It’s a new year but it’s the same old gas cartel. As I warned late last year, so long as the cartel is in place, the war for the survival of the east coast economy is not over. And now a new battle has begun:
Multiple energy retailers across the eastern seaboard have stopped taking new gas customers and others are ramping up their prices as they struggle to secure ongoing supply from producers following the Albanese government’s imposition of a wholesale price cap.
Two of the east coast’s biggest gas producers have kept up their month-long suspension on offering new supplies after the government in December capped new contracts for wholesale gas in the east coast market at $12 a gigajoule for 12 months.
Australia’s second-largest energy retailer, AGL, has been unable to secure contract supply of gas for 2023, prompting it to cease taking new commercial and industrial customers, and forcing those whose contracts are expiring on to expensive default tariffs.
…The government’s December consultation paper on the policy noted: “The ACCC and AER will be closely monitoring the behaviour of all participants in the wholesale contract market and, if other wholesale gas sellers’ prices are identified as being excessive relative to their costs, the scope of the price cap could be expanded.”
Professor Hepburn said the government’s mandatory code of conduct for the gas industry also included obligations on both producers and purchasers to act in good faith, requirements for gas producers to publish or otherwise make offers broadly available to the domestic market, a reasonable pricing provision, and requirements for gas producers to disclose certain information when issuing expressions of interest or making offers to enter into a gas contract, such as the factors considered in determining the price.
However, Professor Hepburn said: “There is nothing in the code that directly compels gas producers to offer gas to domestic consumers.
“If gas producers are found to be actively avoiding negotiating with domestic consumers because of the price cap it may mean further measures will need to be taken.
“In my opinion this may include a domestic reservation policy, which compels producers to reserve a percentage of domestic gas for domestic consumers. This could be similar to that which has been implemented in Western Australia.”
Sadly, Australia’s most corrupt energy think thank piled in to provide cover for the barstardry:
Grattan Institute climate change and energy program director Alison Reeve said the government was still consulting with industry on the mandatory code of conduct.
“If suppliers don’t know what (the reasonable pricing) provision is, it would be difficult to write a multi-year contract,” Ms Reeve said.
“If they assume a future higher price, they may get caught out if that price is later determined to be ‘unreasonable’. If they assume $12/GJ continues, they may miss out on profits.
“Suppliers won’t want to contract until they get more certainty about what the ‘reasonable price’ is.
And? These are the normal risks of doing business in oil and gas. When contracts of duration are signed, commercial entities always risk outcomes they can’t control. The price cap is the result of the same commercial entities forming a cartel. Why should the Australian people guarantee its returns?
As for Shell and Woodside, I would provide them with a punitive ratchet mechanism for blockading gas sales. Starting with summoning the CEOs to Canberra for public humiliation, billion-dollar fines for refusing supply, and escalating swiftly through export levies, “use it or lose it” legislation, up to nationalisation for threatening Australian interests.
I have seen some of the cartel’s internal communications and the outrage by management is unhinged. Time to remind it of its obligations.
These are not commercially operating firms. They are a foreign-owned, China-beholden cartel that is threatening the lifeblood of 82.5% of the Australian economy.
Treat the disease not the symptoms.
