By Leith van Onselen
Ross Gittins has written a solid piece today arguing that the Australia’s government’s are misleading the people on the true reasons behind gas price rises in a bid to force through controversial coal seam gas (CSG) projects:
For an example of state politicians willing to blatantly mislead their electorates, look no further than the Victorian and NSW governments’ dishonest explanation for the looming jump of about 25 per cent in the price of household gas.
The true reason for the rise is that the building of natural gas liquefaction plants in Gladstone will soon allow gas producers on Australia’s east coast to export their gas and obtain the much higher prices paid on the world market. The east coast will go from being outside the world market to inside it.
The price rise is thus inevitable unless governments were to prohibit the companies from exporting their gas.
…state politicians have taken up the dishonest claim of the gas companies that permitting them to build new and controversial coal seam gas plants would somehow prevent gas prices from rising or force them back down. But as any student of economics could tell you, there’s no way NSW and Victoria could ever produce enough natural gas to significantly affect the world price of gas.
The price of gas in NSW and Victoria would stay below the world price only if the new producers were compelled to sell their gas to local users at below the world price. Again, there’s been no suggestion of this.
Crikey’s Paddy Manning has today raised similar concerns, arguing that former federal politicians with ties to the energy industry are using the threat of gas shortages to force through CSG projects:
Former John Howard industrial relations minister Peter Reith — whose recommendation to lift fracking bans was ignored by the Victorian government last year — used his column in Fairfax papers yesterday to accuse the O’Farrell government of abandoning the CSG debate, warning “there is a real prospect Sydney could suffer gas shortages”. Reith failed to disclose his consultancy with construction giant Bechtel, a major contractor to the CSG industry.
Former federal energy minister Martin Ferguson was appointed chair of new advisory group APPEA (“the voice of Australia’s oil and gas industry”) in October, barely six months after he stepped down from his cabinet post and only weeks after retiring from Parliament — flouting the 18-month cooling-off period required of ex-ministers under the lobbying code of conduct. Ferguson had a dig at his erstwhile NSW Labor colleagues for “parroting the lines of the Greens and showing itself to be completely irrelevant to the debate”, urging Premier Barry O’Farrell to break “the impasse preventing the development of the state’s abundant gas resources to put downward pressure on rising prices”…
Both commentators are spot on.
Energy companies, and the politicians that serve them, are exploiting the problems they’ve created by using the threat of gas shortages to insist that Australia needs widespread development of CSG in order to ensure domestic supply and lower prices. In doing so, they are placing the natural environment at risk through the potential poisoning of ground water via fracking, which could also adversely impact the agricultural industry. Moreover, the cost of fracking, along with its relatively small scale, means that CSG is unlikely to have a material impact on gas prices anyway.