Resources Minister Canavan should be arrested for grand gas larceny

Check out this great news, via Reuters:

Vitol Group’s head of liquefied natural gas trading said on Wednesday that the outlook was bleak for LNG in the short term due to an “incredibly” oversupplied market, which would lead to some output shutdowns.

“We had record imports of LNG into Europe. Three years ago we saw 63 cargoes in one month, in March we see 125 cargoes, April and May we expect 150 and 170 cargoes… This is really unprecedented,” Pablo Galante Escobar, Vitol’s head of LNG, told the FT Commodities Global Summit in Switzerland.

“We said before that we expect a battle between the U.S. LNG and Russian pipelines. We believe that is happening now but it is being joined by LNG from the Middle East, Africa that is not finding the homes in Pakistan, Bangladesh or China, where the winter was mild but there are other factors, such as excess production.”

This week, spot prices for LNG cargoes to be delivered into northeast Asia in May fell to a nearly three-year low of $4.30 per million British thermal units (mmBtu) as buyers are shunning cargoes and re-directing them to Europe, trade sources said.

As we know, Australia actually benefits when the global LNG price falls owing to its appalling mishandling of its own gas reserves. That is, so long as we use our domestic reservation mechanism, via the AFR:

The Pacific Basin spot price for the form of the fuel that is liquefied for export to overseas markets has sunk to about $US4.50 per million British thermal units, or little more than $6.30 a gigajoule. When LNG transportation and liquefaction costs are taken into account, the “netback” price, which regulators have said should be seen as an upper cap on local prices, is even lower…the Sydney spot price for gas on Wednesday is $11.25/GJ, and just less than $11 in Adelaide, Brisbane and Victoria, according to the energy market operator.

“What is going on? If this keeps up there will be more companies going out of business,” said Garbis Simonian, managing director of gas wholesaler Weston Energy, which last week saw its second customer in two months bring in administrators, partly because of rising energy prices. “A lot of people are under pressure: How many more businesses do they want to go broke?”

…However, federal Resources Minister Matthew Canavan said his stance on LNG export controls was guided by the ACCC and the Australian Energy Market Operator, both of which had found no shortage of gas on the east coast this year.

Let’s cut the bureaucratic bull. Minister Canavan needs to get on the blower to the cartel bosses and threaten blue bloody murder if they don’t immediately drop prices.

The export net back price of $4-5Gj is supposed to benchmark the gas cartel’s domestic supply under the terms of the Australian Gas Security Mechanism (ADGSM) yet here it is partying at $11Gj. As well, every $1Gj move in the gas price shifts the electricity price by $10MWh up or down. Given it is hovering around $100MWh at the moment, if the ADGSM were deployed then power prices would collapse to $40MWh.

That would deliver gas and power price cuts across the east coast of 60% and 20% respectively (assuming the wholesale is 30% of retail). According to Canstar, the average power and gas bills for households are $1,800 and $1,200 per annum. In short, if the ADGSM were implemented properly then households would immediately see an annualised cash windfall of $840 each. Given there are $8m or so occupied dwellings on the east coast we are talking about a stimulus of $6.7bn per annum.

Business consumption of gas and power is materially larger so the multiple for broader profitability is huge.

Yet the Resources Minister is breaking the ADGSM agreement on behalf of the cartel instead of enforcing it on behalf of his constituents. This is highway robbery in the plain light of day, literally the Government protecting a cartel that is stealing straight from the pockets of every business and household on the east coast even as the economy spirals into the dirt.

This has now gone way beyond market failure. It is simple theft. If Resources Minister Canavan doesn’t act he should be arrested for aiding and abetting grand gas larceny.

Comments

  1. Canavan’s obsessed with loving coal and hating renewables. The longer prices stay high, the more he can continue with the Loons’ line about prices being pushed up by renewables virtue signalling and it would all be solved by building coal fired power stations. I am sure gas prices barely register in his consciousness.

    • That’s been obvious for about 3 years. His willingness to back industry over constituents has been something that struck me as a personal long-game for him.

  2. We must now be at the point where we are virtually paying someone else a premium to hoover up a valuable resource belonging to us and take it away and get rig of it, as though it were taking up space and we didn’t want it – surely the only country in the world to voluntarily do so.

    Yet the average Aussie appears blissfully unaware……………..

    • Not an issue in WA – which has gas reservation.

      As for the other states, corrupt websites such as RenewEconomy and The Guardian lie to the voters about the fact that gas is needed between sunset and sunrise.

  3. Personally I rationalize this by assuming that we can’t, as a nation, bet far from achieving peak stupidity.
    Presumably once we have reached this goal we can let good sense prevail, ah but that would be little more than wishful thinking for which there is zero evidence.
    On reflection stupidity probably never peaks, all that happens is that those individuals that are smart enough to recognize the raising tide of national stupidity just take it upon themselves to find a smarter place to live.

    • I’m shocked labor is not forcefully advocating this

      Unless they are keeping quiet about it and will do something post election ie don’t scare the horses now

      • ErmingtonPlumbingMEMBER

        Last time they “went after” the resource industry much money was mobilise against them.

      • MountainGuinMEMBER

        Last time Labor tried it was an additional tax they proposed. In this case it is asking the existing net-back to be used as the threshold has well and truly been passed. But i take EPs point about the pressure industry would bring and labor seems on track to win the election.. so why risk it.
        The second question is will a minor party or independent seek to push this matter. A massive win on electricity prices by using existing agreements seems a pretty easy position to take.

    • Gold. You expect pollies to ‘do something’. Unless it’s building an express lane in an airport where they don’t have to meet the plebs, forget about it

  4. SamscoutMEMBER

    Rubbish – iit was the Bligh/Beattie Goverment who sold the gas reserves to foreign interests as well as Queensland’s gas assets. It was Hawke Keating who introduced the PRRT.

  5. St JacquesMEMBER

    Why should they care? They’ve got their cushy retirement corporate gigs to worry about and besides they’re going to be out of government, so anything that helps crash the economy even harder now won’t make any difference since they will be able to blame the mess on the incoming government as the economy nose dives. What a great system we have.

  6. Has anyone been watching the 7:30 report “3 part special” on energy prices…..

    part 1 blamed the shutdown of Hazelwood for the increase in electricity prices, absolutely no mention of Gas in the mix.
    part 2 focused on the hideous number of solar panels being dumped into landfill…. Some only 8 years old….

    no mention of the massive subsidies given to the fossil industry, only the renewables. Even pointed out that those without solar are paying for the others to have solar…

    No mention of the massive solar panel recycling industry in the US and EU….

    It really smells like a hit piece on renewables with a pro “burn the ground stuff, its good for you” agenda.
    Have not seen part 3 yet, but I expect it will point out the cosmic ray effects of using LED lighting in a high wifi environment…..

  7. TailorTrashMEMBER

    Don’t be so hard on little Matty Cannelloni….it’s probably all his mums fault .

    • Well, in all truth, it is his mom’s fault. . . For having him! She could’ve had a dump under the fence, and world would’ve been better for it!

      Say it ain’t so, Matteo? Say it ain’t so!