Australian gas producers are calling for an immediate policy reset due to Labor’s market interventions and regulatory uncertainties, which are undermining investor confidence and delaying new supplies.
They are also calling for the Energy Minister to support further gas investment and boost supplies via the north-south pipeline, despite the possibility of extending the mandatory gas code to retailers.
Opposition energy spokesman Ted O’Brien argues that more investment and pressure on states are needed to mitigate regulatory uncertainty.
The regulation most under scrutiny is the mandatory code of conduct which caps contract (but not spot) prices at $12Gj, a still highly profitable price.
The code exists because during the Ukraine War, the cartel decided it was a good idea to war profiteer, charging $70Gj for local gas when it comes out of the ground for $1Gj or less. They made off with a cool $130bn or so, which, from everyone else’s perspective, was an enormous bill and inflation shock.
In short, the cartel shredded its social licence to operate. The only issue with the responding regulation was it moved too slowly and was not harsh enough.
Now, the cartel is threatening to block supply and new development. So the answer is not to back off, knowing the evil at its operating heart, but to go deeper on regulation.
The entire East Coast needs a new gas management regime that brings the spaghetti bowl of rules together under a federalised system that includes ‘use it or lose it’ laws for leased acreage and harsher domestic reservation that guarantees local supply at reasonable prices, as well as covering the spot gas sales that determine electricity prices.
The first firm that challenges new rules should be crushed. Then watch as everybody just gets back to business, making money at reasonable rates of return instead of gouging Australia to death and destroying the decarbonisation process.
The cartel is already pushing spot gas prices above the contract price cap of $12GJ:
And as night follows day, a new winter power shock is on the way with the higher gas prices:
The gas cartel is not a regular private business. It is a coterie of 19th-century robber barons that have occupied the epicentre of the economy.
Any public entity with the slightest clue will deploy every resource at its disposal to crush it.
