The gas cartel is going to crash house prices

This is now reaching proportions of madness reserved for Banana Republics like Venezuela. The east coast Australian gas price is $35Gj, $4Gj higher than the same Aussie gas is being sold to China. The sheer lunacy of this has shaken even the trickle-down wankers at the AFR:

The first signs of the price surge feeding through to household power bills came on Tuesday as the Victorian regulator announced a 5 per cent average increase in standing offer power bills from July 1.

Increased standing offer prices are expected to be announced for other states by the Australian Energy Regulator on Thursday, reflecting the leap higher in wholesale costs in recent months.

Wholesale gas prices have doubled this month, coming on top of electricity forward prices that have risen up to five-fold in 12 months. The price surges have triggered fears of an energy price crisis similar to Europe’s and led to warnings that the new Labor government will fall short of targeted price reductions.

The AER decision was delayed in late March by then federal energy minister Angus Taylor until after the election, in which the cost of living and future energy prices became a heated topic of debate.

The escalation in gas prices on the east coast in May builds on April’s 46 per cent jump and is forcing manufacturers that rely on wholesale tariffs to the brink of closure, as well as squeezing retailers caught in between.

Prices for wholesale power in the 2022-23 financial year have surged almost five-fold in NSW over the past 12 months, and more than trebled in Victoria, Queensland and South Australia, according to energy adviser Energy Edge.

…That means Labor’s policy of increasing renewable power penetration to 82 per cent of total power generation by 2030 is unlikely to work on its own for prices to fall to $51 a megawatt-hour by 2025 and $45/MWh by 2030, according to JPMorgan energy analyst Mark Busuttil.

“In our view, wholesale prices are being driven by high fuel costs (not renewable power penetration) and therefore unless the ALP addresses east coast gas prices, electricity prices will remain elevated,” Mr Busuttil said.

Believe it or not, Australia’s east coast is currently paying the same price for gas as is Europe. The difference is that we produce it at $1Gj while Europe has none and relies upon a deadly enemy in Russia to supply it, which is obviously gouging mercilessly.

The east coast population of Australia has no such sovereign enemy. What it does have is a homegrown foe in the LNG gas export cartel which is viciously starving the economy of gas while it ships it all to China, driving the local price mad. That is Santos, Origin, BHP, Exxon and Shell.

This is all more ludicrous because we have the policy mechanism to fix it in the Australian Domestic Gas Reservation Mechanism (ADGSM). It can force as much gas as we like to stay at home. But nobody is triggering it. The Morrison Government was corrupted by the cartel. The Albanese Government may be as well. We don’t know yet. It doesn’t even have an energy minister. w

WA has just such a domestic reservation policy and is currently paying under $6Gj.

Recall that gas also sets the marginal cost of electricity and when you plug these prices in the result is mind-blowing:

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At current gas prices, east coast wholesale electricity prices will rise 1000% from recent lows in the near future. That’ll mean 250% for end-users.

This is energy, the purist input price into EVERY SINGLE business and household in the economy.

The RBA is already freaking out about inflation and readying paralysing rate hikes in the wake of the RBNZ. Yet here we are handing ourselves a European-scale energy shock despite the fact that we produce massive excess gas that comes out of the ground virtually for free.

This is so far beyond the pale in every conceivable way that we should leapfrog the ADGSM, nationalise the blood-sucking gas cartel, and send its executives to prison for grand larceny.

Houses and Holes
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Comments

  1. happy valleyMEMBER

    “This is so far beyond the pale in every conceivable way that we should leapfrog the ADGSM, nationalise the blood-sucking gas cartel, and send its executives to prison for grand larceny.”

    Hear, hear.

  2. C.M.BurnsMEMBER

    great work HnH, keep up the pressure and the excellent commentary on this !

  3. Rudd and Grylls were smashed by the miners, while Carpenter held his ground. If the gas (Energy) Minister remained as Bowen, I fear he would consider the national interest for ~ 90 seconds, before selling out.

    • No one remembers what you do in the 1st year of your term! Most people have the memory of a goldfish.

      • kierans777MEMBER

        Exactly. Labor needs to get the hard stuff like domestic gas reservation done ASAP while everyone is still in honeymoon mode from getting rid of Scotty. It can ride out whatever scares happen in the media but when electricity prices do go down, and cost of living eases there’s political capital to recoup in 3 years time. Get it done!

  4. If the gas cartel is going to help crash house prices I would say that’s a positive outcome especially if RBA chickens out lifting rates.

