Australian Petroleum Market

Running head: AUSTRALIAN PETROLEUM MARKET
Australian Petroleum Market
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AUSTRALIAN PETROLEUM MARKET
The petroleum industry in the Australia is one of the highest contributors in
the world. Australia has about 257 trillion cubic feet of the resources of gas
(Valadkhani and Smyth 2018). The petroleum industry of the Western Australia is
also one of the largest contributors of most of the petroleum goods. The government
should continue to intervene the market for petroleum industry in order to avoid
any kind of market manipulation. The government needs to enter into the markets
even when the price of oil becomes highly volatile in the international markets. The
market intervention of the government is a type of institutional orders that is reflected
in the regulation of the gas framework. The administration of the government is
already taking huge measures for setting out various reforms in the petroleum
industry. By entering into the market, the government can combat the inequities of the
market with the help of regulations, subsidies and taxations. Australia’s oil and gas
industry is therefore, is the major contributor to its economy where the coal and gas
sectors in the country plays a very important part. In order to promote economic
fairness, the government can enter in to the market of petroleum in Australia
(Aph.gov.au. 2018). Market interventions are mostly for correcting the market failure,
improving the performance of the economy and achieving equal distribution of both
wealth and income. Based on the various reserves in the shelf of North West, the
industry of Australia extracts crude oil and natural gas. The largest refinery of
petroleum is present at Kwinana and most of the crude oil and petroleum liquids are
exported.
The petrol market of Australia has been subjected to various types of price
controls and monitoring by the Commonwealth and state governments. One way of
government intervention can be the use of taxation policy which states that excise tax
should be imposed on petroleum for generating revenue. This is also term as the fuel
tax. The reason behind the fuel tax is that it will help in reducing the consumption of
fuels along with greenhouse emissions. In addition to the greenhouse emissions there
are also presence of negative externalities which includes air pollution. Also,
sometimes setting a price floor or a price ceiling will make sure that both the
consumers and the producers are earning profits where price floors are usually used
by the governments to prevent prices from becoming too low. Another kind of
intervention is providing subsidies as that would lower the cost of production. Some

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AUSTRALIAN PETROLEUM MARKET
of the possible ways of subsidies includes direect funding and tax giveaways.
However, subsidizing petroleum will add a risk of carbon lock in.
Government intervention is very important in the industry when there is a
presence of market failure. Therefore, the government needs to enter the market for
fair distribution of wealth. When the society is not stable because for the distribution
of wealth it will result in unemployment and even crimes. Market failure also does not
provide good market environment to everyone. Government interventions can have
both good and bad effects in the market. The natural gas industry in the United States
have been the largest source of the production of energy representing about 33% of
the energy produced (Heaney and Treepongkaruna 2017).
The prices of petrol in Australia are on a four-year high where the pinch of
thee inflated prices can be felt as the prices are being driven by the trends in the
international supply of oil. A study carried out by the Australian Competition and
Consumer Commission the petrol prices have seen a dramatic rise after April in the
five largest cities although they were stable for the three months before that
(Aph.gov.au 2018). The current prices are as high as $1.60 per litre. The international
factors are held responsible for inflating the wholesale petrol prices like the tensions
in the Middle East, US sanctions having the potential to be renewed against the Iran
war and the concerns over the Venezuelan supply. This sent the prices of crude oil to
a four year high in May. The fall in the Australian dollar had a compound effect in
raising the oil prices as predicted by Morgan Stanley, who also said that this would
nullify the impact of the proposed income tax cuts. For the petrol prices to fall, there
has to be more definite easing of the production restraint agreement from the side of
Saudi Arabia and Russia (Chua, De Silva and Suardi 2017).
The government has introduced apps which help drivers to locate places that
will supply petroleum at lower prices to aid drivers. This had a downward effect on
the prices and the condition of low competition (Hashimi and Jeffreys 2016).
However, government intervention in this situation of a high price is very crucial to
stop the prices from going higher up and avoiding market failures but this will have
no impact on the demand or supply. Economists have agreed that taxing or removing
subsidies will have negligible impact on the long run demand of petroleum. However,
they would lead to higher innovations in the field of fuel-efficient cars but the