Toot! Here comes the energy bad ideas train

With friends like the AIG, who needs enemies?

Tennant Reed, principal national adviser at the Australian Industry Group, said energy prices hikes for household of at least eight to 15 per cent were already backed by the regulator’s hike in the default price last week. It was likely this price would rise further over coming months and years, he said.

Some customers of smaller retailers that did not have their own access to power generation would see prices go up even further, he said, noting that one company had told customers prices may double.

He said in the current geopolitical climate and in the face of a global energy crunch, any moves by Australia to cut energy exports would not be received well by export customers.

He said the government’s policies to improve transmission to incorporate more renewables, in addition to state government efforts to improve household efficiency and substitute gas appliances with electric alternatives, such as induction cooking and heat pumps, were the right responses, but they would take years to implement.

In the short term, he said federal and state governments could consider subsidising households hit hardest by the crunch.

According to its early estimates, if governments targeted the most vulnerable 10 per cent of households and small businesses, such an effort would cost around $6 billion.

Woodside’s O’Neill said the volatile market was evidence that “our response to the climate crisis [could] trigger an energy crisis”.

“I fear that some of that may be playing out in Australia where firming capacity really has reduced, there’s not as much firming capacity as there historically has been,” she said. “And so when coal-fired power goes offline, it means a significant draw on gas and, there’s just not enough gas to meet that demand.”

The AIG is like kindergarten kids. In the grown-up world, export contracts are broken all of the time. It is commonplace to do so. Declare force majeure and get on with cutting a few export cargoes. There is no sovereign risk when the risk is to the sovereign.

The other AIG idea is completely bonkners. In effect, it is a proposal to subsidise the war-profiteering of the gas and coal firms using the wider tax base. If you do that the energy cartels will keep pushing prices higher and run wild forever.

Moreover, it will worsen the inflationary consequences of the shock as energy prices pour inflation into everything plus punters still have money to spend!

As for Woodside, it only joined the east coast gas cartel this week when it completed the takeover of BHP’s Gippsland JV with Exxon. It knows there’s an amazing amount of gas. But it has sold all of it to the exporters in the cartel:

More bad ideas were on offer at your ABC which ran a half-cocked report that editorialises without authority:

The mechanism can only be used in limited circumstances, and it is not clear the current price spikes would be enough to invoke it.

The Resources Minister, the newly-appointed Madeleine King, would need to determine that there will be a market shortfall of gas next year, not just high prices.

Even then, the earliest date export controls could be imposed is January next year, which would do nothing to help with the immediate issue of price peaks for businesses and households.

Of course, the government could rewrite the terms of the mechanism to get around those problems.

But there are other reasons to be cautious about pulling the trigger.

If supply contracts are disrupted, it could affect Australia’s reputation as a reliable trading partner, which could have long-term ramifications for the resources sector.

And cutting critical energy supplies to allies we are supporting to push back against Russia might not be a wise diplomatic move, either.

Who said these things? Just the journo? Then put a line through them.

Ever since 2014, Australia has been in a rolling energy crisis owing to the gas shortage. It is a structural sovereign risk that requires a structural sovereign fix. Not fixing it and leaving export customers in doubt is just as bad long term.

As for supplying European allies, sure, go ahead. Three-quarters of eastern gas goes to China where it is used, in part, to build weapons that threaten Australia. Cut those volumes.

In fact, China has been on selling LNG cargoes anyway owing to a glut!

China, the world’s largest LNG importer, has become a seller of LNG export cargoes as domestic demand wanes amid pandemic movement curbs in Shanghai and fears of similar restrictions being imposed elsewhere in the country as authorities move decisively to stem the spread of COVID-19.

“Except for the big three national oil companies – PetroChina, Sinopec and CNOOC– which have an obligation to ensure natural gas supply, others LNG importers were heard to have resold many of their LNG imports recently,” a trade source with an LNG terminal in south China told S&P Global Commodity Insights.

LNG terminals were still profiting from selling long-term LNG cargoes in the domestic market, but reselling LNG cargoes in the international market was proving more profitable, the source said.

Perhaps the AIG and ABC would like us to buy back our own gas at another healthy markup. Ironically, we might get it cheaper from the Chinese than our own export cartel given China is paying $33Gj for Aussie spot gas while Australia pays $40Gj. We could save a dollar!

