AIG: “Apocalyptic” energy hikes “threaten chaos”

AIG today:

“Apocalyptic rises in energy prices threaten chaos for industry and pain for households.  They demand a national, integrated and strategic response,” Innes Willox, Chief Executive of national employer association Ai Group said today.

“The extraordinary price rises, including a 50-fold spike in wholesale gas prices in Victoria, have seen market price caps imposed in some of our largest local energy markets.  The immediate pressures are from outages at old coal plants, consequent high gas demand for power, and the collapse of a mid-size gas retailer.  But beyond these acute pressures lies the pull of international coal and gas prices, which are unprecedentedly high in the wake of the invasion of Ukraine.

“With Europe announcing further steps today to wean itself from Russian energy, we can expect international factors to sustain high energy price pressures for years to come – especially in natural gas.

“The price pain is already intense for those businesses who’ve found themselves suddenly needing new energy contracts amid local and global turmoil.  Households will feel the punch from higher default electricity prices from July, and more pain is coming for all.

“Solutions are not going to be simple.

“All of Australia’s former energy strengths – our reliance on the legacy coal generation fleet, large gas resources and a deep entanglement with export energy markets – are working against us in the current circumstances.  But all of our new energy options – from renewables and storage to biogas, hydrogen and energy efficiency – are hard to accelerate amid global supply chain woes, skills constraints and unease from communities around energy megaprojects.

“The most sensible steps on both the supply and demand sides to build for the future and reduce our exposure to fuel costs will take time to deliver.  Short term responses to help vulnerable industry and households will also be needed.  They should be swift, targeted and have a clear handoff as the benefits of longer term measures are achieved.

“The new Albanese Government has an unenviable but urgent task in responding to this crisis. It is not one they can or should take on alone. The States hold many relevant levers, as do the energy market authorities, energy suppliers and energy users.  The first task for the Commonwealth is to bring us all together.  Any strategy will need wide participation to work,” Mr Willox said.

The AIG is not prone to such language.  This is a genuine national security crisis. Our energy markets have FAILED.

The solutions are actually pretty simple. The Albanese Government should NOT convene some sort of all-inclusive summit which will turn the issue into a pointless debate instead of leadership. It needs to ACT in the national interest and explain it as it does so:

  • the gas cartel lied to Australia that it had enough gas for exports and Australia;
  • it pays no tax on these war-profiteering profits and Australia is paying more for its own gas than China is;
  • recession will result if no action is taken;
  • the Morrison Government handed this bag of shit over;
  • the ADGSM must be triggered to retain gas in Australia and crash the price to $7Gj.;
  • coal must be forced lower by a similar reservation mechanism.

Otherwise, energy bills go up 200%, the RBA runs wild with rate hikes on a booming CPI, house prices crash and the banking system is busted, the nation’s most vulnerable are rorted by a war-profiteering fossil fuel industry and decarbonisation is trashed.

Albo needs to declare a national crisis, appoint an energy minister or special minister of state and dictate the outcome for good.

DO NOT WASTE THIS CRISIS. It may be very early days for this government but it will either make it or end it.

Houses and Holes

Comments

  1. Must have been waiting till after the election, hahaha. Think of this as just another subsidy for renewables. My PV payback must now be 1 year (accounting for avoided gas heating costs) and the local swimming pool showers are magnificent!

  2. Ronin8317MEMBER

    Thank you for continuing to bang the drum on this issue. (like the Solomon Islands Chinese military base). Let’s hope Chris Bowen is paying attention.

  3. Jumping jack flash

    How much jurisdiction does the government have over these private companies to seize “their” resources and their ability for generating profit?

    We, like almost every other country on the planet bestowed with abundant natural resources, should certainly nationalise our natural resources and then lease extraction and sales rights to these mining companies for a fee, instead of just handing it all over and hoping that we get a bit back for the country by way of taxes. This strategy hasn’t worked so far, and it never will.

    With interest rates rising and the almost certain contraction in debt spending and recession that it will cause, it is vital that we find some way to obtain a reliable source of national income to mitigate.

    • Hill Billy 55MEMBER

      One of the policies that Clive had (UAP) was the Iron Ore Export Tax. Whilst he was obviously playing his own book, a tax of this nature across all resources is what is needed. To me, Albo and the ALP have the greatest opportunity to do it, given it was promoted so much by Clive (albeit solely on Iron Ore).

