Australia’s slow motion prognosticators are waking up to the new energy crisis. At the AFR is Jenifer Hewitt:
Faced with the Turnbull government’s demands for change, the big market players promised to ensure adequate supply for domestic needs. At what price is far more complicated.
…To help clarify matters, the ACCC is now publishing an index of of netback prices, updated every fortnight. It won’t make pleasant reading in Canberra or in businesses looking hard at their power costs.
…There is now a race on from various companies to build gas import terminals in Victoria and NSW to compensate for this. This will take time and even then, the gas due be provided in a few years will also cost far more than traditional supplies from Bass Strait and Gippsland.
Which will make it worse. Today’s export net back price for contracts is around $16Gj as oil rises and AUD falls. The import price will be another $3 on top of that. In other words, imports are only viable if domestic reservation is killed. LNG imports must be stopped or Australian energy security will be destroyed.
Another article appears at The Australian:
Heavy industry and large manufacturers struggling to cope with a forecast spike in gas prices on the east coast may require financial assistance from the federal government to remain afloat, according to a former adviser to Australia’s largest energy producers.
Providing support to big manufacturers over three years should be considered to reduce risks to the Australian economy of big businesses falling over, gas consultant Brendan Dillon said.
“While generally frowned upon by academia in normal circumstances, government intervention, when correctly targeted, designed and implemented, does have a role in assisting an economy transition during periods of upheaval. This is the exact scenario unfolding now relating to gas costs on the east coast,” Mr Dillon, who has worked as a gas adviser to AGL, Santos and Shell in the past decade, said.
Who’s going to pay for it? The gas export cartel pays no tax. This would be a form of domestic reservation if the government taxed them and recycled the revenue as subsidies but without that this is just a subsidy for the gas export cartel at tax-payer’s expense. More rent seeking in other words.
Nor does it address the cost of gas for households, nor the flow on effect of higher power prices as gas sets the marginal cost of electricity.
There is only one answer to the crisis. Domestic reservation must be toughened, export contracts renegotiated and the gas export cartel take the pain square on the chin. It is logical and fair. They overbuilt the LNG capacity. They bought up the third party gas. They misallocated capital in a bubble. We didn’t even have a regime to approve the projects. They thought they could just wade in, take the gas, and charge us for the privilege.
It’s either that or everyone else suffers to protect them.
Nor is this just an issue of who pays. This is an issue of critical national security. If we don’t break the gas price link between Australia and Asia then we will offshore our industry to China, rendering us ever more dependent upon resource exports to the same just as the great power Cold War begins in earnest and we should be seeking to balance the other way, as well as increase our industrial independence.
Domestic gas reservation using $6Gj fixed price quotas is the ONLY answer.