This is all transparently INSANE.

For grown-ups, there are only two fixes for this:

  • My favoured solution is to apply a 100% war-profiteering levy on all export sales above pre-Ukraine war prices for gas and coal. That’ll crash the local price, as well enrich Australia. The energy cartels have no right to such an unethical windfall.
  • But, I acknowledge that will send the entire mining lobby into meltdown and pick an RSPT-scale fight which Labor’s ball-free zone is clearly not up to.
  • So, instead, reserve enough gas and coal for domestic use to crash the local price and export the rest, which will be nearly all of it, with minimal disruption to the miner’s profits and export customers but cheap prices at home.

All of this tiptoeing around the facts is pathetic. Energy markets have failed. There is no subsidy or giveaway that fixes it.

What must be done in the national interest must be done.

Houses and Holes
Latest posts by Houses and Holes (see all)


  1. I got called out this morning in the café where I have my coffee for yelling at the phone when reading the ABC article.

    • Grand Funk RailroadMEMBER

      I will see you and raise.

      I have just done a Defence ‘Workplace Behaviours’ Mandatory training session – all contractors public servants and military do this, it is all online and takes circa half an hour.

      I feel like i have just visited planet fffroooon276 on the outer reaches of the known universe

      • Bwahahahahahaaaaaaa!!!!!!

        I feel your pain brother, and my heart goes out to you!

        I worked in the Defence industry since….errm…well, as a civilian since…about 1987.

        I’m now stitting by my fire at home (fvck the gas cartel) with a glass of red wine, and no prospect of ever doing another insane workplace behaviour “trainings” where I’ll have expected “learnings”, as the woke lunatics say these days. I couldn’t be happier.

        My previous employer is now littered with indigenous dot paintings, they have an indigenous HR officer who is pale skinned, blue eyed and blonde and went to a private school but likes to talk about her oppression by the system (ie white people), weekly scolding by HR about “modelling correct behaviours” etc. All this happened since they employed an ex APS HR Manager, and none of it contributes to making good products or making money. In fact, it consumes resources while producing nothing. I think they’re fvcked.

        • My previous employer is now littered with indigenous dot paintings, they have an indigenous HR officer who is pale skinned, blue eyed and blonde and went to a private school but likes to talk about her oppression by the system

          ….weekly scolding by HR about “modelling correct behaviours”…

          All this happened since they employed an ex APS HR Manager, and none of it contributes to making good products or making money. In fact, it consumes resources while producing nothing. I think they’re fvcked.

          That’s exactly what I mean when I talk about “forced diversity” baking in incompetence.

          The dullards like Dennis with think it’s an attack on skin colour… but dullard’s are gunna dullard.

          You have here an ideologue, who is now actively consuming way too may resources, for a function which is not the core mission of the business. There is no duty to any stakeholder of the firm, but the attitude of what they are serving is essentially an article of faith… even the atheists ultimately seek out a new religion….

          And yet, these utterly defective people.. are dictating what is ‘correct behaviour’

          In fact, it consumes resources while producing nothing. I think they’re fvcked.

          “Baked. In”

          Under their regime, incompetence is all that will remain.

      • I’m new the whole world of Defense contracting and I’ve already had some big fights about their expectations for stuff like this that I’ve told them flat out I have no interest in getting involved in any of it.
        Of course they’re saying…but but but it’s mandatory
        I simply replied : my involvement in this project, or the training?

  2. The ALP can get another 2-3 terms out of such moves.

    Further, out consumption is a fraction of our exports, so it will barely make a dent. China and India will just makeup shortfalls from Russia anyway, as they are already doing.

    The root causes are governmental, so fix it with governmental interventions and actually restore proper market function, not undermine it.

    Was the system made for man? Or man for the system?

    • kierans777MEMBER

      If Labor botches this then they are truly just Liberal Lite but with a bit more respect for desks and prayer rooms. Chalmers has to find his inner ticker.

    • DingwallMEMBER

      our consumption is a fraction of our exports, so it will barely make a dent
      Exactly. The exporters would see like 0.002% off their current bottom line so they shouldn’t even blink.

