Australia is much too cheap. In fact, it wouldn’t worry me unduly if it doubled in price tomorrow.

I’ve always been puzzled why as a society we place such a poor premium on the value of fuel. Not only is it so low-cost that much use is frivolous (and that’s fine: I get lots of enjoyment from driving), but pricing it cheaply also sends the wrong messages to car manufacturers and consumers.

In fact, the major pressure on car manufacturers to improve fuel efficiency isn’t coming from fuel consumption per se, but from emissions legislation – the easiest way of reducing emissions is to burn less fuel. Consumers? Well, from where I stand, they don’t seem to care about fuel consumption at all.

Here in Australia the market for SUVs is booming; by and large these cars use more fuel than the equivalent conventional car. Cars are also getting heavier at an incredible rate and to provide adequate performance, manufacturers are fitting more and more powerful engines – which, typically, use a lot of fuel.

I am aware of the reduction in fuel consumption that’s been achieved over the years by most manufacturers (for example, compare the government fuel figures for a 1990 Holden Commodore versus the current model) but to offset this, just look at cars like the Holden Adventra – it achieves what can only be described as appalling fuel consumption.

The main problem is that manufacturers are still building engines that don’t vary in size. The BA Ford Falcon that I drove last week has a 4-litre engine developing 182kW. Even pushing the car fairly hard, those 182kW were very rarely used – I think perhaps only 10 or 20 times in the 4 days I had the car. (Remember, peak power is achieved at only one rpm.) For all the rest of the time, most of the capacity of the (relatively) huge engine was just a passenger. Yes, I thought the car was economical – but only in the context of a 182kW 4-litre six in a body weighing just under 1800kg!

But compare the Falcon’s performance/economy ratio with its turbo brother. Two hundred and forty kilowatts is the max output of the turbo version – but the engine is still only 4 litres. Driven gently, it achieves economy very similar to the naturally aspirated version. Effectively, the action of the turbo steplessly varies the engine capacity from 4 up to about 6 litres. But still with the pumping and frictional losses of a 4-litre engine. To put it another way, a 2.5-litre Falcon engine with turbo would have similarish performance to the 4-litre naturally aspirated engine… but with much better economy.

In addition to using a turbo, another way of varying engine size is to deactivate cylinders when less than the full output is required. That reduces pumping losses, leading to better economy. A number of engines from domestic US manufacturers are now using this technology.

So what new car technology would result from a doubling of the price of fuel? The short answer is far higher efficiencies building on better starting points – turbos, variable valve timing of the intake and exhaust cams, soft hybrids, wider use of turbo diesels.

None of these necessarily makes cars slower, or less fun.

Ah, you’re saying, but what about us who can’t afford new cars? Why should we be penalised by a fuel price hike? OK, let me change the scenario. Instead of doubling the price of fuel, impose a new car tax that slides upwards with fuel consumption.

Yep, that means the old-fashioned, large V8s will cost more – perhaps a helluva lot more. Straightaway, you’ll see manufacturers making the engines variable in size. Smaller V8s with cylinder deactivation, or little turbo sixes and fours. Going lightweight will suddenly become vital, otherwise the smaller engines won’t provide the market’s desired performance. Sure, some manufacturers won’t be able to come up with the goods – their cars may in fact become so expensive that no-one buys them. The manufacturers will then go broke or stop producing these outdated cars: technical Darwinism at work.

At the other end of the fuel consumption continuum, the cars that are technologically brilliant – the Prius is the standout example – will drop in relative price. Instead of being viewed as an oddity (by some – in the US it’s selling very well), it’ll be seen as the logical small/medium choice. Plenty of interior space (if you haven’t sat in one, go to a Toyota dealer), strong off-the-line performance….and at this stage, not great top-end and overtaking urge. Any car that mixes economy with excellent on-road performance will become far more attractive.

Coming from a contributor to a modified car magazine who drives a Lexus LS400, this may all seem like massive hypocrisy. But the Lexus, all 208kW of it, can still easily get fuel consumption in the Eights and Nines (litres/100 km) on the freeway and very seldom exceeds 12 litres/100 km in any driving conditions.

And neither do these philosophies conflict with car modification. Unless you’re making radical changes, fuel economy in a well modified car will be better than standard. After all, free-flowing intakes and exhausts, intelligent turbo boost controls that spool up the turbo proportionally to load, higher compression or ported heads – they all allow smaller throttle angles for the same power. Of course, a massively oversized turbo or really lumpy cam will send fuel economy plummeting, but – for me at least – the resulting cars aren’t all that nice as everyday road cars anyway.

As it stands, the current situation is madness. Why?

• There’s insufficient incentive for introducing new car technology that reduces fuel consumption
• The really economical cars already using innovative technology (the turbo diesel Peugeots and Citroens can be included here as well) are priced too high
• There is little encouragement for manufacturers to stop putting more and more weight into cars and then boosting engine size to compensate
• In the area of aftermarket modification, poor tuning that results in cars gulping fuel is seen as only a minor annoyance

Think about either a petrol price hike, or a tax on new cars that have poor fuel economy. Once you get past an initial gutwrenching “Noooooo!”, either approach makes perfect sense.