ScoMo to examine gas reservetion

Via the ABC:

A portion of Australia’s gas supplies could be set aside for domestic use as part of a Federal Government push to try to bring down gas prices.

Resources Minister Matt Canavan announced the Commonwealth would formally examine a domestic gas reservation scheme in Western Australia, where he said consumers paid some of the most affordable gas prices in the world.

“Imitation’s the best form of flattery and what we’re seeking to do is imitate the best things about what is working in the west and possible apply it to eastern Australia,” he said.

“Our market is different over here, we’ve got multiple state governments, a pipeline network that straddles those jurisdictions, so we’ve got to work through a lot of issues.

“That’s why we’re going to have those discussions in a diligent, considered way in coming months and formulate whether or not we can do something to reserve gas here in eastern Australia for our own use.”

Senator Canavan rejected suggestions the measure was part of a deal struck with Centre Alliance Senator Rex Patrick in exchange for his party’s support on the Government’s income tax cuts package last month, saying the Government was already considering a range of policies.

He also announced the bringing forward of a scheduled review of the Australian Domestic Gas Security Mechanism, which could be used to force gas producers to limit their exports in the event of a domestic shortfall.

“Since we established gas export controls two-and-a-half years ago, we have developed more measures of gas prices,” Senator Canavan said.

“Before that, there wasn’t a lot of useful, up-to-date information around what different people paid for gas in our region.

“So there has been a question mark about to what extent prices play a role in our decision-making under the gas export control framework and so, given those developments, we’ll look at how we might best integrate those.”

While the Australian Competition and Consumer Commission (ACCC) has backed calls for a national domestic gas reservation policy, the industry remains opposed to the proposal.

The Australian Petroleum Production and Exploration Association (APPEA) previously said it would stifle investment and drive up prices, rather than lower them.

The Government will take until February 2021 to consider its options and Senator Canavan said the states should also look at easing their own restrictions on gas developments.

“There’s not much point in reserving gas if you’re not actually producing any of it to begin with,” he said.

“So we will be making sure the states understand that if they support something like this, if they would like to see gas reserved for Australian use, well, they’ve got to come on this pathway with us and develop their own resources too.”

Riiiight. Because that’s what gas reservation has done to WA:

Still, I’m worried about this. We know what needs to be done. Simply trigger the ADGSM and force more gas to stay under a given price. These reviews can go array, via the AFR:

“The review will assess if the ADGSM is still fit for purpose to deliver a functional domestic gas market with the lowest possible prices for consumers while ensuring strong investment in the new gas production,” it said in a statement.

“It will specifically investigate the ongoing appropriateness of the ADGSM’s total market security obligation arrangements.”

The review will be carried out by the Department of Industry, Innovation and Science and be completed by the end of September.

That does not sound like a slam dunk to me. But at least one truth is finally seeing some sunshine, at Domain:

Australia’s gas supplies are poised to be reserved for local use as the Morrison government moves to further drive down household power bills and protect domestic manufacturing jobs.

Plans to establish a national gas reservation scheme – long called for by blue-collar unions – will be unveiled on Tuesday, adding pressure on state and territory governments to overturn their bans on onshore gas exploration.

Recent estimates have found if producers were forced to make a minimum amount of gas available for local users, flow-on reductions for household electricity bills could be up to $270 a year.

Why it took seven years of writing to get this basic fact into the MSM I will never know.

Houses and Holes

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 fouding 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.

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