Over the past few months, petrol had risen about 20 cents a litre – costing the typical family an extra $9 a week – and the government had no plans to deal with this, Opposition Leader Kim Beazley said yesterday.

Australia already imported 60% of its domestic oil needs and was consuming oil three times faster than it was finding it, he said.

Instead of increasing reliance on imported oil, the government should move to grow an Australian liquid fuel market by supporting gas-to-liquids research projects, according to Labor.

"We want Australia's natural gas developed to make us more self sufficient in transport fuels and less vulnerable to future global oil shocks," Beazley said.

"Australia's competitors in the gas industry are way ahead of us, particularly in the Middle East where countries like Qatar already have major gas-to-liquids [GTL] projects making refined products for the global market."

Beazley also urged the government to give more support to the biofuels industry, including ethanol.

“One way to do this would be to follow the lead of state governments in Queensland and New South Wales and provide a government fleet market for ethanol blends to help grow that industry and make us less reliant on oil imports in the future,” he said.

But there is strong opposition in some quarters to further support for the ethanol industry.

Commonwealth Securities industry analyst Peter Harris recently said without an excise rebate, ethanol could not compete with petrol despite record oil prices.

“The price of a litre of petrol before tax is about 57 cents… ethanol is selling at 70 cents a litre,” he wrote in a letter to The Australian Financial Review.

However, the world leader in ethanol production, Brazil, sells 100% ethanol fuel at the pump for 54 cents a litre – less than the price of petrol before excise.

Brazil started a major ethanol program in 1975, aiming at improving the nation’s security of fuel supply while stimulating the sugar industry and creating growth in rural areas.

The initial investment was huge – as much as US$11.7 billion – but it has paid off for Brazil, according to a report in today’s Australian Financial Review.

“The substitution of gasoline with ethanol has saved a considerable amount of wealth for Brazil,” Brazilian economist Plinio Natari told an international conference on ethanol in Brisbane in May.

“Valuing the substituted gasoline for its price in the international market, forgone imports from 1976 to 2004 have saved Brazil $US60.74 billion in constant dollars of December 2004.”

The savings could be much larger under a carbon trading regime, as ethanol emits less greenhouse gas than petroleum-based fuels.

Now all petrol in Brazil must be sold with at least 25% ethanol blended in.

Only a minority of the country's vehicles run on 100% ethanol fuel. But the flex-fuel engine, released in Brazil last year, can run on both a petrol-ethanol blend and pure ethanol, allowing drivers to choose whichever fuel is cheaper at the time.

The Brazilian car manufacturers’ association expects that within the next three years, all cars produced in that country will be flex-fuel vehicles.