Sadly for some, the energy war-profiteer’s pillaging has come sooner rather than later:
The failure of NSW gas retailer Weston Energy last month has left NSW hospitals, prisons and swimming pools grappling with a major spike in the price of natural gas supplies after being caught in the crisis gripping the sector.
HealthShare NSW, the NSW Department of Communities and Justice and the authority that runs the Olympic Park Aquatic Centre at Homebush are among the 400-plus former customers of Weston, which lost its licence on May 24.
They were automatically transferred over to default contracts with other retailers at much higher prices as they work to try to lock in fixed-price contracts at lower tariffs in a market where domestic supply has been stretched by cold weather and increased gas use for electricity generation.
I will remind you that this is why this war-profiteering is so very destructive. Energy is literally the building block of the modern economy. More, it is the foundation stone of our civilisation.
If the war-profiterring is not stopped, within a year or two, every single household, business, hospital, police, fire brigade and all other public amenities upon which we rely as a society is going to see a combined gas and power price shock in the region of 100-200%.
This is a 5-10% CPI shock that will drive interest rates wild and crush asset prices on top of the theft of income. A recession will ensue.
I suggest you remember this whenever the energy war-profiteering firms bleat about how terrible they are being treated:
Two major gas operators, Shell and the Santos-backed GLNG export venture, have cautioned the Albanese government against intervening in the industry and say it could ruin Australia’s reputation as a reliable energy supplier.
The government is considering a scheme to reserve gas for east coast users, and direct intervention to increase supply is also on the table, as it battles energy shortages that have driven a spike in electricity prices.
Shell, one of the biggest gas producers in Australia, said it was opposed to retrospective gas reservation and was wary of changes to the gas trigger to moderate skyrocketing gas prices.
The Santos-backed GLNG project – which counts France’s Total and Malaysia’s Petronas as partners and operates next door to Shell’s QCLNG export scheme in Queensland – also fired a warning to the newly formed government over the prospect of new policy measures.
“The Queensland gas industry has swiftly responded to the elevated domestic gas demand. Last week pipeline transportation usage between Queensland and the southern states was near capacity,” GLNG Operations chief executive Stephen Harty said. “Regulatory intervention at this stage would do little to help the situation in Victoria or NSW, while at the same time causing significant harm to Australia’s reputation as a reliable energy supplier.”
Frankly, mate, who cares. When everything that the sovereign does and stands for is at risk, worrying about export sovereign risk is irrelevant.
This is a lesson that the Davosian AFR and its creepy trickle-down leadership is yet to learn:
Labor in government has got its first big call right on the energy transition so far, and must hold the line against populist banana republic-style calls to divert Queensland-sourced LNG exports to the home market. That gas has been tapped only due to tens-of-billions of dollars of investment to bring it onto the global market.
Rather than increasing the sovereign risk of a commodity-exporting economy, more gas exploration and development is needed so that Australia can help the global transition to a lower-carbon world. A practical transition plan needs to be technology-neutral and not repeat the mistake of demonising any particular energy source. As such, it should be open to the role zero-emissions small scale nuclear generators might play in a low-carbon economy.
The cartel knew this would happen. It lied when it built the plants that it had enough gas. It was a regulatory arbitrage play from the outset.
The cartel created the sovereign risk, not Australia.
Now it should pay the price, not everybody else.