Morrison’s gas cartel triggers huge east coast energy shock

This is what happens when a corrupt government sponsors a gas cartel to capture your energy reserves:

A fourfold increase in gas prices has inflicted huge losses on a Riverina-based manufacturer in NSW and may force the company to temporarily close its doors within months if there is no relief.

Causmag International, which uses gas to make magnesium products, has already wound back operations over the past 12 months, cutting workers at two sites near Young from 38 to 29.

The company is one of many east coast manufacturers considering shutting down their plants as prices for natural gas surge due to coal power unit outages. These are sharpening the threat of the sort of broad crunch in energy that has hit economies overseas.

Wholesale gas prices in Victoria have tripled or quadrupled from typical levels to more than $30 a gigajoule, while prices in Sydney are north of $26/GJ even before colder winter weather drives up demand to peak levels.

…Causmag’s predicament comes as big industrial consumers are facing a “doubling or tripling” of electricity prices if they come off contract in the next few months, Energy Users Association of Australia chief executive Andrew Richards said.

…Prices are also being drawn higher by strong international prices for LNG, which soared last September and again after the Russian invasion of Ukraine in February. They have remained much higher than normal as energy importers seek to avoid Russian supplies.

…Gas buyers are partly blaming Queensland’s LNG exporters for the higher east coast domestic prices as they seek to capture more of the super-high overseas prices for gas.

“Netback” prices for LNG exported from Queensland, which signal the equivalent domestic price that exporters are receiving, are at $38.09/GJ for this month, according to the national competition watchdog.

That is higher than the spot prices in the four eastern states of between $26/GJ and $36/GJ. That signals that the three LNG exporters in Gladstone are still making more money from exporting gas than they would from selling it on the east coast spot market.

But analysis by consultancy EnergyQuest says the rise in domestic prices did not appear to be because of any increase in LNG export volumes. EnergyQuest linked the rise in gas prices more to greater call on gas for power generation because of the coal power outages.

This is a joke. In terms of Australian consumption volumes, the gas is basically unlimited. We’re only short because the exporters have left us that way. The local price is rising to parity with the global prices exporters have exposed us to.

IT HAS NOTHING WHATSOEVER TO DO WITH COAL.

The Morrison Government has failed utterly to bring discipline to the gas export cartel via the Australian Domestic Gas Security Mechanism.  It was supposed to strengthen it in 2019 after doing a deal with Senator Rex Patrick in exchange for $158bn in tax cuts. It outright lied and was captured by gas cartel bribes instead, which led to the perverse “gas-led” recovery.

The ADGSM must be triggered and the gas export cartel forced to supply locals at prices far below export net-back. It is the only solution, as has been amply demonstrated by WA for decades.

Morrison’s catastrophe is only complete when one understands that three-quarters of east coast gas is being shipped to China to strengthen its industry (including military). Yet, as Morrison makes an enemy of it, we are gutting the last of our industrial base to guarantee that we have no way to defend ourselves.

The cartel pays no tax, employs few, and spends a lot of money bribing the government. The final insult is that gas sets the marginal cost of electricity so everybody is about to be hammered on that bill, not to mention extra rate hikes.

This is a case of Dutch disease so virulent that it will kill the host.

Houses and Holes
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Comments

  1. The Morrison Government has failed utterly to bring discipline to the gas export cartel via the Australian Domestic Gas Security Mechanism. It was supposed to strengthen it in 2019 after doing a deal with Senator Rex Patrick in exchange for $158bn in tax cuts. It outright lied and was captured by gas cartel bribes instead

    Thanks for continuing to bang on about this issue David, I was disappointed Anthony Albanese didn’t mention this during the debate on Sunday night(?) with ScoMo. He could have wedged him real good on 1 of the inputs to power prices being GAS and the current arrangement needing to change. Instead they went down another rabbit hole on infrastructure etc..

    Does the Labor party not understand this or are they unaware? Can someone tell them? @Ermo?

      • Yep the labor policy is to have no policy. What they deliver is anyone’s guess. They have learnt from the last election, when they made the mistake of not shutting Shorten in a dark closet somewhere.

      • Being afraid is half the problem, we need Politicians with some actual guts to get things changed.

        • DodgydamoMEMBER

          Sadly Australian voters have shown they won’t vote for anyone with bold policy and are easily swayed by advertising scare campaigns from the vested interests (could be worse though just look at the Phillipines 😩)

        • TRADINGtheAPOCALYPSE

          We need an informed electorate with same said guts. Good luck with that though..

    • Does the Labor party not understand this

      No. The Labor party only knows how to gain enough votes to get more power and money for selves (eg get elected).
      To get elected you need to offer the average dumb voter an obvious $100 more than the other big party (eg Liberal).

      Serving the people and doing the right thing has no connection to Labor party knowledge or intention.

      • PalimpsestMEMBER

        To be fair they offered a path last time and the Ozzie voter chose the short term cash. It’s no good having great policy if Australia won’t vote for it…. And they don’t. We get what we ask for. We got what we asked for.

