Energy farce complete as government debt subsidises gas cartel

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The energy circle of farce is now complete:

Payments of $50 a year for every Queensland household will be handed out by the Palaszczuk government as part of an “affordable energy” plan released ahead of a state election.

The money will come from the dividends of state-owned power companies that had been used to pay down debt.

Premier Annastacia Pala­szczuk revealed the plan to offer sweeteners — including the $50 payments to 1.9 million households and a further $20 million in rebates on offer to buy energy-­efficient fridges and air conditioners — after threatening to reintroduce a state-owned electricity retailer.

The circle now runs like this:

  • QLD has a coal-seam gas bubble with massive over-investment in export plants;
  • ACCC and other authorities allow gas reserves to consolidate around the export cartel and QLD’s abundant and very cheap gas reserves are exported en masse;
  • Asian gas prices crash on oversupply and the Curtis Island cartel loses money on every calorie exported meaning that no Australian tax is paid thanks to write-offs and depreciation;
  • the cartel artificially limits gas supplies to the east coast economy driving prices crazy;
  • because gas generation sets the marginal cost of electricity, power bills soar;
  • neither the subsequent demand destruction nor calls for more supply help because the cartel just ramps exports further;
  • QLD steps in with power subsidies for households that are recycled directly to the gas cartel, and it is now literally borrowing to pay the gas cartel to steal its own gas.

Why not install state-based domestic gas reservation instead? Get your gas price down to $5Gj from $12-16gj? Solve the problem at the source?

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.