      • Jumping jack flash

        Agreed, but what are the chances of it turning into another Rudd/Gillard mining tax that did nothing?
        Remember Clive is one of them, would he actually propose policy to harm himself and his ilk? Plus he was desperate, he would have literally said anything to get a few more votes. Bashing miners is like shooting fish in a barrel.

        Nationalisation and leasing is the surest way. It works for almost all other countries that have natural resources. Rio doesn’t seem to care, they own plenty of leases in other countries to extract and sell minerals. Fairly sure BHP does as well. In Australia they laugh all the way to the bank.

      • Yes, one of his policies that would have been good for Aus, even if it was for the wrong reasons. The current energy inflation spike is a rare occurrence which Albo could use to stamp his authority in government, it ticks most of the boxes in his election campaign yet there is a reluctance to do anything, must be the money. Would be amusing if Labors failure to deal with the energy shock took them down within the year, then the UAP or Greens would likely get a massive swing as both majors would be on the nose.

  4. @houses and holes, do you think any thing will change, you give a summary of the issue, except, No one F—king cares in Govnuts.
    In your comments your have predicted the future, massive increase in energy costs, resulting in inflation, resulting in increased IR’s, resulting in recession.
    I agree with you, the Labor govnuts have nothing to loose by doing something and everything to loose by doing nothing, it is their choice, the people has spoken.

  5. You need to think like a politician.
    You don’t proactively intervene to prevent a crisis, because no one will notice and give your credit. Instead you wait for the crud to hit the fan then sweep in with your heroic fixes!

    • BabundaMEMBER

      Agreed. Acting any sooner will be all the ammo the other side needs to point at Albo and say, “Told you so! He’s a raging commie!!”

    • If Anus Bollox is using words like “apocalyptic”, doesn’t that suggest that the faeces has impacted the air movement device?

    • Spot on.

      Anus also didn’t reference the ADGSM. Obviously doesn’t want to point the finger at the gas sector.

  6. Michael JohnsonMEMBER

    Flows from delusion that renewables will replace fossil fuels anytime soon, mixed with the zealot like belief that the climate in 50 years is a known known (mathematically impossible within an acceptable margin for error). A simple forward planning in HELE coal fired power stations with locked is coal supply contracts (as Japan is doing) added to investment in sensible solar and wind projects (from non rent-seeking investment banks). Anyway, its too late now, the zealot woke will be reaping any energy disaster. You need the base load power at an affordable price, – all else then follows!

      • that piece is ancient history. Blue hydrogen is bs spouted by the power industry. Green hydrogen is a real deal. Power usage varies based on tech, but like alot of this space not enough optimisation has been done and large gains have been made since 2020 and I imagine more will happen as time progresses.

        With variable power generation replacing fixed generators having a simple energy sink that can be used for mobile power seems pursuing. It can sit alongside aluminium and other heavy power consumers and may even become seasonal in nature.

  7. SharmanMEMBER

    David why don’t you set a meeting with the Industry and Energy Minister when they are appointed. Then you can walk them through this issue in detail. They need good advice, not just the gas lobby in there ear continuously.

  8. ridin one oil-man’s D (gas) while jacking off two other oil-mans D’s (biomass and hydro), while another creeps in from behind (oldschool oil baby!).

  9. DodgydamoMEMBER

    I got SMS and email warnings from my (small) electricity retailer yesterday advising me to go lock in a deal with another provider now… while it is still possible… as due to recent unprecedented doubling of Victoria wholesale power prices it is likely they will soon need to double their retail charges.

    • The reason they are telling you to leave is they cant charge you more than the Vicorian Default Offer -a cap on resi and small business electricity tariffs.

      Nearly every retailer bar AGL, Origin and Energy Australia will be edging toward insolvency if forced to sell at the DMO (NSW, QLD, etc.) Or the VDO as spot and current forward wholesale power prices are higher than the VDO/DMO.

      many retailers have long dated forward hedge books entered into a year or more ago. These will protect the core of their business but not all of it.

      Further, apart from ASX electricity futures which have small flows, most hedge contracts are OTC. The solvency of some of our generators may also soon be an issue if they have generation units out and are forced to settle out of the money hedges without the income from electricity delivery at current wholesale spot sales.