Energy war 2023: Gas mates versus you

The weekend media was full of gas crap. Mostly from people that have no idea what they are talking about. Some from energy voices that are always wrong. And a lot from those on the take.

Do not be fooled by the idea that this is a “debate” in any meaningful sense. Rather, the battle lines are being drawn over whether a portion of the Game of Mates gets to exploit Australia (and your finances) to death, or you get your nation back along with rising living standards.

The tip of the spear for those that would exploit is the Australian Financial Review. Somebody should sue that paper to force it to drop “Australia” from its masthead. It is nothing more than a mouthpiece for local and globetrotting robber barons that are never rich enough and would see you and nation radically impoverished.

It is a treasonous document that prints unalloyed gas propaganda while doing its best to amplify it.

Its weapon is the CEO. That rare species of wanker that farts and shits just like you and I every morning which the AFR then repackages as gold:

Top chief executives from across the economy have backed energy company complaints that the Labor government’s caps on gas prices will threaten the investment needed to fill looming supply gaps in the domestic market.

..Telstra chief Vicki Brady said: “Domestic gas prices need to be considered as part of an agreed and co-ordinated national approach to energy more broadly.

…Seven Group chief executive Ryan Stokes, who oversees a conglomerate spanning building products, mining services, media and energy, said gas supply remained the real issue for the economy, and gas price caps were likely to be counterproductive.

…Rob Scott, chief executive of Wesfarmers, similarly urged a long-term view, and backed gas reservation for domestic users over price caps.

…Graincorp chief Robert Spurway backed calls for reservation, and Mark Fitzgibbon, boss of health insurer NIB, was typically blunt.

“Nothing good ever comes out of government price intervention in competitive markets. It would be better and more efficient to subsidise those in need,” Mr Fitzgibbon said.

These talking points are bullshit:

• The Telstra CEO is not in energy and should shut up. Her profits will be smashed if the gas cartel gets its way as utility bills rise 250% followed by massive spillovers on the supply side of the economy. That is 7% plus spillovers added to the CPI. This will send the cash rate to levels households cannot handle resulting in a balance sheet recession as income and wealth evaporate via halved house prices. In turn, Telstra’s growth rate will shunt lower permanently. Shareholders should take note .
• Ryan Stokes is a vested interest in gas via Beach Energy. ‘Nuff said.
• Likewise Rob Scott via Wesfarmer’s ownership of Curragh coal mine. He should be very careful what he wishes for. His retail interests will be annihilated if the gas cartel gets its way. Shareholders again should take note.
• For the Graincorp bloke, the Labor package is a form of reservation. One that ensures price participation. Without it, the cartel will charge whatever it wants regardless of retained volumes. Gas is a cartel not a market.
• If regulation is egregious to NIB then let’s strip it of its unbelievable health insurance subsidies.

In sum, this list of CEO hacks is nothing like and nowhere near “across the economy”. It is, in fact, a grab bag of vested interests and those not bright enough to know where their own shareholder interests lie.

I note, especially, the absence from the AFR’s crap list any CEOs from banks. Very sensible on their part. Defending the gas cartel is the same as arguing for a financial crisis. The banks should be powerful Mates to households in the year ahead.

Amusingly, giving the gas cartel its way would also destroy the parent company of the AFR, Nine, whose realty and consumer advertising businesses will be wiped out. As tempting as it is to see seditious AFR journos turned street beggars, cutting off your nose to spite your face doesn’t quite say it. It also raises a question for shareholders about Peter Costello. Will he back the business or Gas Mates Coalition.

The second group in this undebate are the media careerists who add nothing but fog.

Leading this pack is former Origin (gas cartel) executive Tony Wood of The Grattan Institute. Grattan is sponsored by Origin and BHP (former gas cartel) so, arguably, it should just shut up as well.

Wood famously and catastrophically campaigned against domestic reservation when the east coast LNG plants were built. Then he argued recently for super profits taxes and energy subsidies to blow inflation sky high. Now he’s flip-flopped to god only know what at The Australian:

“It is weird, I don’t quite understand it,” the Grattan Institute’s widely respected energy expert Tony Wood told Inquirer.

“I thought they were on the cusp of an extraordinarily clever political compromise and instead they seem to have created a war that was unnecessary.”

…“They should have sat down with industry to solve a longer-term problem,” says Wood. “They didn’t and instead just announced this mandatory code of conduct. And it’s blowing up in their face.”

