More LPG price hikes coming

The Federal Government's carbon tax and an increase on LPG tax from July will further push up the costs of vehicle freight, particularly taxi fares.

Prices for LPG are up almost 20 per cent on last financial year with Perth and Canberra hit recently with average prices about 85c a litre. In the same period, national city petrol prices rose 10 per cent. Industry group LPG Australia has hit back at the government for another LPG tax rise - to 5 cents a litre from July - while slashing the LPG conversion subsidy.

"Where are the government's standards?'' asks LPGA CEO Michael Carmody. "LPG has 15 per cent less vehicle emissions than petrol, is half the price of petrol, is available at 4000 stations around Australia and is largely a home-grown product."You would think that a government trying to reduce carbon emissions would provide incentives for this product. But the subsidy to convert to LPG has fallen to a point where it isn't as attractive as before.'' 

Mr Carmody says the Federal Government offers a $1250 rebate for a gas conversion. It was $1500 until June 2011 and will fall to $1000 from June this year before being phased out next year. A rebate of $2000 is available to buyers of new LPG cars. He blames the soaring LPG price on three main factors - a jump in the gas price because of European winter demand; the end of a national vehicle fuel price war between Coles, Woolworths and 711; and the effect of the government's new LPG tax that started from December 1, 2011.

The tax started at 2.5 cents a litre - plus GST - from December and rises in 2.5c/litre increments annually until it reaches 12.5c/litre on July 2015. LPG for vehicle use is not currently proposed to be affected by the carbon tax but Mr Carmody says that could change. "There are negative messages coming out of the government about using alternative fuels, at the specific time when it wants a carbon tax and when it says it's trying to lower emissions,'' Mr Carmody says.

"I think the LPG sector will decline. The problem is that it will dwindle to a point where, one day, Australia will need alternative fuel. "By then it will be too late - there will be no infrastructure and we will be left to being totally reliant on importing all our fuel needs.'' Mr Carmody says the government's decision to introduce the LPG tax was about politics, not policy. "We (LPGA) has made dozens of submissions to the government and we've got nowhere. "I have to ask if the government is serious about moving away from our reliance on imported fuels.''