At senate estimates, Treasury secretary Steven Kennedy has outlined the case for intervention in energy unmarkets:
“For example, the current gas and thermal coal price increases are leading to unusually high prices and profits for some companies; prices and profits well beyond the usual bounds of investment and profit cycles.”
“The same price increases are leading to a reduction in the real incomes of many people, with the most severely affected being lower income working households.
“The energy price increases are also significantly reducing the profits of many businesses and raising questions about their viability.
“In summary, the effects of the Ukraine war are leading to a redistribution of income and wealth and disrupting markets. The national interest case for this redistribution is weak, and it is not likely to lead to a more efficient allocation of resources in the longer term.
“Policy responses could take many forms but in the current circumstances of generalised price pressures, they need to be mindful of not contributing further to inflation.
“This would suggest to us, that interventions that directly address the higher domestic thermal coal and gas prices are more likely to be optimal.
“Even if the war in Ukraine persists, global supply and demand will adjust over time.”
Well, well. It looks like we might get a better outcome than hoped if coal is included with gas. There are rumours of a $70 coal price and $10Gj gas price which, I will tell you right now, will crash electricity prices straight below $50MWh.
In turn, this would set up 2023 as a year of massive energy deflation:
The firm most responsible for the entire mess, Santos, is still shooting its mouth off:
Santos CEO Kevin Gallagher has blamed energy policy failure in Australia and domestic climate wars for the energy supply crisis gripping the east coast, rather than Russia’s invasion of Ukraine, and has called on governments to put their “shoulders to the wheel” to get more gas developed to relieve the pressure.
Poppycock as usual. Narrabri should be developed but solves precisely nothing if you leave the cartel in place. It will simply switch other volumes currently supplied locally to offshore markets to keep the local market tight.
But, revealingly as the cartel whines like a stuck pig, the east coast gas price has suddenly cratered to the lowest point since the Ukraine War began:
The gas cartel is a typical bully. All it takes is some balls and it’ll fold like a cheap suit.
That said, be aware that this war is far from over. The cartel will retire from the field and plot its next rort in the shadows.
At least it appears that Aussies are about to finally win a battle.
