And nobody has yet discussed it.
As the Australian dollar falls, the price fetched for Aussie LNG in Asia is going to rocket upwards. Here’s what it looks like with constant oil prices and an AUD that falls progressively to 55 cents over the next two years:
Yes, regional LNG will be trading at $16Gj and if left on its own the Curtis Island cartel will be running at 105% nameplate capacity as it prints money.
That will seriously worsen the domestic gas shortage and, given even now, the domestic reservation mechanism has been unable to bring prices down to anywhere near export net-back around $8Gj, with gas contracts still trading at $12-16Gj, imagine what the cartel will be selling it at if Asian prices double in AUD.
You might argue that the AUD won’t fall this far without a global shock that also pushes down oil. Perhaps. Or that LNG rises of this nature will themselves stabilise the currency. Perhaps.
But as things are shaping up today, the US is entering a late cycle boom just as China is set to slow and the AUD is going to come under significant downwards pressure. If it lasts two years then AUD at 55 cents is not ridiculous and oil might even rise a bit. Remember that there is no LNG income to collect so it’s not going to boost taxes or economic activity at all (on the east coast) to support the currency.
Australia could hand itself a massive energy shock just as its other, actually profitable, commodity income tanks. And households plus industry will be gas cartel monster truck road kill.
If I were you, Do-nothing Malcolm, I would be seriously toughening up your domestic gas reservation mechanism now. Crisis managing it will be too late.