It’s not an easy feat to slay truth, households, and 99.9% of business in one fell swoop but Australia’s Mad King has managed it:
“Australia’s key east coast gas producers are working to respond to the need to ensure adequate supplies of gas are available to keep the lights on and businesses operating during our winter energy crisis. I urge them to keep contributing to the solution,” federal Resources Minister Madeleine King told The Australian Financial Review.
“It is worth remembering that Australia’s gas export industry, that is providing gas to the domestic market, was built with the support of foreign investment. And without the export industry, there would be even less gas available to provide for Australia’s domestic needs.”
This is toxic gas cartel propaganda pumped unprocessed from the pipe:
- East coast energy cartels are ripping $50bn per annum out of households and businesses in straightforward war-profiteering.
- Australia’s east coast gas producers are the core of the problem and have been ever since they lied to the Australian people about having enough reserves to cover their export contracts.
- It is not a “winter crisis”. It has been running since 2014 when the LNG export plants opened.
- They are not “working to respond”. They are being forced to ship gas south by AEMO at 1000% mark-ups to traditional prices.
- If there had been no LNG industry and Australia was short of gas then the price would have risen and QLD fields be developed for domestic use. Given the gas comes out of the ground at $1Gj cash cost that is CERTAIN. Domestic prices today would be sitting at $6Gj, not $43Gj.
In short, the foreign capital lied, stole, and corrupted the political system. It is shipping 71% of the gas to China, the number one existential enemy of Australian freedom. Simultaneously, it is hollowing out the local industrial base needed to defend against China. All while trashing the P/L and balance sheet of every household and business east of WA.
Mad King is from WA and knows that the state has $5.50Gj gas because it did not believe the energy cartel lies and reserved enough for itself.
But lies they were. The subsequent failed east coast gas and electricity markets are the direct responsibility of the cartel. This not only justifies public intervention in the form of retrospective reservation, export levies, or super profits taxes. It demands it in the name of market integrity.
There is ZERO sovereign risk in doing so. Don’t ask me. Just ask the former head of the World Bank and winner of the Nobel prize for economics, Joseph Stiglitz, via an interview with Richard Dennis:
Richard Denniss Professor Joseph Stiglitz, welcome to Australia. John Maynard Keynes once said “practical men who believe themselves to be quite exempt from any intellectual influence are usually the slaves of some defunct economist”. It’s decades since you and other Nobel prize winners debunked the intellectual underpinnings of neoliberalism. Are Australians slow to change their minds or is this a global problem?
Joseph Stiglitz This is a global problem. Keynes was writing about the United Kingdom and we have the same problem in the United States. One example: Milton Friedman argued in 1970 that economic efficiency required firms to maximise their shareholder value, and that’s all they should do. He believed it would be almost criminal if they did anything else, and if a chief executive worried about the environment beyond what was required by the law, he should be removed. At the time that he made these powerful rhetorical claims, I was doing research with colleagues asking that question from an analytical point of view and publishing the results in good academic journals, and we showed that he was wrong.
History shows that just because an idea is wrong doesn’t mean it won’t overwhelm other alternatives, and we need to ask why. What Keynes should have talked about is the role of powerful interests. And when there’s a conjunction of interests and ideas, you really need to watch out. For instance, the idea that unregulated free markets would lead to economic efficiency was widely supported by the financial industry. That led to deregulation. But when it came to the 2008 [global financial] crisis, the same individuals who claimed that government shouldn’t get involved in markets came to government and asked for hundreds of billions of dollars. That exposed a kind of hypocrisy. The idea of small government was useful initially, and powerfully advocated, until that idea wasn’t useful to the powerful interests any more.
RD Speaking of power, the gas industry in Australia is very profitable and very powerful, and adamant we shouldn’t impose a super-profits tax on them. What’s the worst thing that could happen if we did?
JS Jokingly, the answer would be you have a better environment and incomes would go up. Most likely, a windfall profits tax wouldn’t have any effect on investment. It doesn’t reduce the viability of a gas project. You don’t need a 1000 per cent return on your investment to keep operating. So a super-profits tax would not lead to less investment in gas, that’s the almost certain outcome. It would transfer money from the foreign owners of the gas to Australians, making Australia richer.
Tell the Mad King. Soon we will know how much pull she has:
Longer term, Victoria and other jurisdictions want a domestic gas reservation policy, which would force gas producers to set aside a proportion of LNG production for domestic use, helping to keep a lid on prices. Such a reserve has been in place in Western Australia since 2006, with 15 per cent of gas produced in the state kept for domestic use.
The issue will come to a head at an August 15 meeting of state and federal energy ministers.
Alan Carpenter, the former WA premier responsible for the 2006 policy, told The Sydney Morning Herald and The Age last month that it was unfathomable that the model had not been copied in other parts of the country.
But for many gas producers, the situation is not so simple. They say it can take years to release returns on investments.
David Maxwell, managing director of Cooper Energy, which supplies the Victorian market from gas fields in the Gippsland and Otway basins, strongly disputes D’Ambrosio’s claim that gas producers have been “getting away with too much”.
Maxwell argues that without the economies of scale linked to Australia’s massive LNG export markets, Queensland’s coal seam gas fields would simply not be economically viable.
Here are the breakeven costs of the gas in question:
But, this includes the sunk capital costs of pipelines and other capex built to supply LNG plants. These were all written off long ago after the plants crashed the global gas price (while jacking up the local). Today the gas comes out at a cash breakeven price of $1Gj or less.
There is no justification for charging Australians 40-60x production costs.
Unless you are bought and paid for by the war-profiteering profits.