For many years I have tried and failed to explain the operations of the Australian gas cartel. It has proven too complex and difficult for the shriveled and corrupted Australian media mind.
Today bears the bitter fruit of that failure as the gas cartel devours Australia’s stillborn economic recovery.
At issue is the east coast’s failed gas market. Please keep that in mind as we discuss the latest atrocities. This is all about correcting a “failed market” of overbuilt LNG export terminals that needed to buy up huge quantities of third party gas to fill themselves for exports, even after the builders had promised they had plenty of gas of their own.
Today we come to this shameful discussion by way of a pack of ravening wolves tearing at the public flesh, egged on by a nation-eating newspaper in the AFR:
A gas pipeline from Western Australia, boosted production in the eastern states, and even shifting energy-intensive manufacturing west, are all options under consideration by the expert committee advising the government on how cheap gas will play a key role in Australia’s economic recovery.
Committee chairman Nev Power says cheap gas would benefit households and energy-intensive manufacturers who have been struggling under high gas prices for years, and also lower the electricity price and fast-track the transition to baseload renewable energy.
Along with tax reform and deregulation, cheap gas on the east coast will be a central pillar of the Morrison government’s plan for economic recovery from the coronavirus-induced slump.
But with plans to entrench the gas price at around $6 to $7 a gigajoule, the government faces a fresh fight with gas producers who are already starting to argue that such a price would make extraction uneconomic and discourage investment. They claim the government could jeopardise one industry to save others.
The government rejects this. A senior source said the economic catastrophe caused by the coronavirus pandemic had strengthened its resolve to maintain low gas prices on the east coast.
Low gas prices? $6-7Gj is double the pre-LNG historical average. These are not low prices. They are gut-wrenching, hollowing out, high prices. There’ll be no manufacturing renaissance at such prices, given that they will very likely be above Asian prices held artificially low by our own flood of cheaply exported gas, leaving us at a disadvantage.
Moreover, we will see minimal utility price relief for every business and household on the east coast at such prices. Every one of them. EVERY SINGLE ONE. From James Packer to the pensioner. All have had this thieving gas cartel’s hand in their pocket for five years with the blessing of the Coalition Government.
As we know, Nev Power is corrupt. He is a director at Strike Energy and should simply resign from this role. Listen to this:
[The Government] intends facilitating this by providing the regulatory regime to enable increased production and the construction of new infrastructure, such as pipelines.
In addition, of the 12 projects shortlisted under its pre-virus policy to underwrite reliable generation, five of them are gas projects.
…”The key is more supply,” he said.
Mr Power, who chairs the National COVID-19 Co-ordination Commission, said several options were under consideration, all with the common goal of entrenching a low gas price and lower costs for consumers and business.
These include looking again at the long-mooted $6 billion pipeline linking large gas fields off Western Australia to Moomba in northern South Australia, which is already linked to the east coast.
Another, he said was developing the onshore gas reserves in NSW’s Narrabri region and those in Victoria. This could also involve boosting the east coast pipeline network to connect smaller gas fields to the main pipeline coming south from Queensland.
“This is what happened in the US. Once you put infrastructure in, small gas deposits could be hooked in,” he said.
Mr Power said another option would be to relocate energy-intensive manufacturing to his home state of WA where the establishment long ago of a domestic gas reserve has locked in cheap prices for domestic users.
None of these options provides cheap gas. There is no cheap gas. The cheap gas is all within the gas cartel which will keep shipping it offshore to Asia.
But it really gets whacko when we bring in the wider discussion, also at the AFR:
The idea of a $6 billion trans-Australia pipeline linking large gas fields off Western Australia to the east coast has got a new lease of life under the Neville Power-led National COVID-19 Co-ordination Commission, with the aim of reviving gas-based manufacturing despite serious doubts about its economics.
The trans-continental pipeline, which was found to be unviable two years ago and met criticism from WA Energy Minister Bill Johnston on Tuesday, is among options being considered by the commission as it works up recommendations to be put to the Morrison government, according to sources.
Several members of the commission or its manufacturing taskforce have previously spoken in favour of such a pipeline, including Mr Power, special adviser Andrew Liveris, and manufacturing taskforce member Daniel Walton, national secretary of the Australian Workers’ Union.
Is it a pre-requisite to swallow the blue pill to get into this discussion? This is still $7Gj gas at best and probably much higher if government does not build it. And, here’s the kicker. For it to remain that low, it would rely entirely upon WA sustaining a domestic gas reservation policy that then has to cover demand for the entire continent.
This idiotic suggestion has scoping failure written all over it. Because the east coast is such a captured pansy and won’t install it’s own domestic reservation policy, WA has to cover us all with its? Why would it do so? It is highly debatable that it will have the spare gas, especially when North West Shelf LNG trains are about to run out of the stuff and need backfilling.
The likely outcome is that WA gas suppliers will also privilege export customers and use the pipeline to break WA reservation, lifting its domestic price not lowering ours.
So, let’s return to the beginning. The basis of this discussion is government interventions in the east coast gas market because it has failed. The gas (and increasingly power as well) market is nothing more than a blood-sucking monopoly attached to the aorta of east coast economic progress. Hence these discussions are possible.
But if that is the case then the answer is not the mindlessly repeated moniker of “more supply”. The answer is fierce anti-trust action to destroy the cartel. You could break it up. You could nationalise critical points in the supply chain. You could create a national gas company.
As it happens there is no need to be so dramatic. One simple policy switch does it all for you. Domestic gas reservation, like that of the WA, fixes all ills. And lo, that policy mechanism already exists for the east coast in the Australian Domestic Gas Reservation Mechanism (ADGSM) which helped push the gas price from $20Gj to $10Gj since it was enacted.
Moreover, there is already an advanced reform process underway to tighten the ADGSM. It was agreed last year between the Morrison Government and Centre Alliance – in return for its support on $158bn in tax cuts – that we tighten the ADGSM further. The review to do so was unequivocal in its conclusion:
The review recognises that price is an important indicator in establishing whether the domestic market is functioning effectively and considers that the ACCC’s forward LNG netback price series is the most applicable prices when estimating the likelihood and extent of a potential shortfall. As such, the review recommends amending the ADGSM’s guidelines to include referencing the ACCC’s LNG netback price series in estimating a potential shortfall.
This amendment clarifies the relevance of the ACCC’s LNG netback price series to considerations under the ADGSM and strengthens the ADGSM’s ability to deliver on its objective of securing domestic gas supply.
If that simple price trigger is included in the ADGSM then the local price will fall to $2Gj today and very likely stay well below the Government’s mooted $6-7Gj given JKM is the Asian spot price that is glutted for as far as the eye can see. This is because it forces the east coast gas cartel to supply its abundant cheap gas to the local economy ahead of its Asian customers. If it gets higher then just put a cap price on the ADGSM of $4Gj, much like WA does.
Then you will see a manufacturing boom as well as massive utility price relief for every business and household from Cairns to Adelaide.
Sure, the cartel will wear a few losses as it writes down assets. Who cares. That is their problem not ours. They deliberately destroyed what was functioning east coast gas market and they should pay for that mistake. Not everybody else.
In short, today’s entire gas recovery discussion at the AFR – which bizarrely includes manufacturing and union interests – is a maddening pile of steaming horse dung shat upon the east coast economy by a gas-captured recovery advisory board. Presumably, this has been done with the corrupt Energy Minister’s permission with the intention to destroy the extant, imminent and real gas recovery plan already agreed with Centre Alliance.
I mean, seriously, where the fuck is the press.