The Opal Alliance - March 2006

Regional Rollout of OpalFuel in Central Australia - Cost Benefit

Study Findings

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The Passion

“Now listen, I know some of you have heard about petrol sniffing, but where I come from every single family has a family member affected by petrol sniffing, and we now have a terrible problem on our hands. When our young people sniff petrol they develop all sorts of health problems, such as mental health problems, heart and lung problems and acquired brain injuries. Petrol sniffers sniff all night and do not rest and this affects the whole family.

Anangu families are exhausted. These petrol sniffers are our own flesh and blood, yet we have lost them all to petrol... Of course we know that some petrol sniffers cannot be helped. They will live their lives in wheelchairs with acquired brain injuries. But for the new recruits…well we are hoping that with Opal there will be no new recruits to petrol sniffing.”

Janet Inyika, NPY Women’s Council staff member, former Executive member and resident of Amata community SA, launching Opal fuel with Health Minister Tony Abbott, Adelaide, February 2005. Translation by Linda Rive, NPY Women’s Council.

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The Study

Study commissioned by the Opal Alliance:

NPY Women’s CouncilCAYLUSThe GPT Group

Undertaken by Australia’s leading economic consultancy, Access Economics

Independent third party assessment, globally accepted methodology

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Background

The Opal Alliance identified a comprehensive Regional Rollout as the most logical way to optimise the benefits of Opal

Our advocacy efforts were concentrated on a regional approach supported by Federal and State Government initiatives

We found a willingness to use Opal but resistance to a Regional Rollout on the grounds of cost and practicality

But there was an information gap on both the cost and benefit of Opal - a factor critical to forming policy on Opal

The Access Economics Study aims to fill these gaps

Opal fuel alone is not the complete solution but it is a great tool to help reduce sniffing

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Rollout Area Definition

Why this area?How it was established?

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Study Methodology

Petrol Sniffing costs:• Loss of life• Health costs• Crime• Justice system costs

• Rehabilitation costs etc

Rollout costs:• Opal subsidy (@ 27c per litre)• Supporting programs

– Employment

– Education

– Intervention

– Policing etc

Benefit of lower petrol sniffing costs - Cost of Opal rollout = Net benefit

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Key Findings - Costs of Sniffing

Total cost of petrol sniffing is $78.9m in 2005, comprising:• $38.1m (49%) was the net cost of the disease burden • $16.2m (20%) was the crime and justice system impact• $8.3m (11%) was the productivity loss• $12m(15%) was the health, long term care and rehabilitation impacts• $2.3m (3%) was informal care provided by families and significant others• $1.9m (2%) was deadweight losses from raising additional taxation revenue to fund

transfers

After allowance for less than 100% effectiveness of Opal, the benefit of cost reduction is reduced to $53.7mOn a scenario basis the Cost range (expressed as a benefit) is:

Prevalence Scenario

Total Benefit ($m)

Net Wellbeing Benefit ($m)

Total Financial Benefit* ($m)

Best (100%) 73.5 38.1 35.3Base (75%) 53.7 28.6 25.1Worse (50%) 34.9 19.1 15.8

* Note: Total Benefit minus Net Wellbeing Benefit equals Total Financial Benefit

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Key Findings - Costs of Rollout

The total costs of the Rollout is $26.6m comprising the fuel subsidy and supporting strategiesFuel subsidy cost $15.8m

• Fuel subsidy based on 27 c per litre (was 33c)• Fuel usage is considered conservative at 58.5m litres

Usage Scenario Litres (million) Cost ($m)High (worst) case 73.1 19.7Base case 58.5 15.8Low (best) case 43.9 11.8

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Key Findings - Costs of Rollout (Cont’d)

The cost of a package of strategies to address petrol sniffing is estimated to be $10.8 million per annum.

• shared by the NT, SA, WA and Commonwealth Governments. • well-implemented supplementary demand reduction policies are essential to accompany supply

substitution:– Awareness and harm minimisation health strategies;

– Youth and recreational programs;

– Employment, education and training services;

– Preventive and rehabilitative outstation programs;

– Deterrence (legal sanctions, police presence); and

– Community action programs

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Key Findings - Net Total Cost Benefit

The results of the cost benefit (including healthy life gained) show a $27.1m net gain ($53.7 costs - $26.6m)This means there would be a net decrease in costs across the Rollout Area and a 75% reduction in sniffing in the base case

TOTAL COST BENEFIT ANALYSIS ($ MILLION)

-40 -20 - 20 40 60 80

Worst

Base

Best

Net Benefits Costs

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Key Findings - Net Financial Cost Benefit

The results of the cost benefit (excluding healthy life gained) show a $1.5m net loss ($25.1 costs - $26.6m)$1.5m is a small cost to save lives and reduce petrol sniffing (140 Quality Adjusted Life Years are gained)

TOTAL COST BENEFIT ANALYSIS ($ MILLION)

-40 -20 - 20 40

Worst

Base

Best

Net Benefits Costs

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