The gas cartel has bought Morrison lock, stock and barrel

Yesterday the competition regulator said:

Recommendations to address price concerns

The ACCC recommends the extension of the existing Commonwealth Government’s Heads of Agreement with LNG producers, due to expire at the end of 2020, because of the demonstrated capacity of LNG producers to supply additional gas into the domestic market when needed.

“As well as extending this Heads of Agreement, we think the government should consider strengthening the agreement’s price commitments,” Mr Sims said.

“For example, reference could be made to LNG netback price expectations and the prices LNG exporters could expect to receive for uncontracted gas in overseas markets over the relevant period.”

“Extending the Heads of Agreement is one measure that can be adopted now. Further measures are also needed to ensure adequate supply of appropriately priced gas over the longer term,” Mr Sims said.

That is a call for domestic reservation and price fixation. Can you ever remember the national competition regulator recommending such action? Neither can I.

That is a measure of the viciousness and significance of this energy cartel gouging. It is the worst I have ever seen worldwide. Far worse than the disgraced Enron ever was.

Yet did the national media even report it? Not that I could find. Because the gas cartel doesn’t have big norks or what?

Instead what we got was an anodyne dismissal from the Morrison Government:

Joint media release with Treasurer the Hon Josh Frydenberg MP, and Minister for Resources, Water and Northern Australia the Hon Keith Pitt MP.

Australia’s gas supply outlook will remain steady through next year despite the ongoing impact of COVID-19 according to the latest Australian Competition and Consumer Commission (ACCC) Gas Inquiry interim report.

The report also confirms that gas prices have continued to fall, which is expected to provide some relief to local gas users.

The majority of offers by producers for supply in 2020 and into 2021 fell to between $8–$10/GJ. There is also evidence of further price falls since February, with prices being offered in Queensland falling below $7/GJ.

The COVID-19 pandemic has had little impact overall on East Coast gas production or consumption so far in 2020, compared to the same period last year.

Sufficient supply has also been confirmed to meet forecast domestic and export demand in 2021.

This is enhanced by LNG producers being well placed to alleviate any potential supply pressures. It is expected 84 petajoules (PJ) of excess gas in 2021 could be directed to the domestic market.

Despite this good news, the Government is taking the ACCC’s concerns seriously in regards to the widening divergence between domestic price offers and the LNG netback price.

There are also reports that some LNG spot cargoes have been sold at well below the prices being offered to the domestic market.

Treasurer Josh Frydenberg said The Morrison Government welcomes the latest report from the ACCC into the east coast gas market.

“The impacts of the COVID-19 pandemic are being felt across the economy which is why it is important that the Government and the ACCC continue to monitor developments in Australia’s gas markets to ensure Australia’s consumers and businesses benefit from competition,” the Treasurer said.

Minister for Energy and Emissions Reduction Angus Taylor said the Government expects gas producers to reflect internationally competitive export prices for Australian gas users.

“Australian gas must be working to benefit all Australians. It is essential that local gas users see the price reductions locally that are available on the LNG export market. We expect these price reductions to be passed on fairly,” Minister Taylor said.

“We support the ACCC issuing a compulsory request to seek more supplier pricing data so that we can better understand this pricing difference.”

Beyond 2021, however, the supply outlook is expected to tighten, with the ongoing impact of COVID-19 casting uncertainty over the longer-term outlook.

“Australia’s competitive advantage has always been based on cheap energy, particularly for the manufacturing sector,” Minister Taylor said.

“Gas will be central to our ongoing economic recovery. A robust and competitive gas industry will allow both gas producers and users to thrive, with lower prices benefiting all Australians.”

The ACCC also recommends that the Government’s landmark Heads of Agreement with Queensland LNG producers be extended to beyond 2020 to improve supply certainty. The ACCC recommends that the Government work with industry to include a reference to the netback price in the Agreement to make commitments that support domestic gas users.

Minister for Resources, Water and Northern Australia Keith Pitt said despite the ongoing impact of COVID-19, the gas market had continued to perform comparatively well.

“The COVID-19 pandemic is impacting all sectors of our economy, but our gas industry continues to show resilience under pressure,” Minister Pitt said.

“There will be challenges in the future, particularly regarding uncertainty over our mid – to long-term supply outlook, contributed to by bans on gas exploration.

“The Government will continue to call on states and territories to remove blanket bans and moratoria on conventional and unconventional gas exploration.”

In 2017, the Government entered into a Heads of Agreement with east coast LNG exporters, which has been successful in committing big LNG producers to make more gas available to domestic users.