  3. Talk of “sovereign risk” is nonsense in current situation, we are not in a normal world currently, countries with governments that actually worry what their populace think have been banning exports of all sorts of things, without notice, and even if they did reduce contracts we can easily reduce prices and they’ll all come running back.

    And there is a shortage of gas, else we wouldn’t be paying so much more for gas!

  4. UK Slaps 25% Windfall Tax on Profits of Oil and Gas Firms

    The 25% levy on energy firms will raise about £5 billion ($6.3 billion) to finance one-off grants of £650 to more than 8 million of the poorest households in the UK, Chancellor of the Exchequer Rishi Sunak said in the House of Commons on Thursday. Sunak did not rule out applying a similar levy to power generators

    Fake left is absolutely fake.

    • Peter SMEMBER

      The windfall tax can be offset by 91 pence in the pound invested in exploration and project development so producers will be highly motivated by this impost, to increase their production of oil and gas. A bit like the PRRT which deducts exploration and development spending from EBITDA, prior to levying a 60% impost.

  5. Display NameMEMBER

    I emailed the energy minister Bowen a few times regarding this. Suggest a few more people do. Be the squeaky wheel.

  6. Reserve 10% of the stuff for Australia, use 1% and gut the price to stimulate manufacturing. At the moment, even with all the proposals above it would not change the manufacturing lens in Australia.

    We need it for power gen, industry and manufacturing. The more we have the cheaper it should be.

  7. When all the wrong solutions are exhausted, they might actually suggest the correct response, but by then everybody will know the solution, except the politicians who have ingrated themselves to provide the solution. The situation will be terrible by then, pensioners freezing to death as too scared to turn the heater on.

  8. How can you have a national interest when there is no nation? Nothing will be done.

  9. Damn! Domgas reservation is so cool! I just got an extra 30% discount on my local natural gas contract here in WA without even asking! West is best
    I really thought the nation would have learnt from our successes by now – the recipe is very simple 🙂

  10. At least Rex Patrick had a crack at geting it in place, pitty the Libs screwed him…but even MORE a pitty Rex fell silent on the issue… he really ought to take a look at himself in the mirror

  11. The ALP can’t act yet. They know the power of the resources sector. This has to become a public issue first. The price rises are only just starting to flow through to retail energy bills. The pain for the public needs to be massive then all will demand the gas sector’s head on a pike.

    Wait until end of September 2022 (when price rises flow through an appear as household bills) and the gas sector will get reamed to the joy of the MSN and all Australians.

    • I think you’re right. I had to explain all this to my partner over the last few days, and she’s an educated and intelligent woman. Most people have no idea at the moment about the lubeless reaming that is heading their way.

      Before the ALP will do anything we have to have the normies demanding heads on pikes due to their gas bills being so high, so that the ALP can increase their political capital from it.

  12. and when did Mike Cannon Brook become ABC Australia’s authority on all matters relating to electricity generation and distribution on the Eastern seaboard? LOL!

    • Since he made a lot of money.

      The ABC and their viewers submit all authority to those with money.

      • Lucky we have all those consumers of News, Nine, Seven and 1970s AM radio to keep us informed of what is really going on, untainted by the views of rich people.

        • Lol!

          Every single thing on any MSM platform, whether it be TV news, social media, entertainment, whatever…is aimed at enhancing the wealth and power of the Great Princes.

          Same as it ever was.

    • I get the feeling that MCB is weak when it comes to understand exactly where we are today (and why we are where we are). However I think he is very strong when it comes to understand where we need to be in say 15 years time.
      Ideally it’s MCB’s vision that needs to be combined with AGL’s technical understanding / market reach and execution.
      That said, I doubt it will happen without a fight that leaves both parties wishing they’d never heard the others name.

  13. What are you on about, there is no Gippsland JV gas going anywhere near the LNG plants? Qld is sending about 380TJ south today.

    • Peter SMEMBER

      The East Coast gas market is interconnected. The Gladstone “Cluster” was initially sucking in merchant gas, away from its CSG developments and then it sold CSG into the local market, but that is coming to an end. The Gladstone LNG plants have been operating below capacity. The CSG fields need constant capital spending to keep up supply, so they had been buying gas from conventional gas producers to top up.