Centre Alliance patriots hammer gas cartel

Bravo Centre Alliance, via the AFR:

The Coalition is risking a brawl with the gas industry by actively considering a domestic gas reserve on the east coast for new projects as part of its push to get income tax cuts through parliament.

The proposal, similar to a gas quota policy conceived by Labor three years ago, has been under consideration within the Coalition since before the election and is now on the table as part of discussions with the Senate crossbench to secure the passage of the $158 billion in income tax cuts.

Other options include strengthening the gas trigger to force exporters to divert more gas for domestic use, and improving transparency around long-term contract negotiations to enable big gas users to secure a better price.

…Centre Alliance senator Rex Patrick and Resources Minister Matt Canavan discussed short and long-term options to lower the gas price at a lengthy meeting on Monday that was also attended by Finance Minister and tax cut negotiator Mathias Cormann.

…Senator Canavan said the mechanism was already due to be reviewed next year and the government was also already looking at “operational changes to ensure its effectiveness”.

…”In South Australia we have very, very high power prices, which are set by the gas prices, and we are paying more for gas than our Asian friends who are using our gas, it doesn’t make sense,” he said.

No, it doesn’t. Unless you’re a bloody sucking cartelier:

Santos chief executive Kevin Gallagher and Shell’s most senior executive in Australia have issued fresh warnings that triggering Australia’s domestic gas security mechanism would only choke investment in new supply just as the federal government considers toughening up the policy.

Both Mr Gallagher and Shell Australia chairman Zoe Yujnovich said any further intervention into the east coast gas market such as price caps would lead to a reduction in supply and therefore cost jobs.

They called for a focus instead on lifting state restrictions on accessing onshore gas so that projects such as Santos’ Narrabri coal seam gas venture in NSW could move ahead.

The cartel will simply buy it and ship it offshore anyway. And there is no cheap gas left to produce, except within the cartel’s reserves.

Hence CA should drive for a tougher ADGSM as the primary option. I favour a fixed price cap but a stronger, automatic trigger would do. The Government cannot be trusted to pull it otherwise.

Future projects with reservation won’t lower the local price. The cheaper gas is already locked within the cartel and it must be forced to stay here in sufficient volumes to drop the price.

David Llewellyn-Smith

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.

He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.


  1. With CA in control of our energy policy, Trump in the White House and Boris in 10 Downing Street, there might be some hope for the world, yet.

    • Strange Economics

      CA are property market boosters.
      Still the govt absolute highest priority is more money for high earners with tax breaks,
      so a small token reduction in energy costs can be arranged.
      Thats 1 % less for 20 gas boss bonuses, and 5 % more after tax for all the 300k highest earners (mates and donors).
      Its a no brainer.

      And Thats 300k house buyers ready for a higher price.

      • I know they are bubble boosters.

        But I’m a pragmatic person.

        I’d rather get good policy courtesy of a bunch of d!ckheads, then get deadsh!t policy from a bunch of bleeding heart altruists.

        Much rather.

  2. bolstroodMEMBER

    You are flogging a dead horse H&H.
    If it keeps going it will be dead planet.
    LNG and Fracking are lethal to life and a liveable climate.
    Don’t take my word for it, look at the evidence that is now emerging;

    A sensible government and public policy would be going 100% renewables as fast as possible and bug-ger the vested interests.