So says Woolies: Woolworths chief executive Brad Banducci has warned that rising energy costs will eventually force the food giant to increase grocery prices. Mr Banducci, speaking at a business forum in Melbourne on Tuesday, said while Woolworths was trying a range of strategies to cut energy costs, including installing more energy efficient lighting and
Australian LNG has a long history of pioneering investment. From the North West shelf to the first floating LNG project ever constructed.
Like other Australian commodities this history aligns with that of development economics of Asia. The first wave of Australian LNG development grew to service a modernising Japan and its demand for energy. This bilateral relationship has a long history of cordial relations, share-equity investment and oil-linked contract pricing to satisfy both parties.
The second wave of Australian LNG was far more chaotic, matching the staggeringly swift rise of the much larger Chinese economy. It began along with the pre-GFC oil boom and Malthusian assumption that the world was going to fall short of everything as the enormous Chinese and then Indian middle classes ballooned and consumed more energy per capita.
Multitudinous LNG projects were sanctioned in Australia which found itself by 2010 developing no fewer than seven LNG project simultaneously. Needless to say this did not end well with gigantic cost blowouts for all as they competed for labour and other resources.
Yet, as the commodity super cycle peaked in 2011, demand suddenly fell well short of expectations and kept doing so over the next four years. Making matters worse, the US shale revolution suddenly turned that nation from net LNG importer to net exporter of a magnitude equal to Australian LNG. The global glut from 2015 was enormous.
The Australian LNG boom included a particularly cavalier offshoot in QLD where coal seam gas was liquefied via three projects on Curtis Island. As the boom subsided, and oil-linked prices crashed, the companies involved were all either sold or destroyed.
The legacy left by the projects was one of very high Australian gas prices with very low Asian gas prices, also delivering an huge blow to the competitiveness of the east coast economy. Thus the $200bn investment proved to be the greatest single capital mis-allocation in the history of the Australian economy (and surely global energy markets) and was little more than a monument to Banana Republic economics as tax takes failed, income fell and hollowing out transpired on raised local costs.
MacroBusiness was the only analytic house to call the Australian LNG bubble early, track it and predict its demise. It continues to cover the LNG sector with daily updates and a large grain skepticism and is a must read for anyone that needs to know the economic forces coming to bear on the sector.
Via the AFR The Australian Energy Market Operator has again highlighted the challenges to the power system from increasing shares of variable wind power in its final report on South Australia’s September 28 blackout. But it says the risks can be managed by harnessing the grid-stabilisation potential of wind farms and paying customers to reduce
East coast gas prices are easing back after their recent super spike but they remain higher than the same gas costs in Japan: Thus electricity prices remain crazy as well: The news flow shows that pressure continues to mount on GLNG and Santos, the real cause of all problems, via the AFR: The theory that investors in
Jeez: Malcolm Turnbull says the government needs to “get to the bottom” of excessive profit margins made by electricity retailers, insisting the Australian Competition & Consumer Commission’s investigation will help address the “very real problem” of rising electricity prices. An interim report will be handed down in six months and the full report published by
Three things are certain in life: death, taxes and Gotti panic: All businesses and households in Victoria, NSW and South Australia need to seriously consider investing substantial sums in diesel generators, batteries or other sources of emergency power. Banks need to be ready to fund the massive investment required during the next nine months. It
The Brent oil price managed to rally a little Friday night on growing confidence that OPEC will renew its cuts: Of course OPEC will renew. The alternative is carnage: “Without the production cut agreement, I think you could basically target the low-to-mid $30s. I’m of the mind they extend it,” said Gene McGillian, manager market
At The Australian today: The Turnbull government has opened talks with Asian investors to build a coal-fired power station backed by its $5 billion northern Australia fund, as half the nation’s voters endorse the use of taxpayer funds to develop the project and improve energy security. …The Prime Minister and Treasurer will announce today that