…The Albanese government’s premise is that the east coast energy market is fundamentally broken and that the only way to fix it is for the government to get the Australian Competition & Consumer Commission to regulate prices.

“Now that is an extraordinary leap,” says Wood.

“And it’s an almost impossible job too.

“What they could have done is say ‘look, we are going to do the price cap, but we do also need to think about what the longer-term situation looks like, we don’t want to get into this situation again’. But they don’t need to do it this way. Instead of a skirmish, you now have nuclear war.

“It’s a ­mystery to me why they felt they needed to do it.”

He’s right about one thing. He does not understand it. Sitting down with the cartel gets you nowhere. See Mad King ADGSM round one. All consultation does these days is give the interests time and a leg-up into the media to corrupt policy. It’s much better to drop the policy suddenly and negotiate from an incumbent position. See the success of QLD coal royalties. Albo’s government is learning,

It’s not impossible to cap prices. It’s easy and has just been done. Nothing can be sold above those caps for gas or coal. It’s law. What the cartels and robber barons might do is sell less volume locally and more overseas to trigger blackouts. If this transpires then the Albanese Government needs to ready to escalate the war with levies that rightfully take every brass razoo derived from Ukraine War profiteering.

Let’s see how shareholders like them apples.

Another fence sitter is this Chris Richardson:

“The real problem is that we don’t tax gas well, we don’t regulate the east coast markets well. That is what you spend 12 months running around doing while the sticky tape is in place.

“Instead, they have a reasonable price thing as an ongoing one. I don’t get that. They could have done a bit less and achieved the same political outcome … and then spent the next 12 months fixing up taxation of gas and the regulation of the market.”

Rubbish. This is a CARTEL not a market. Pussy footing around that fact to play the Game of Mates leads to all the wrong conclusions. If Albo’s reasonable price mechanism is derailed then the only solution will be much more severe regulation of the CARTEL.

Then there are those who simply have no idea, like Peter van Onselen, distant cousin to LVO, but seemingly missing an important gene:

Yet price caps aren’t the worst part of the energy policy design thrust on the parliament this week. At least they are limited to the next 12 months, even if the market is now aware that the government is happy to use them whenever it thinks it’s necessary to do so. The so-called reasonable price on gas – that is, the rate of ­return regulations – in the new rules are set to be applied indefinitely. This will severely curtail the gas market. Remember, gas is an important adjunct energy source and a vital transition energy supplement as we attempt to shift to more renewables.

Err, why will reasonable local prices that deliver excellent returns “severely curtail the gas market”? It hasn’t happened in WA, USA, Qatar, Iran, Russia, Trinadad and Tobago, Mozambique so on and so forth. On the contrary.

Finally, the third group in the Gas Mates versus you is the Coalition federal opposition:

“They don’t realise it yet, they’re excited about their win, they’ve got the support of the Greens, and when the Labor Party and the Greens come together on economic policy you know trouble is on the horizon,” Dutton told parliament in his response to the bill.

“You know that power prices under this government will continue to go up and up. You know the uncertainty they’re creating in the marketplace will mean a reduction in investment.

“It’s shambolic. I honestly believe that this is catastrophic for economic policy in this country.”

Riiight. Only, it was the Coalition that was forced to regulate the Cartel the last time prices crossed above $20Gj in 2017. Last winter, the price hit $65 and would have gone to $100 had the cartel been allowed to run. What would Dutton have negotiated with his Gas Mates? $20Gj? $30Gj, $50Gj? A rocketing CPI and house prices down by half with a financial crisis?

All the Dutton Opposition is illustrating is that it remains corrupted by its Gas Mates, addicted to lying, an energy vandal, and will always put a shot at taking power ahead of nation.

In sum, resistance to the energy measures is as loud as it is weak. It is confined to the ideological, the stupid and the corrupt. A Coalition of Gas Mates not a rational policy block.

The Albanese government’s energy interventions are good. It was right to use price caps. It was right to deploy an ongoing mechanism to regulate prices after 12 months. Neither should deter investment. It has left for itself a VERY LARGE bazooka to point at the Cartel’s head if it wants to play silly buggers on supply.

The measures have already halved electricity price futures and I still expect the price to fall below $100MW/h yet. This will mean the utility shock is over in NSW and rises elsewhere will be limited to 25% or so and may not come at all if global prices subside in 2023 while state subsides hold prices down:

But, be warned, this war is not over. The Coalition of Gas Mates will blame everything plus the kitchen sink on the policy henceforth and it will need to modified, toughened and managed ongoing.