  5. Exxon/BHP are effectively one player as they enjoy joint-marketing arrangements. Considering BHP has divested its petroleum arm to Woodside, this will change on June 1 according to current key dates provided.

    Michael West has an article from 2018 on the myths around the gas cartel and prices.

  6. Yawn yawn, Solar PV is the future of electricity production in Australia.
    Nothing else can compete. This is especially true (for bulk solar farms) if recent commercial advancements in Perovskites are found to be durable and stable.
    https://www.technologyreview.com/2021/06/29/1027451/perovskite-solar-panels-hype-commercial-debut/
    Sorry but it is game over for all fossil fuels. The transition may take 10 years or or might take 20 years but what’s important atm is to not lose focus. PV is the future.
    PV has the obvious problem that it doesn’t produce power at night.
    From a Mineral processing perspective this suggests that our research dollars should be invested in finding methods to use excess power as and when it is available. Currently things like Alumina refining require continuous power, and smelter operators can incur significant costs if power is interrupted. It is this production model which needs to change.
    Similarly Ammonia production needs to transition to become direct PV powered. In Australia there is no other Ammonia production model likely to be used after 2040 (and change this could come as early as 2030).

    Looking towards 2030 and onward, when it comes to domestic residential power nothing beats PV and Battery, especially if we can backup this local distributed generation with some form of large scale storage (such as Snowy 2, or distributed pumped Hydro, or even Compressed gas)

    This is change is not 30 years away, it’s happening now. I believe we can fully transition within 20 years (and we probably will have to especially if globally we implement some form of Carbon tax), but such a feat requires work and focus. What’s important is to support transitioning these industries and support the development / installation of the required Infrastructure.
    As for supporting FF’s, that’s just the sort of distraction that we don’t need.

    • kannigetMEMBER

      Sure. We dont need to worry about the current price of Gas because we are immediately moving to solar in 20 years….

      • Exactly, yes we move away from fossil fuels but this doesn’t change what is happening today

        • So put a package together to ensure that we maintain skills (and develop the new skills) and make the Gas exporters pay this expense.
          I’m not giving the LNG exporters a free pass, they need to pay for the gas that they’re extracting, what’s happening atm is a joke, we need a federal ICAC to look into exactly who is profiting from this situation.

      • The current price of gas literally no bearing on the viability of critical industry and definitely doesn’t affect residents right now.
        Failure to capture tax on this also definitely doesn’t affect the budge now either

      • bolstroodMEMBER

        Finland is not blessed with massive Solar energy year round.
        Of course they need alternative sources of energy.
        This is not the case with a continent like Australia, that with Solar and Wind covering 3 time zones , Battery backup, Hydro,, and Green hydrogen + potential Wave and Tidal and Geo Thermal energy covering thousands of Kilometres coast line , has a very diverse and constant mix of Energy sources .

      • haha that’s funny
        why would any Australian company waste it’s capital developing products when they could just speculate on RE?
        So no not to my knowledge

          • Yeah I’m aware of this discrepancy, but I’ve not found that I’m not a good enough liar to profit from lobbying. However I’m still a good enough engineer to ensure that my R&D efforts remain profitable, I’ve also morphed into somewhat of an a55hole when it comes to demanding that my teams R&D efforts be properly (and promptly) remunerated.

    • Sure, but the problem is now! Gas rising 500%, electricity 1000%, there won’t be any companies around in a couple of years

    • So in the intervening 10 years as we wait for the PV miracle to eventuate, the gas cartel just rapes and pillages the entire Australian economy and that’s fine?

      • No we can’t do nothing but imho we’re better off simply charging NG extractors for the gas and using the proceeds to rebuild / refocus / reengineer / reskill….
        From a political perspective we can implement gas reservation and give the gas extractors a free pass on all other costs
        Or we can charge these gas companies for exporting OUR gas and invest the proceeds in what we know the future to be.

        There’s a real tangible First-Mover advantage here which all Australians should be aware of and willing to support.

    • Ammonia is made using an chemical process, not electrical. You need methane. Solar also has the small problem of only working during the day, you need storage, and lithium supply is hitting constraints. If you want to replace fossil fuel in a dry country then you need nuclear.

