Gas cartel fails to track oil prices lower

Via the AFR:

East coast manufacturers are voicing frustration as domestic gas prices fail to follow international LNG prices lower, leaving them paying up to 25 per cent more for spot gas than equivalent export “netbacks” despite the dive in crude oil prices.

A combination of cool spring weather in Victoria and an apparent reduction in supplies from the Esso-BHP venture in Bass Strait has pushed gas prices in in the south-east up to about $10 a gigajoule, from $8-$9 a few weeks ago.

At the same time the rapid drop in international oil prices, the steepest since the global financial crisis in late 2008, has pushed the LNG “netback” price – the price of Australian LNG less liquefaction and shipping costs – down south of $8/GJ, according to energy market adviser Energy Edge.

I’m all for kicking the cartel where it hurts. That said, the oil crash has been fast and there have been periods beforehand when the local price was well below net back.

These dynamics also contain a note of warning about LNG imports. If they get off the ground then the local price of gas will never fall below $3Gj above net back.

The real problem is that the local price is attached to export net back at all. This is the nexus that Labor must break with a stronger domestic reservation mechanism that aims for a fixed price of $5-6Gj.

That way, when international prices rise producers will benefit from higher income but local users will not be punished for it.

Comments

  1. “The real problem is that the local price is attached to export net back at all” – bang-on… its a tragedy that this has almost been accepted by default ! Federal government should be ashamed. PATHETIC GOVERNANCE!!

  2. robert2013MEMBER

    I’d like to know why nobody is complaining about the price of diesel which was about equal with unleaded a few months back and is now 30-40 cents/litre higher.