        • Surely its a politicians job to sell the electorate on difficult messages which are for the betterment of the country. I dont buy into the notion that all voters are purely in it for themselves. 60-70% of the people I know and speak with regularly care about the betterment of the country. There are of course a chunk who are so misinformed or self interested that they follow the short term benefit.

          With me being N=1, recognize my sample size does not make a solid argument.

    • ErmingtonPlumbingMEMBER

      “Does the Labor party not understand this or are they unaware? Can someone tell them? @Ermo?”

      I bring up gas all the time at meetings and demand that there should be legislation that has Australian citizens and businesses not paying a single cent more for AUSTRALIAN Gas than the cheapest price paid by any foreign customer.
      If the Govie has to take over the distribution infrastructure to make it happen then so be it.
      But those that have made a career out of politics remember what happened to an Australian Government that mess with Global Plutocracy and its ideological imperative.
      The real reason Whitlam’s labor Government was sacked was because Rex Connor, the minerals minister had big plans to nationalise Australian resources for the benefit of Australian citizens at the expense of US and UK mining company share holders.
      The whole Khemlani affair that lead to the Dismissal was around a loan of $4 billion dollars (22 billion in todays dollars) to build a Gas pipeline from the North West shelf to the East Coast of Australia in the 70s!
      We would have been so much better off today with the cheapest Gas and electricity in the world for the last 40 years and way into the future!
      But Global plutocracy and its Pinkertons/CIA/MI6 put a stop to that happening and instead today we liquify and bottle the stuff to ship over seas to our competitors with fk all taxes or royalties placed on those shipments and the vast share of profits going off shore to Global Plutocrats.

      Individual politicians and parties can and do get destroyed when they pick a fight with the global mafia dons who really run this world.
      If you got any where near real “political power” you’d know all about Gav
      https://www.theguardian.com/commentisfree/2014/oct/23/gough-whitlam-1975-coup-ended-australian-independence

      • “But those that have made a career out of politics remember what happened to an Australian Government that mess with Global Plutocracy and its ideological imperative.”

        The LNP dont deserve a vote but if ALP wont change the status quo, do they deserve a vote either? There job description should be to do what is right for the country and sell the message to get the outcome, rather than running scared of maintaining existing practices.

      • “Individual politicians and parties can and do get destroyed when they pick a fight with the global mafia dons who really run this world.”
        Yes and we have some ripper energy “dons” here

  2. This is an outrage. How can you have a shortage of gas in a country that makes almost the world’s greatest Export quota of LNG?
    Is it a state government problem, as here in WA the gas is not too expensive, the DOMGAS as Woodside call it, is reticulated to Perth and Bunbury in the South. Our bills aren’t too bad, for a house that uses gas for hot water, cooking and keeping warm, it’s about $50/mon or so. Can ScoMo overide the states premiers, or is his government the cause of this?

      • Scotty from marketing is both too stupid to understand the accounting and too lazy to wade through the reports from the people who do.

    • How can you have a shortage of gas in a country that makes almost the world’s greatest Export quota of LNG?

      Simple. The same way a country with the most land per person can have a shortage of land zoned for residential housing – deliberate government policy to benefit cronies.

      • Thanks Claw. manufactured scarcity. Just drip feed it to the market and crimp supply, people believe it’s scarce. It’s so simple, the Poms did that to salt in India and people died.

        • The independents running for office in the federal election should be less beholden to the gas giants.
          Hard to see how it plays out but if the balance of power is held by independents and gas prices decimate local industry, the sector may well get targeted.

      • ErmingtonPlumbingMEMBER

        Some forms of corruption may be be considered relatively harmless but this issue is straight up Treason.
        Id happily pull the latch on the Guillotine (free of charge) that has the necks of those responsible underneath.

  3. Frank DrebinMEMBER

    Is 75% really going to China ?. I thought it was mainly Japan and Korea via long-term deals.

    With a stroke of a pen they could reserve a fair chunk for domestic use only.

  4. Dutch disease, don’t make me laugh, we can only wish for Dutch disease, what we have is a far far worse disease than anything the Dutch ever suffered.
    From an Economic Complexity perspective the Netherlands has dropped from 20th (around 2000) to 25th today while Australia has dropped from 60th (2000) to be somewhere in the 90’s today.
    Today the Netherlands counts as economic peers countries like Denmark, Poland and Malaysia while Australia counts countries like Pakistan, Mail and Albania as our closest Economic peers (as measured by complexity analysis)
    To compare Australia with the Netherlands, is to imagine ourselves as their economic peers, equivalents. In reality however they’re a league ahead of Australia, they have the Economic, Social and Educational structure of a first world country while Australia battles for economic position with third world basket case countries.
    As is the case with most of these third world countries, crony capitalism and outright corruption are the primary driving forces in the Australian economy, if you try to clean up the game you interfere with the operations / profits of the only successful businesses that we still have.
    Australia is F’ed, it’s completely F’ed and in no way comparable with the economy of still functional countries like Holland.

  5. happy valleyMEMBER

    “The cartel pays no tax, employs few, and spends a lot of money bribing the government.”