      • Thanks for the Chemistry lesson,
        If I’m not wrong Methane to Ammonia follows more or less this flow
        CH4 H2O → CO 3 H2
        CO H2O → CO2 H2
        CO 3 H2 → CH4 H2O
        CO2 4 H2 → CH4 2 H2O
        3 H2 N2 → 2 NH3

        Green Ammonia
        Is simpler
        2 H2O → 2 H2 O2 (Anode Reaction: 2H2O → O2 4H 4e- Cathode Reaction: 4H 4e- → 2H2)
        3 H2 N2 → 2 NH3

        No Carbon needed, no Methane needed, no further education needed thanks

      • BabundaMEMBER

        Obviously he’s talking about green ammonia, which is produced using renewable electricity. Stop obfuscating

      • bolstroodMEMBER

        What he said , but if you really need extra 24hr electricity , liquid Salt is a tried and proven at scale energy storage source.
        You sound like a Clive Palmer Nuclear Gnome.

    • Sure is. Large scale PV based in WA to power up homes on the east coast. The three hour time difference means that 3:00 pm in WA is 6:00 pm on east coast. No battery needed.

  7. But but but sovereign risk! What do you mean sir? the risk that your population is gouged on energy costs leading to poor social and economic outcomes? No No, I mean the risk that Santos may have to pay an extra 100bps in the future to fund a flawed capex project…..

  8. Anthony RogersMEMBER

    It’s not just gas. There are a large number of coal stations shut down…
    Bayswater 3: Due back 22 June
    Erraring 3: Due back 3 June
    Erraring 4: Unit available but not running (coal?)
    Liddel 2: Unit available but not running (coal?)
    Liddel 3: Decommissioned
    Liddel 4: Outage, due back June 1
    Mount Piper 2: Unit available but not running (coal?)
    Callide B2: Unit out, due back 30 June
    Callide C4: Unit damaged 1 year ago, no known return date
    Gladstone 1: Unit available but not running
    Gladstone 2: Unit available but not running
    Gladstone 3: Unit out, due back 11th August
    Millmerrian 1: Unit out, due back 8th June
    Tarong 4: Unit available but not running
    Loy Yang A2: Unit out, due back 31st July
    Yallorn 1: Unit available but not running

      • BadaBingMEMBER

        Any chance of some news.com.au syndication on this one HnH? Seems the time is ripe, and soon to be truly pungent?

        well done.

    • You can’t help but wonder if all these shortages are deliberate and the WEFs great reset is underway. Scary stuff coming out of Davros! (not a typo)

    • WTF? I thought coal was *** ULTRA AND I’M TALKING ULTRA RELIABLE BASELOAD ALWAYS ON WE NEED IT ALWAYS FOREVER DID WE MENTION IT’S ULTRA RELIABLE **

  9. kannigetMEMBER

    I would suggest price correction is already happening.

    I received a marketing “message” about how prices are still ok despite a drop in auction clearance rates in the ACT. This is last weekends results.

    https://zango.com.au/auction-results/auction_results_16-05-22_22-05-22/

    48 “Successful” auctions for a total of $26.8M. giving an average of $558k. Now, the Median they reported is $860K and top price of $1.7M. So, for the average price to be that low after a top price that high there needs to be a lot of properties that sold for low prices as well, statistically speaking. When you look through the list, there are not many units in the auction list and only one disclosed the price when it was below the average. I would suggest that there were a few “dismal” results that just had to be accepted.

    Either that or the data is fudged, for example by only including disclosed prices in the median calculations.

    • BabundaMEMBER

      That is quality reading, thanks. So basically we’re treated as just another customer in the global gas market and therefore pay market rates, even though we own the stuff. Talk about policy failure.

      • We get the privilege of buying back our own gas at 31x its extraction cost.

        STRAYA!!!!!

  10. 8KW Solar array with Tesla battery come at me.

    It pisses me off the stove isn’t electric or induction and the hot water system is gas. The ducted heating will never be turned on.

    For the stove issue the air fryer does the job most of the time lol.

    • Are you in a rental
      We bought a place in mid 2020 and when we moved in first thing to go was LPG stove for induction
      HW with solar

    • When is the electricity price gonna start going up for residents? My last power bill was $90, so low…

  11. JACOB,
    Finally I have found someone who will discuss the use of Nuclear Power for the long term. It produces zero CO2 and will provide baseload power around the clock. I have read endless articles in many of the national newspapers regarding Global Warming and ways to slow it. None of them ever discuss the nuclear option.
    All of the nations in the G20 and other groups that Morrison and his entourage travel around the world to chatter to have nuclear power plants except one ( Aust.) France has eighty percent (80%) of its power provided by Nuclear plants and sells an enormous amount of electricity to Italy.

