Former gas executive: Reserve gas AND super profits tax cartel

Grattan Insitute’s Tony Wood, a former gas executive at Origin Energy which is one member of the east coast gas cartel, today backflips to recommending aggressive domestic reservation AND super profits taxes:

Under the Heads of Agreement between the government and the producers, the latter would then be required to offer their uncontracted gas to the domestic market first.

…Over the past few years, the ACCC has referenced export parity prices (i.e., what the producer could expect to receive from exporting the gas) as the primary benchmark for domestic prices. Unfortunately, international developments, notably Russia’s war on Ukraine, have driven benchmark international prices from $3-$10 per gigajoule to well above $40, and prices offered by LNG producers have largely followed that rise.

The ACCC recommends nothing to address this problem. Among alternatives canvassed over the past couple of months, the most effective government action would be a windfall profit tax on gas producers.

I prefer fixed-price reservation for gas only because it is more efficient and politically sellable.

But if the super profits tax were benchmarked to pre-Ukraine prices, it would also collect the war-windfall gains from the cartel to which it has no right and actually boost the budget despite recycling some of the revenue into energy subsidies.

A better idea, still, is an export war levy benchmarked to pre-Ukraine prices which would crash the local gas price and boost the budget massively without all of the waste of deciding who gets the subsidies.

Welcome back to Planet Earth Mr Wood:

The Grattan Institute’s Tony Wood reflected this thinking in 2013: “With more than $160 billion forecast to be invested in LNG production, the export industry is good for the economy. Governments should therefore resist self-interested calls from some industries to cap prices or reserve gas for the domestic market. Western Australia should go further, and end its policy of reserving gas for domestic use. Protectionism may provide some short-term price relief for targeted industries, but ultimately it leads to higher prices and damages the economy.”

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Comments

  1. Where was Tony Wood in 2013 when these behemoth LNG trains were being built? He was busy arguing against reservation and demanding WA end theirs.
    His mea cupla is a case of better late than never.

    • True, … better late than never, still, that leaves a lot of less able, weak or compromised executives etc who will do nothing as our country sinks.

  2. rob barrattMEMBER

    It’s very straightforward. As a plitician in power with influence, you know you won’t be there forever. So:
    1) Contact senior executives of the aforesaid gas cartel companies and see if there is a well paid sinecure availabel in 2-3 years.
    2) If No, do something about the disgraceful situation..
    3) If Yes, do FA (hats off to Captain Bligh).

    So, obviously the cartel is doing a great job of playing them all off against eachother. You’ve got to hand it to them.

  3. Stephen Morris

    The last time this happened it led to the creation of the Federal Crude Oil Excise:

    https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/bd/bd0102/02bd053

    The Whitlam Government introduced the crude oil excise in August 1975 to redistribute to the community via the government some of the gains oil producers received after world prices increased in 1973.

    For a long time there remained a distinction between “Old Oil” discovered before 18 September 1975, and “New Oil” discovered thereafter.

    The excise applied only to Old Oil as its producers were deemed to have benefited from a windfall gain. New Oil was exempt to maintain the incentive to continue exploring.

  4. Democrats call for Biden officials to limit US natural gas exports because of rising home heating costs

    Fake Greens love the rort.

  5. A different paymaster brings on a conveniently different spruik – One we should jump at!

  6. David Llewellyn-Smith do you think what these gas companies are doing is criminal? In my opinion, it looks like their actions are criminal on a few fronts. Namely being collusion, price fixing and tax avoidance. And from the noises the ALP have made in the last 24 hours there plan is only to renegotiate the Heads of Agreement, which in my opinion will probably lead to less spikes in the gas price like we have seen. But never the less we will be left with gas at a price that is still too expensive and there will be no repercussions for the east coast gas cartel and there criminal behaviour. It’s just not acceptable in my opinion. David I would really like to do a YouTube video and hopefully make it go viral. I know your an expert and have done an amazing job on the east coast gas debacle. Before I make this video I was hoping to get your opinion and advice on this topic. Are you able to call me? This is my number 0438922525 and my name is Shannon.

    Thanks mate