloney.

The mixed reaction towards the new subsidy scheme has not fallen on deaf ears, and talking to South Cross Broadcasting, the Prime Minister of Australia, John Howard, conceded that this new scheme is not a complete solution to rising fuel costs, but will provide some relief to some drivers. "There's no easy solution to this problem and I don't hold out the LPG subsidy as being a silver bullet, as being the answer to high petrol prices.

"It's doing something at the margins to help, I suspect, a reasonably large number of people," said the Prime Minister. "The best way of helping people in relation to high petrol prices, generally, is to put more money in their pockets through things like tax cuts."

While most motoring groups have welcomed the package as well, the Opposition Government is skeptical about the $1.5 billion package, with Labor leader Kim Beazley arguing that the Howard Government isn't doing enough: "Over the next eight years the Commonwealth will take in revenue associated with the fuel excise of over $100 billion, and big-hearted Arthur opposite, the Prime Minister of Australia, will return to the Australian people in one way or another perhaps $1 billion."

While the LPG scheme will be a welcomed by many, and can reduce fuel costs considerably, there are other issues to consider including the infrastructure - or lack of - to cope with converting the expected surge in demand for LPG. Martin Ferguson, the Labor party's spokesman for resources, had this to say: "The Prime Minister has to face up to the fact that it is not just the availability of LPG in rural and regional areas that is a problem — it is the availability of workshops and skilled people that can do conversions."

Many LPG conversion shops had already experienced a boom in people wanting the conversion for their cars, and before the rebate scheme begins on October the 1st, many shop were already reporting backlogs until late into the year.

There are many arguments for and some against the new initiative by the Government, who is well aware that rising petrol prices will be one of the key election issues at the late 2007 (or possibly early 2008) Federal Election.

Will you be getting LPG now there's a rebate? Can you afford the initial outlay, and what do you think of the plan? Is it discriminatory as some are arguing, or is the Australian Government doing all it can to ease the burden of rising fuel prices?

Tell us your thoughts on the issue and we'll print them in the letters section.

Web Links:
LPGautogas.com.au
FCAI.com.au