    Ah, yes – Scummo’s can-do capitalism working as always like a well-oiled (no pun intended) Swiss watch.

    • bolstroodMEMBER

      The Prime Ministers Office is Staffed by the Gas Cartel and Coal Lobby… That’s the extent of the Coup

  6. DodgydamoMEMBER

    Situation is so fvcked they’re planning on building a gas import terminal off Geelong (that no one there seems to want) but nobody seems capable of connecting the dots

    • ErmingtonPlumbingMEMBER

      We are one of the most corrupt countries in the world.
      Everyone toes the line and Picks safe and fake battles.
      I was at the May Day Sydney rally the other day and listened to all the Union reps, Commies and Socialists waffle on.
      Almost nothing on the theft of Australian resources by Global corporate plutocracy,…But heaps of shyte on “Aboriginal land always was always will be”, lots of concern over Trans and other GLBTIQXYZ discrimination, The evils of Patriarchy and White privilege but next to nothing on this issue that has a direct negative effect on the standard of living of all Australians on every rung of the intersectional hierarchy of victim hood ladder

      It might be the last May Day I go to.

      • That’s because everyone rather culture wars then delivering on proper solutions for all Australians.

        • ErmingtonPlumbingMEMBER

          But ask yourself why culture waring is the path of least resistance embraced by institutional leaderships on both the Right AND Left.
          I would argue that avoiding antagonising Organised money is the primary reason behind the embrace of identity politics as it poses no real threat to the economic status quo. Those effectively challenging the increasing concentration of wealth and power by the Global 0.01% will not be tolerated and will be relentless attacked until they cease and desist.

          “Left leaders” have a much less molested existence if they just ignore the corruption of our corporate mafia and just stick to calling out their own “Wh!te Privilege” in a country that is still 80% wh!te.

          • kierans777MEMBER

            Well said. And that’s what the ALP needs to do to win back the Aussie people en masse. Get back to some old fashioned class warfare. As MLK said, all justice begins with economic justice.

          • “I would argue that avoiding antagonising Organised money is the primary reason behind the embrace of identity politics as it poses no real threat to the economic status quo. Those effectively challenging the increasing concentration of wealth and power by the Global 0.01% will not be tolerated and will be relentless attacked until they cease and desist..”
            That is pretty much what happened to Shorten for daring to tread, albeit tentatively, in that direction.

            I’m not sure if Labor qualifies as “left” anymore – just less right wing than that bunch of social conservative nutters running the Libs at the moment. It’s also obvious that its the LNP and their mates in the press that are keeping identity issues front and center at the moment. It’s not just about scaring the “left” off from tackling the big issues, its also about dividing the left.

            Edit: To Albo’s credit, at least he is talking about the minimum wage in progressive terms. I will give him that.

  7. Three friends on three different providers have in the past week received notification of electricity price rises, the highest of which was ~50% more than he was previously paying.

    All are blaming rising wholesale costs.

  8. rob barrattMEMBER

    So where are all the ABC dirt diggers when it comes to investigating gas cartels etc etc? I presume the ABC doesn’t feel the average Joe would understand the arguments or the 3 lines of arithmetic.

    A nice sex scandal (proven or otherwise) is a much tastier diet…

    • They could pull The Big Short trick and have celebrities explain the hard bit in cut scenes. Mark Waugh and Ricky Ponting having a punt on the horses. Guy Sebastian and Delta Goodrem judging performances. David Koch and Karl Stefanovic talking into the void. The normal stuff we love.

  9. If we’re going to import all our manufactured goods then we have to export something to pay for it, right? We could keep our resources for domestic use, but then we couldn’t import as much stuff from overseas. I’m not saying that would be a bad thing per se, however it’s certainly a tradeoff.

    • We do export, quite a lot. Fe and C mainly. And education services for the lols.

      • Yes, but we also import a lot. If gas exports are reduced then imports must also be reduced by whatever degree or else we’ll be running a trade deficit.

        If hypothetically all gas exports were banned, then we’d have much cheaper gas, but then we’d have to pay more for other stuff since we can’t afford as many imports. After all, if restricting exports just resulted in the former exports being cheaper locally, why not ban all exports?

        Kiwis make the same complaints about having to pay the global market price for milk since most NZ dairy is exported… but those exports pay for all the imported stuff Kiwis enjoy.

        • Ok, I misunderstood your point. I think in that scenario the trade-off will be overwhelmingly positive, e.g. cheaper gas, cheaper manufacture (say, fertiliser) and, probably, import replacement.

  10. If this continues there is a time not to far away when the appropriate action is to blockade the port and give the Executives and shareholders of these companies what they so richly deserve. Sounds extreme, but the apparent lack of corporate responsibility of the C-suite in these companies astounds me (not as much as Star/Crown but that’s the lowest of low bars). You can only pursue profits as far as your social license to do so. Pay tax, stop gauging or be nationalised. To deal with sovereign risk blather, mention criminalising certain activities and that companies paying no tax, making no profit, and having no plans to do so lose their licenses. Alternately we can look forward to Scott, without irony, saying ‘let them eat coal’. Wait he already has…