From the radio this morning: JON FAINE: Innes Willox is the CEO of the Australian Industry Group, one of the most powerful and influential business lobby groups in the country. Innes Willox, good morning to you. INNES WILLOX: Good morning Jon. JON FAINE: What do we exist for? INNES WILLOX: We exist we hope to
The pressure DCE is not abating with it down -1.5% at the open: The reason why be still more PBOC mortgage tightening, via Reuters: The People’s Bank of China (PBOC) will strictly check the source of down payments by individuals purchasing property in Beijing, the Beijing operations office of the Chinese central bank said in a
Nothing in Australia ever gets done right, or at all. It’s a combination of world-leading rent-seeking techniques, disastrous political leadership and a horribly corrupted and stupid press. The latest live example is the energy crisis which is swinging into the usual full scale scab grab with the average Aussie the clear loser. Starting from the
Via the AFR: The Turnbull government is coming under pressure to intervene to keep the massive Hazelwood power plant open in the face of increasing alarm about power shortages. Lobby groups are believed to have approached the government in the past 24 hours seeking some form of intervention to keep the ageing power station open
Via The Australian comes former Santos chief executive John Ellice-Flint: “Australia’s east coast gas supply dilemma can be viewed as the total failure of users — utilities and manufacturers — to contract short, medium and long-term supplies of gas,” Mr Ellice-Flint says in his opinion piece. “While our east coast domestic gas buyers have been
From the excellent crew at Credit Suisse today: When political correctness is key… Perspectives in the domestic gas market, certainly in terms of scrutiny and public perception, have changed beyond all recognition in the past few weeks. To quote APA CEO, Mick McCormack, every petshop parrot now was a view on it all. As of
The east coast gas price retains a very healthy premium to exactly the same gas sold in Japan today: This is despite the fact that in a functional market locals should never pay higher than export net back prices which is the Japanese price minus the cost of transport, liquifaction and shipping, which ought to be
The Bent oil price broke $50 last night but rallied: The news is bearish as Libya returns: Libya’s oil production has reached 700,000 barrels per day (bpd), the National Oil Corporation (NOC) said on Wednesday, recovering from a drop earlier this month caused by fighting at two key oil ports. “We are working very hard
Dalian is open and soft but holding: The good ‘ol days return today as Big Iron is getting hosed: FMG is falling -5% and describing a superb head and shoulders topping pattern: The uptrend is broken but we’ll need to see it breach the $5.80 neckline before the topping pattern is confirmed. RIO has a
From Gotti today: I have a shock for any politician, public servant or political advisor found by the courts to be misleading the public about the dangers of their power and gas policies — they can be jailed. Back in 1995 the parliament of the day passed legislation that they hoped would never be necessary
From the AFR: Shell has responded to the intensifying squeeze on east coast gas with a commitment to provide 10 per cent more gas for the domestic market thanks to a $500 million investment to drill more wells in south-west Queensland. “Project Ruby”, by Shell’s QGC business, represents the next chunk of investment that was required after a $1.7 billion tranche
The Brent oil price continues to slip: Goldman today provides a new take on US shale: Shale’s short time to market and ongoing productivity improvements have provided an efficient answer to the industry’s decade-long search for incremental hydrocarbon resources in technically challenging, high cost areas and has kicked off a competition amongst oil producing countries
From The Australian: Australia could resolve its energy crisis “very quickly” if it followed the lead of the US in unlocking its gas resources, the head of oil and gas giant Chevron’s Australian business says. Speaking at a Committee for Economic Development of Australia breakfast in Perth this morning, Chevron Australia boss Nigel Hearne said
Dalian is down the better part of -5% today: But nobody cares as Big Iron has barely budged: Any time iron ore is in the $90s there is only downside. FMG’s potential head and shoulders top has firmed a little. Big Gas is holding too despite the mushrooming political risk: Big gold is under-performing: Big
Gotti maintains the rage on gas today: How in Australia did we elect politicians in both the state and Federal sphere that have let us down so badly by vandalising our energy system? …Our energy crisis actually started back in the first decade of this century when in both state and federal spheres we began