It has brought the price down from $20Gj to $12Gj but that remains the highest price in the galaxy:

The Government’s proposed solution of increased supply will not lower prices at all. Indeed, it will lift prices from here. All new gas supply is too expensive to make a difference or is within the cartel. It does not matter if more gas is domestically reserved if it is within the export cartel. It can just shift other unreserved volumes offshore to keep the local market tight. It is competition that matters to price.

To repeat, this is NOT just about large gas users. The much larger damage is the skyrocketed gas and power bills (gas sets the marginal electricity price) impacting every household and business across 90% of the Australian population from Adelaide to Cairns.

The gas cartel has bought the Morrison Government lock, stock and barrel and applied a private energy tax on every single denizen of the east coast economy.

Why nobody cares is a mystery to me.

David Llewellyn-Smith
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Comments

  1. Nobody cares because they have all been brainwashed that it is evil renewables which have pushed up electricity prices.

  2. buttzilla 28 days later

    gas was supposed to be for transition to newer, cleaner and viable renewable systems. spivs on both sides, one wants fossil; the other wants Koch style old renewables w/boys network attched – burnin’ tyres and woodchips. can’t win.

  3. No mention of the fact that Joel Fitzgibbon is pushing the onshore gas solution hard either ? Same with Shorten ….though I’m not sure if he counts for much these days . The intent is there .

      • bolstroodMEMBER

        The love child of his father’s Chinese spy girlfriend and the ghost of Martin Ferguson.
        Labor are as much in the clutches of the Gas Cartel as the LNP.
        It was Labor legislation that gave the Fracketeers their start in Australia, curtesy of Eddie Obeid and Ian MacDonald.
        Even Mark Butler is tainted by his partner working for Santos.

  4. GunnamattaMEMBER

    Manufacturers seek ‘urgent intervention’ to rein in gas giants
    https://www.theage.com.au/politics/federal/manufacturers-seek-urgent-intervention-to-rein-in-gas-giants-20200817-p55mhn.html

    “The idea of indigenous gas being cheaper abroad should be a red flag to both consumers and the government, and a clear signal the market needs urgent intervention,” Incitec Pivot chief executive Jeanne Johns said.

    Global coronavirus travel restrictions slashed energy prices, but Australian gas users have voiced frustration that gas giants have not dropped their long-term contract prices. They want them closer to spot prices of less than $5 a gigajoule in the south-eastern states, or liquefied natural gas (LNG) cargo spot prices of less than $2.50 per million British thermal units. More than 95 per cent of domestic gas sold on the east coast is sold under long-term contracts.

  5. It would be great if someone can provide the ACCC with a compelling documents they seem to think may exist. From the article:

    Mr Sims said while there was “no evidence” of cartel behaviour, gas exporters may be making decisions to charge Australian buyers more.

    “I do think they are exporting gas overseas and receiving prices for that well below what they can get domestically. You hear rumours they may be shutting in gas so there is not enough available,” he said.

    “We haven’t heard a compelling reason for this and we’d like to get to the documents behind the scenes. It’ll be fascinating to see what we get back.”

  6. Jumping jack flash

    There’s too much debt to lower prices at all. Lower prices may mean lower wages, lower contracts, less money!

    How much debt is attached to, and requires that level of wages to maintain?

    How much does somebody need to get paid to become eligible for the enormous amounts of debt that are required to buy the things they need?

    Wont somebody think of the debt!?

    The volume of debt and the necessity for enormous quantities of debt is the main driver of the high cost of living in Australia including gas/energy which is an essential resource and therefore completely gougeable.

  7. PaperRooDogMEMBER

    Albo & Labor should literally be banging on about this every day (like the LNP used to bash Labor) & they would hang the LNP out to dry! But they are so unless they cannot or will not as they are corrupted as LNP. Why isn’t anyone thinking of Australia’s future? We really are worse than Belarus or annoy other extremely corrupted country!

    • TheLambKingMEMBER

      Albo & Labor should literally be banging on about this every day (like the LNP used to bash Labor)

      And how would that work? Who do they get to bang on about it? The reason that the tactic was so successful for the LNP (and still is) is that the Murdoch and most of the press is right winged and wants the LNP agenda. Newscorp makes a loss – who do you think pays for the ‘opinion pieces’? Sky News bangs on with 1/2 truths. If the ABC try to ‘bang on’ they get accused of being ‘biased’ and get threatened with funding cuts.

      There is nobody to ‘bash the LNP’. There is no medium to do this This is why democracy in this country is broken.

  8. Stewie GriffinMEMBER

    In the EZFKA, the highest measurable aspirational point that anyone can strive for is to maximise individual profits.

    BRAVO to the Gas Cartle, the administrators of EZFKA and their commercial mouthpieces, in helping them reaching this remarkable achievement of profitability.

    All praise the bottom line.