Honestly, if you have the dough, you could successfully argue the moon is made of poop in the Aussie political economy.
Labor has failed to win over the Coalition and energy producers after unveiling legislation for its controversial gas reservation scheme, leaving the program’s future in doubt as the government pledges to deliver a “sufficient volume” of gas into the east coast market while putting downward pressure on prices.
The Coalition is promising to work productively with the government in the national interest, and demanding Labor work with it rather than the “anti-gas” Greens, but major sticking points remain.
Labor will push ahead with its commitment to oversupply the domestic market by requiring exporters to offer gas equivalent to as much as 110 per cent of forecast domestic demand.
It also remains committed to “must-sell” provisions, which force exporters to sell up to 20 per cent of LNG export volumes to the domestic market even if buyers are reluctant to contract at the prices on offer.
Energy producers were quick to slam the government for pursuing an artificial oversupply of gas, warning it would weaken investment signals and crowd out smaller, domestic-focused producers.
For an example of this raw monopoly power, look at the spot gas price, which the cartel has pushed above the $12Gj cap for the first time in years to spite the government.
We went from an average gas price of about $4Gj forever to a relentless climb from 2015, when the LNG plants opened. COVID interrupted it only briefly, and war profiteering followed.
Is our gas “market” appropriately supplied? Or is this monopoly gouging? Is the moon a desolate, dusty rock in space, or a ball of dung?
Will gas suppliers be forced to sell below cost? Of course not. They will be forced to supply low-marginal-cost gas locally and high-marginal-cost gas to Asia, the opposite of today.
The only conclusion I can draw is that these robber barons are actually made of poop. The journalists who buzz around them are flies on poop.
It appears the poop’s next move may be to break the government’s $12Gj gas ceiling, as they anticipate removing it when gas reserves arrive.
That may mean another round of war profiteering before any oversupply arrives, which is not imminent. Despite the whinging of the poop, here’s what some basic modelling suggests is the East Coast outcome.
Sadly, it makes little difference for another decade as the Bass Strait reserve runs dry.
If the government removes the $12Gj cap or allows itself to be bullied, the global energy shock will drive local prices mad.
We may all end up covered in poop.
