Inept manufactures call for more gas supply

Via The Australian:

Manufacturers and heavy industry may be forced to shift operations overseas or shut down as energy prices soar three times higher than in the US, sparking fears of a fresh crisis for big users, analysis backed by Dow Chemical has warned.

Queensland, the home of three LNG export plants, pays more for its residential gas supplies than any US state, while only Hawaii has higher gas tariffs than NSW, South Australia and Tasmania.

A Melbourne-based manufacturer is now paying 177 per cent more for its gas than a decade ago, while in New York that same fuel is 41 per cent cheaper than 2008 levels due to the success of the ­nation’s shale revolution.

Electricity users are also suffering price shock, with Australian power bills surging by 70 per cent on average in the past 10 years — while remaining flat in the US — leading to fears of serious economic consequences for industry.

That’s because gas-fired power sets the marginal cost of electricity on the east coast.

Sadly for Dow, which appears to have folded into the wider business consensus now, more supply is NOT the answer. All untapped reserves are $8Gj plus. Add a margin and you are already at today’s crisis gas prices. That’s before we even discuss that the cartel will keep buying up and available gas to fill its export capacity.

The export gas cartel has dominated all cheap reserves. Only by applying domestic reservation to it can the problem be resolved and gas prices returned to viable rates around $5-6Gj.

It’s a very simple equation. Either make the cartel pay for mis-allocating its capital such that the only way for it make money is to gouge Australians, or, stop them doing it and let them bear the cost.

That is literally all that there is to this.

 

Comments

  1. I’m no expert on this, but your views and recommendation on this are clear and have been consistent for a year or more.
    Can’t anyone else see the solution as clearly as you do? Couldn’t you sell the idea to Labor?

    • In the mining super profit text saga, Rudd was killed off by his own party for a few million dollar of ads in WA. Shorten won’t risk this in QLD with the gas cartel.

      • He has no choice. If he doesn’t then the renewables surge will drive prices higher as gas becomes ever more central. The attack from the new opposition and its press cheerleaders writes itself.

        Better to spend some political capital up front and enjoy crashing household utility bills.

      • Can labor afford to kill the Gas golden egg? Go check out https://periodicdisclosures.aec.gov.au/SummaryDonor.aspx and see the list of ALP donors.
        Biggest Donor – ANZ. Expect that to evaporate if Labor implement RC reccomendations.
        Next – National Automotive Leasing and salary packaging association,
        Third – Woodside Energy Limited. Gone if LNG gets significantly changed.
        Can labor afford to lose 2 of it’s top 3 donors from last year?
        Top 20 also includes Genworth Mortgage insurance, CBA, Insurance council of Australia.

      • Labor should get Mr. Calm and Sensible Bowen to explain the likely % drop in people’s power bills.
        I thought Murdoch now backed Labor? He’d put the power bills cut news on the front page of the Currant Bun for all the punters to see, wouldn’t he?