Gas cartel rorts ACCC

The ACCC was out with its LNG net-back price yesterday:

It’s calculations for net back are higher than mine largely because of this:

For a given measure of Gladstone FOB prices in A$/GJ, the next step in the calculation of netback prices is to deduct LNG plant costs. For this, the ACCC has used estimates of shortrun marginal LNG plant costs—that is, the costs that would be avoided by LNG producers if the excess gas that would otherwise be sold into the Asian LNG spot market were not converted to LNG and instead diverted to the East Coast Gas Market. These costs include the value of the gas that is consumed as fuel during the liquefaction process, as well as LNG plant operating expenditure.

Why is the ACCC using “marginal costs” for the LNG plants? They were built right? Why should locals pay that cost?

The price used should be the all-in cost, including the $80bn of wasted capital that created the white elephants in the first place, amortised into export net-back. That would line up the ACCC’s net back with my own at roughly $5Gj right now.

For that matter, where are these $5-6Gj deals in the gas market? The east coast spot market remains locked at $10Gj. Where are the ACCC’s sanctions to bring the prices into line with the Australian Domestic Gas Security Mechanism (ADGSM)? Where’s the Government?

Where’s “Australia”?

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    • Why? What example from his presidency can you give that relates to the gas market in Australia? He isn’t busting up cartels or putting limits on rent extraction.

  1. ErmingtonPlumbingMEMBER

    “Where’s the Government?”

    The Liberal party have always been the Big Business party and the electorate largely know this.
    Its no supprise or betrayal when they sell out the vast majority of the population in favour of self regulating coporate Plutocracy.

    But soon the ALP will be holding Federal reins and for them to allow this to continue would be beyond the pale and a betrayal of the very principals for which they claim to stand.

    This Cartel is public enemy #1 and a battle with them should be entered with gusto.
    Personally Id like to see the Seizure and Nationalisation of a Engergy resources and infrastructure put to the people of Australia in a Referendum.
    You know like we did with [email protected] Marriage.

    • rob barrattMEMBER

      Agree about cartel. We can only hope Labor do better than they did with the Henry Tax Revue. Pliibersek, Minister for Housing: “Negative gearing will not be included”. Hope for the best but expect the worst..

  2. What are you smoking using long run netback? There are 2 trains worth of spare capacity.

    You would have had to assume a discount rate too…

  3. haimona12MEMBER

    This is a great pick up, thanks. Sadly, the ACCC and also the NSW IPART has form in accepting monopoly pricing to set so called efficient prices, especially in the water sector, and previously in the fixed line telco sector. It’s called the Efficient Component Pricing Rule (ECPR), even though the “E” and the “R” are just marketing terms. This is also called the Baumol Willig Rule. The concept is to set prices at the avoidable cost for the producer, thereby locking in recovery of fixed costs, even where these have been by-passed by new technology, alternative infrastructure or in this case not exporting the gas (aka competition). Inclusion of these “unavoidable” costs (for the producer) is almost the definition of monopoly pricing -setting prices to maximise the producer surplus. ECPR has been banned in the UK and NZ but is happily applied by certain regulators in Australia, even though it flies in the face of the Competition Principles Agreements and cost building block approaches used for most monopoly pricing (e.g. electricity and gas networks).