    Morrison must have looked like an uneducated farmer when it came to discussion of CO2 reduction.
    Australians produce five times the amount of CO2 per person compared with Indians and four times the amount when compared to China. Google “per capita CO2 production” if you don’t believe it. On a per person basis we are among the biggest polluters.

    Please don’t mention Fukishima when discussing the Nuclear option. If you built a nuclear plant on the oceanfront in an area subject to earthquakes and possible tsunamis then you were asking for trouble.

    BTW I have solar panels at home and have had for ten years. Solar and batteries will never give us enough power to cover the 24hr. cycle.
    The amount of batteries in Europe are enough to provide power for a total of fifteen (15) minutes! . When they’re flat that’s it.

    • Solar and batteries will never give us enough power to cover the 24hr. cycle.
      Do you care to elaborate, expand, qualify or quantify this opinion?
      You see some of us disagree.

      • gballardMEMBER

        May be you should do some further research yourself instead of saying you simply disagree. I do believe that the climate is changing but then it always has. However when I question whether mankind Co2 emissions are the main culprit I am labelled a climate change denier. Not true! But it is not science to say Co2 is the cause and get hysterical because C02 is still being created. and there are no other material factors such as solar influences. Much of the so called evidence is based on modelling whereas facts a present a different story in many situations. For example ice is increasing in Antartica and even if the Arctic ice melted it would not change sea levels. Proof : Get two glasses of water at equal levels in which one contains ice cubes. When the ice melts the water level comparison between the two glasses will not have changed.

        • drsmithyMEMBER

          Never fails to amaze when random internet poster thinks scientists haven’t understood something that’s been known for a couple of thousand years and is taught in high school physics.

          (Oh wait, they do, which is why they also know melting sea ice does contribute to sea level rise, because salt water is denser.)

        • I don’t have the time to unpack this gibberish.
          Frankly it just doesn’t matter if C02 contributes to global warming (or even if global warming exists)
          the facts are simple
          1) Today’s PV systems can deliver sub 2c/kwh electricity
          2) tomorrows technology could easily see this reduced to 0.5c/kwh ( Perovskites and other thin film tech)
          There is no other technology that can come anywhere near matching these costs (Coal is 5c to 10c/kwh , Gas upward of 15c/kwh, Nuclear about 8c/kwh (but with lots of unknown backend costs I’ve seen est. as high as 20c/kwh)

          Sorry PV wins however you slice this cake, nothing else comes close.
          As for storage (over night power, cloudy days, rainy weeks) well Compressed Gas is very cheap to implement and delivers about 30% return cycle efficiency) Implying night time power costs of 6c/kwh a little.
          pumped hydro can easily deliver 80% full cycle efficiency implying a night time electricity cost of under 3c/kwh.

          • PalimpsestMEMBER

            plus, of course, with a nationwide network there’s also wind power to cover the net 6 hours of darkness. The wind is always blowing somewhere at night. The dams are always running somewhere at night. Plus the top up of very large batteries, and increased use of domestic batteries, and the (finally) approval for EV’s to act as batteries with V2G. The overnight load is fairly modest, except for industries like Al smelting. I’d like to add Lithium smelting but we wouldn’t do that in Oz. Not until everyone else dominates.

        • You utter dullard. The ice in glasses experiment is the first example of the idiot class.
          The sea level rises because the melting ice is presently on the land. Not in your magical glass you moron.

  12. Here is a bit of a riddle to fill your idle hours. Where are the two most powerful Hydro Units in Australia? A unit consists of 1 water turbine and 1 generator on the same shaft. HINT: they were installed forty years ago.

  13. I remember Bob Brown being roundly criticised for turning his back on the leader of a certain foreign country, because the Howard Government were trying to sign a 20-year deal to sell gas to that country at a price that was very low and very unfavourable to Australia, and it was claimed that Bob Brown’s antics might jeopardise the chances of this terrible deal being signed.

    • What is the point of sharing your memory? How does this relate to the article?

  14. Can I really drag out the pop corn machine- there s just been to many false starts!

  15. gballardMEMBER

    North, you are quick to hurl insults but a little insight might assist you.
    The Arctic (North Pole to you) is comprised entirely of sea ice. On the other hand the Antarctic ( do I need to say this is the South Pole?) is comprised of both sea ice and land ice (because under the Antarctic there is a massive amount of land). For many years now the mass of land ice in the Antarctic has been increasing, and has more than offset the melting of the sea ice on the western side of the Antarctic.

    Now who is the utter dullard?!

    .